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February 8, 1993

Ten Thousand Commandments: Regulatory Trends 1981-92 and the Prospects for Reform

by Clyde Wayne Crews, Jr.

Citizens for a Sound Economy Foundation

1250 H Street. NW. Suite 700. Washington. DC 200053908. (202) 783·3870

Ten Thousand Commandments: Regulatory Trends 1981-92 and the Prospects for Reform' by Clyde Wayne Crews, Jr.
If you say that the purpose of the [C]ouncil [on Competitiveness] is really to slow the flow of regulations and keep them under control, I think you would have to say it has failed, because the flow of regulations has accelerated markedly. 2 James C. Miller III. December 1991 This edition of the [twice-yearly Unified Agenda of Federal Regulations] contains 4,186 entries from 59 federal departments and agencies. Mark G. Schoenberg Regulatory Information Service Center April 1992 I. Introduction During the late 1970s and early 1980s, mounting concern about the economic effects of the federal regulatory burden spawned several reforms designed to reinvigorate the national economy while stemming inflationary pressures. Prominent among these initiatives were partial trucking, rail, and airline deregulation, partial financial services deregulation, relaxed enforcement of federal antitrust laws, and restraints on the imposition of federal paperwork. An increasingly controversial reform measure was the formalization of activist central regulatory review -- a responsibility given to the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB), an office more powerful than its predecessors. Created by the Paperwork Reduction Act of 1980, OIRA initially concentrated on reducing federal paperwork burdens imposed upon the private sector. Subsequently, OMB's oversight authority -- and OIRA's -- was expanded by President Reagan's 1981 Executive Order (E.O.) 12291 to encompass (theoretically) a far greater portion of the regulatory process. Fundamentally, that expanded management role required OIRA to ensure that the benefits of any new major regulation outweighed its costs where not prohibited by statute. In that capacity, OIRA embodied an important new experiment: earlier efforts at regulatory review, such as those conducted by the Council on Wage and Price Stability, the Council of

Clyde Wayne Crews, If. is an Economist at Citizens for a Sound Economy Foundation, a 250,000-member research and education organization located in Washington, D.C.

2 Economic Advisers, and the interagency Regulatory Analysis Review Group, lacked extensive enforcement powers. These earlier groups could require regulatory cost analysis where not statutorily prohibited, but they could not enforce a net-benefit requirement for any given regulation: agencies could, in the end, reject the counsel of the reviewers and proceed with their rule. (Reviewer appeals to the President were possible, but rare and unsatisfactory)." Partly as a result of these assorted regulatory reforms, more than half of the decade of the 1980s witnessed a decline in regulatory costs and in the amount of regulation inflicted upon the economy. Yet a notable increase in regulatory activity has materialized over the past few years, even taking into account the moratorium on new federal regulation announced by President Bush in January 1992. The turning point came around 1986. Dollar costs of regulatory compliance, the annual number of Federal Register pages, the number of agency rules reviewed by OIRA, the number of "major" rules reviewed (generally, those rules costing $100 million or more annually), final rule documents, and the number of Federal Register pages occupied by final rules, and employment at the agencies all began increasing roughly that year. While the number of final rule documents and final rule pages peaked in the late 19805, they both resumed their increase in 1991. Two recent surges in particular -- the Federal Register page increase and the jump in major regulations presented for OIRA review between 1990 and 1991 -- are especially striking. All these developments merit renewed attention given a correlation compiled and highlighted in 1992 by A. B. Laffer, V. A. Canto & Associates: whenever regulation increases (as proxied by weighted Federal Register pages), economic performance (as assessed by a weighted Standard and Poor's 500 index) appears to decline. (See Figure 1).4 This is not to argue that a direct causal relationship exists (especially because of the severe limitations of using Federal Register pages as a proxy for regulation), but the tendency of these variables to move in opposite directions may have some significance, and deserves greater analysis. Regulatory excesses could be better isolated and controlled with improvements in the existing regulatory review apparatus. Even so, as regulation grew over the 1980s, the review efforts at OIRA -- and more recently those at former President Bush's Council on Competitiveness -- became increasingly handicapped by mounting political opposition, a stilltoo-narrow scope of authority, and limited resources. Whatever the policies of President Clinton regarding regulatory review and reform, harnessing regulatory burdens will ultimately require rejection of the anti-market philosophy underlying regulation, and reforms created through the cooperation of both the legislative and executive branches. The attacks on the Council and OIRA haven't simply been manifestations of dislike for executive regulatory review under a Republican administration: non-executive-based regulatory constraints are conspicuously absent from the political discourse as well, which suggests a more fundamental dispute between Congress and the executive branch.

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3 II. The Case for Improving Regulatory Review A. Perspective: The Dismal Performance of the Regulatory Enterprise
The most frequently cited presentation of the gross costs of the regulatory burden is a 1992 paper by Professor Thomas D. Hopkins of the Rochester Institute of Technology. His study is a compilation of research efforts by other scholars combined with calculations and estimates based upon his own extensive regulatory review experience at the Council on Wage and Price Stability' and as deputy director of OIRA. Hopkins demonstrated that the gross cost of federal regulation in 1990 was about $392 billion -- over and above the costs of operating government that appear in the federal budget -- and he projected that annual costs would reach about $492 billion by the decade's end." Hopkins has since updated those figures: at an August 1992 symposium on regulation held in Columbus, Ohio, he presented calculations that pegged the current compliance bill for federal regulation at $560 billion in 1991 dollars." Hopkins does not attempt to measure regulatory benefits, however. As he told the Bureau of National Affairs, his aim was "to define the shape and weight of the elephant, not how much weight the elephant can take off. ,,8 Because regulatory expenditures amount to roughly 8 percent of gross domestic product," a full appreciation of both their benefits and costs would seem crucial to any accountable chief executive. While regulatory benefits can be considerable for certain parties in nearly every regulatory undertaking (although not necessarily for the supposedly intended beneficiaries or for the reasons intended), the overall, or societal benefits of individual programs can easily be outweighed by costs. (Moreover, this "social calculus" technique ignores the deeper issues of involuntary wealth transfers and rights of due process.) Consider the "social" downside of two of the most sweeping environmental proposals so far this decade: the Clean Air Act Amendments of 1990 and the Resource Conservation and Recovery Act Amendments (RCRA). According to Paul Portney of Resources for the Future, the Clean Air Act Amendments will add more than $30 billion (in current dollars) to annual compliance expenditures while the most likely value of benefits derived -- including health benefits -- will be only around $14 billion. to Similarly discouraging, the Environmental Protection Agency (EPA) says the RCRA Amendments under consideration by Congress "could cost up to $46 billion annually, while providing little in the way of risk reduction." The public rarely hears that EPA ranks municipal solid waste, the primary target of RCRA, relatively low on the list of environmental priorities." Researchers have demonstrated how regulations can often selectively and even deliberately benefit some groups of producers (and regulatory advocates) at the expense of competitors and consumers. This phenomenon occurs to varying degrees in Clean Air legislation" and in global warming proposals that promote command-and-control rules even where more market-conscious alternatives are present and viable." The potential for "regulatory pork" can create compelling biases toward command measures since such rules have the double impact of (1) eliminating weaker competitors and thereby facilitating higher prices and/or acquisition of greater market share for the winners, and (2) concealing

4 government-imposed costs of regulation in a manner that up-front taxes and fees obviously cannot. Regulatory review has taken some steps toward control over such abuses.

B. Regulatory Review Generates Pro-Consumer Outcomes Centralized review can help ensure rule benefits exceed costs: Under the Reagan and Bush administrations, centralized review represented the primary procedural check against uneconomic or inequitable regulatory interference. The Clinton strategy is likely to retain some form of central regulatory oversight. At root, executive review is a formal, institutional acknowledgement of the fact that agencies and departments gain -- in terms of budget allocations, staffing, and political status -- by the breadth of the regulatory empires they oversee" rather than by regulating as a last resort after all appeals to the market have "failed." Review recognizes that the underlying menace of the regulatory state is the very same as the alleged menace of market failure: costs can be externalized, or foisted uninvited upon private citizens, and resources consumed beyond a "socially optimal" level. Externalizing costs can be especially easy for agencies, which suffer little negative repercussions when a requirement proves scientifically or economically irrational. Unlike profit-making firms, bureaus face no economic incentive to minimize the costs of their "product" (regulations) since outside parties, typically private sector businesses and the consumers who buy their products, are obliged to absorb the brunt of their error.
Agency turf-building is an obvious source of excessive regulation and the tendency to ignore benefit-cost concerns. Several studies have concluded also that congressional influence is also an important determinant of agency conduct and regulatory outcomes, often to the advantage of favored interests at the expense of the broader economy." Congressional influence can be used to strategically spawn requirements hard to change by executive branch review. This, in fact, is the Achilles heel of benefit-cost-oriented regulatory review as practiced over the last decade. Rooted in executive order rather than statute, review is impotent in the face of statutorily driven mandates. To the extent Congress requires unnecessarily speedy statutory deadlines for new regulations, prohibits benefit-cost analysis, creates loopholes that prevent the review of certain federal paperwork, or adopts rules that benefit selected special interests, regulatory review becomes impossible. "An iron rule in Washington," reminds journalist Jonathan Rauch, "is that regulators regulate and legislators legislate unless somebody stops them. ,,16 Executive branch regulatory review can monitor and restrain costly agency rulemakings created apart from or beyond statutory authority, but it cannot block legislators who consciously or unconsciously act to circumvent external oversight.

Centralized review may empower consumers: Substantial research supports the
intuition that regulatory agencies and legislators maximize their own support by balancing the desires of competing interest groups, whether these are producer groups, consumer groups, or some combination of the twO.17 In a regime without regulatory review, costs of influencing laws are high since policy formation is scattered among many agencies and lawmakers. Producer groups, whose members are often more concentrated, frequently hold

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a relative advantage in securing favorable policy since lower organization costs enable them to prevail at the expense of those less favorably positioned. For dispersed consumers, political organization costs are higher and tendencies to free-ride on the efforts of others may dominate. IS It therefore can cost consumers more to organize and prevent having a dollar taken away than it costs for them to simply accept the loss. Consumers thereby become the "suppliers" of the regulatory transfer." Regulatory review may help level the playing field for consumer groups, however. Centralized review increases the rate of return to lobbying for dispersed groups like consumers relative to that of concentrated interests, because they need influence only one entity rather than a host of them. Meanwhile, lobbying costs for concentrated groups rise, but their expected benefits are likely to be little influenced or even reduced (since they would have taken most of the pie anyway without reviewj.j" The policy outcome is that "commissions (i.e., the reviewing entities) that are responsible for regulating several industries are less likely to be captured by a single industry, and thus are more likely to be responsive to the diverse interests of consumers and consumer advocates. ,,21 However, since regulatory outcomes are prone to manipulation by a Congress that can short-circuit review, regulatory review's response to consumers in its present form is limited. ill. Trends in Federal Regulation and Regulatory Review

A. Federal Register Growth
The Federal Register is the daily government record furnishing public notice of all proposed and final regulations. Eyeballing Federal Register page counts is an extremely popular way of appraising the regulatory burden on the economy (as the Laffer/Canto correlation readily demonstrates), but it is not without its pitfalls. Much of the Register's contents, such as administrative notices and corrections, add greatly to its size but are not strictly regulatory actions, and so are not reviewed by OIRA. (This is not to say such content is not related to the flow and burden of regulation; it may be.) Further, numerous blank pages can appear in the Register as a consequence of the Government Printing Office's imperfect anticipation of the number of pages needed by the various agencies. Proceeding with caution, then, the Register chronicled explosive regulatory growth in the 1970s and reached an all-time high of 87,012 pages in 1980, just before the establishment of OIRA's review authority. Afterward, the page count declined precipitously until 1986, when it stood at a 12-year low of 47,418. While Federal Register page counts remain below the 1980 high, concluding that the regulatory burden is under control based upon that token relief could be a grave error. Except for slight declines in 1990 and 1992, page numbers have been unmistakably climbing since 1986, reaching 67,716 in 1991 before dropping to 62,919 in 1992 (See Figure 2). The 1991 page count was the second highest in the history of the Register, representing a 26.3 percent increase over 1990's 53,620 pages. The 1992 count, though lower than 1991, is still the highest level since 1981. In spite of enforced regulatory review since 1981, the decade of the 1980s ushered in more pages of regulations

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than any prior decade, as approximated by pages in the Register. This is true even if the pre-review high-water year 1980 is omitted (See Figure 3, which shows 1980's pages in contrasting shade for comparison). And if the first three years of the 1990s are a reasonable approximation of what is to come, the 1990s will easily surpass the 1980s in pages of regulation, as Figure 3's projection shows. In fact, every indication is that 1993 is likely to be more of the same; by February 3, 1993, the Federal Register had already hit the 7,000page mark. In an effort to assert some measure of control over regulation, former President Bush issued a moratorium on January 28, 1992, during which agencies were to refrain from issuing non-essential new rules and instead examine and reduce the burden of regulations already on the books. The moratorium was extended an additiona1120 days on April 28, and was extended for the remainder of Bush's term during his acceptance speech for the Republican presidential nomination on August 20, 1992, though it was abandoned with Bill Clinton's arrival in the White House. During the initial 90-day phase of the moratorium, then Vice President Quayle stated that the moratorium was part of the administration's efforts "to ... change a mindset, change an attitude, change behaviorv" in regard to the tendency to regulate without guaranteeing that benefits offset costs. Estimates from the agencies during the initial 90-days projected that savings of $15-$20 billion per year may be realized through the moratorium, although little solid data from the agencies exists to substantiate these claims." In any case, those who expected the moratorium to sire a considerably smaller version of the Federal Register in 1992 were disappointed. Although, arguably, moratorium-exempt deregulation-oriented regulations to "foster economic growth" could account for some of the 1992 volume, Bush also specifically exempted regulations addressing hazards that "pose[ed] an imminent danger to human health and safety. "24 Combined with the fact that regulation can be largely driven by legislation rather than by discretionary agency rulemaking, this exemption effectively neutralized the moratorium. In fact, it was obvious by roughly midyear that 1992 was to be another record year for regulation in terms of Register length despite the enthusiasm and controversy surrounding the moratorium in its early months. Consider: in 1990 and 1991, mid-year (June 15) page counts were 24,546 and 27,887, respectively. Yet the Register was up to 26,766 pages on June 15, 1992, seemingly in stubborn disregard of the moratorium, and all the way up to its fourth-highest level ever by year-end (See Figure 4 for mid-year and year-end page counts since 1986). This pointedly illustrates the executive branch's inability to curb regulation unilaterally even when it goes so far as to freeze new rules. Ultimately, institutional checks far more stringent than any that currently exist will be needed to restrain the regulatory burden.

B. Federal Regulations Reviewed by OIRA
Total rules reviewed are at the highest level since 1982: Since OIRA's regulatory review responsibilities were inaugurated in 1981, the 50-plus federal departments and agencies have consistently submitted more than 2,000 proposed and final rules each year for

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review. As with Federal Register pages, low-tide was reached in 1986 when 2,007 rules were presented for review (See Figure 5). A general upward trend since 1986 is manifest, with dips in 1989 and 1990 offset by 1991 's increase. The 2,523 proposed and final regulations OIRA reviewed in 1991 marked the highest count since 1982, and a 17.9 percent increase over the 1990 count of 2, 139. The growth in rules reviewed since the 1986 low parallels the Register, with the 1991 count marking a 25.7 percent increase over the 1986

low." Number of "major" rules reviewed increased sharply in 1991: Toward ensuring that "net social benefits" are maximized, E.O. 12291 has required agencies to perform detailed written benefit-cost evaluations of "major" rules. Major rules are defined as those which will impose economic costs of more than $100 million per year, or otherwise have substantial impacts on employment, inflation, or industry viability. 26 Those which don't exceed the threshold are classified as minor rules. The required written evaluations of major rules, called Regulatory Impact Analyses (RIAs), are one of the primary devices OIRA uses to make its regulatory assessments. A knowledge problem that can create biases toward negligent analysis and over-regulation is immediately evident here: an agency's basing the preparation of an RIA on a finding of substantial impact is backward. Except in cases where costs are so transparent or excessive that one can tell beforehand that the $100 million threshold will be exceeded, there is no way of knowing the full economic significance of any rule unless an RIA or its equivalent is completed at the outset.
This cart-before-the-horse approach to regulatory analysis has had an unsurprising effect on policy: extensive economic analysis of rules more often than not simply remains undone. In practice, those that experience the scrutiny of an RIA, have averaged less than 4 percent of the total number of rules each year since 1981 (Refer again to Figure 5, which presents annual major rules as a portion of the total in contrasting shade). Uncertainty prevails about the impacts of the remaining 96 percent of rules individually, although the aggregate effect has been an increase in overall regulatory costs, given Hopkins's findings. It is not unlikely that many of these other rules would qualify as "major" if they were examined in depth. In this light, the heated debates sparked by opponents of regulatory review over the allegedly subversive effects of executive review and benefit-cost analysis appear highly simplistic or even naive; the simple reality is that most rules take effect without any public accounting for their economic consequences. Bush's Council on Competitiveness, which came under the most fire, was even less thorough than OIRA since it intervened in only a comparative handful of rules where disputes arose. Capable of only a scattershot approach singling out some of the most burdensome rules for review, its isolated deregulatory actions are unlikely to have long-term effects on policy and agency rule analyses. But since OMB affords special attention to major rules, it is instructive to trace the annual number of them since the issuance of E.O. 12291 in 1981. Figure 6 isolates the major rules highlighted in Figure 5, and depicts their trend since 1981. The total number of major rules from all departments and agencies stood at a low of 60 in each of the years

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8 1981, 1984, and 1985, and thereafter began a staggered climb. Most notable is the fact that the number of major rules has never been higher than in 1991. The count of 142 majors in 1991 is 137 percent higher than 1985's 60 majors, largely because of an unprecedented 73.2 percent jump from 1990's 82 major rules. While the growth in major rules warrants concern in itself, this growth is all the more noteworthy because recent publication of significant agency rulemakings has shown that RIAs themselves are largely fragmentary, noncomprehensive documents. Benefit calculations, whether for health and safety concerns or for economic effects, are often entirely absent, even for approved major rules headed directly for finalization.

Despite the RIA requirement for major regulations, two-thirds of 1992's finalized major rules lacked benefit calculations: The fiscal year 1992-93 Budget of the U.S. Government reports that during 1992, 57 new significant rulemakings were expected to be finalized in the Federal Register. 27 These rules will increase the compliance burden on the
private sector by at least another $15 billion per year according to estimates provided by agency RIAs, although the actual burden is likely to be far higher since agency cost estimates are typically understated." But most notable, the "benefits" so often touted by regulators and regulatory advocates are simply not demonstrably present: benefits in terms of "lives saved" were calculated and provided for only 16 of the 57 major rules (only 28 percent). Three other rules are accompanied by benefit calculations in terms of pounds of pollution reduced, bringing the total number of 1992 major rules with quantified benefits to only 19, or 33 percent of the total. The remaining 38 rules carry no calculated benefit estimates at all. Instead, non-quantified 11 benefits 11 claimed for these remaining 38 rules (which make up 67 percent of the total) are "unknown" (there were 17 of these), "potential savings," "more accurate test results," "Improved knowledge," and "energy savings." One factor that may explain why the benefits of these regulations were not presented (aside from agency turfbuilding) is the fact that 30 of them -- a full 52.6 percent -- have statutory or judicial deadlines for implementation, which can limit the time available for analysis. Paradoxically, if benefits were being adequately computed, there might be less cause for alarm about the growing Register since benefit calculations would make up a larger share of it. But it is increasingly clear that these calculations are not being made for even the most burdensome rules. The most expensive of these 57 major rules further underscores regulatory review's disconcerting limitations: Acid Rain Excess Emissions Requirements rules are expected to add at least $3 billion annually to environmental compliance costs, despite the fact that the 10-year, $600 million, congressionally commissioned National Acid Precipitation Assessment Program study found no evidence of severe damage from acid rain. Yet Congress chose to ignore this study in the deliberations preceding the Clean Air Act Amendments of 1990, and the May 1992 statutory deadline for the rule's final promulgation blocked any meaningful opportunity for OIRA to substantially review or encourage abandonment of the standards. Disclosure of benefits and costs has deteriorated further since the fiscal-year 1993 Budget report. The recently issued "Regulatory Reform and Program for 1993" list 16 rules

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9 required by statute or judicial deadline to be issued in final form in 1993. But this time, no accompanying costs and benefits are provided." All the more ominous is the fact that the April 1992-March 1993 Regulatory Program (which was never issued to Congress until January 15, 1993) reports that 25 agencies are now at work on 383 significant regulatory actions. Of these, 114 (30 percent) are subject to statutory or judicial deadline, which means they're likely to escape review. Fully 96 of the 383 significant regulatory actions come from the Environmental Protection Agency alone." (More will be said later about which agencies produce the most rules.)

c.

Final Rule Documents Published in the Federal Register

Finished regulations published had been declining, but increased in 1991: The
number of final rule documents published each year and the number of pages they occupy in the Federal Register may be slightly more suitable gauges of regulatory activity than the unabridged tome, since they weed out pending rules and assorted documentation and announcements and better represent regulations as finished "products." But still, caution is in order. So far, final rule data for the 1980s and 1990s are only incompletely summarized in the 1992-93 Regulatory Program, but some inferences can be drawn from the figures which are provided there. While the Regulatory Program claims that "federal regulatory activity as represented by [total] documents issued has decreased, "31 isolating the final rules documents component and estimated pages of final documents tells a different story. Figure 7 depicts the estimated number of final rule documents, an estimate based upon "new requirements" and "revisions to existing requirements," since these represent the bulk of added new final regulatory guidelines." Unlike the other gauges of regulation discussed so far, the absolute number of final rule documents published had actually been decreasing since a 1987 peak. In 1982, there were 1,525 of these final rule documents. The number declined for three years, began rising in 1986, and peaked at 1,607 in 1987. Final rule documents declined thereafter, dipping to 1,301 in 1990. But in 1991, the number rose 11.1 percent to 1,446 final rule documents, partly offsetting the decline since 1987. The 1991 increase in final rule documents is consistent with that year's 26.3 percent overall increase in the Federal Register. In all, there were a total of about 14,777 finalized regulatory requirements between 1982 and 1991. The increase in final rule documents for 1991 becomes more pronounced when page counts are considered. The estimated annual number of pages that these final rules occupy in the Federal Register decreased since peaking in 1988, but lurched ahead sharply in 1991. Figure 8 depicts annual pages devoted to new requirements and revisions, estimated from data in the 1992-93 Regulatory Program." Once again, a low was reached in 1986 when pages devoted to new and revised final rules stood at 7,973; pages then peaked to 10,500 in 1988. Despite decreasing to 9,459 pages in the 1990 Register, final rule pages lurched 38.1 percent to 13,060 pages between 1990 and 1991, which is 63.8 percent higher than 1986's low. While more information is now provided in final rule documents than in years past, some portion of this increase can be attributed to increased regulatory activity. Further

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analysis, to determine relative shares of increased information versus increased regulation, would be justified.

Average costs of rules appear to be rising: Those agencies that publish regulatory cost estimates are the exception rather than the rule, but inferences can be drawn about average rule costs based upon agency-specific rule flows and the rare cost estimates that do exist. Consider the case of EPA. By that agency's own estimates, total yearly compliance costs imposed by the agency's rules increased 65.5 percent between 1981 and 1990, from $60.5 billion to $110.2 billion (in 1986 dollars). These costs represented an increase in proportion of GNP from 1.62 percent to 2.14 percent." Furthermore, relative to the rest of the regulatory enterprise, environmental regulation's share of all regulatory costs grew from 9 percent to 23 percent of the total regulatory burden between 1977 and 1988.35 Yet EPA's cost increases took place despite a 76.4 percent decrease in the absolute number of EPA rules reviewed, which declined from 734 in 1981 to only 173 in 1990.36 While the implementation and impacts of pre-1981 legislation and rules are surely driving some of these cost increases, the implication remains that the average cost of new regulations issued has increased considerably during the decade of OIRA review. Additionally, the fact that the number of final rule documents published by all agencies had been decreasing for a time while regulatory costs rose affords further evidence that the average cost of federal rules is increasing. There appear to be legitimate grounds for further analysis of cost trends at other health and safety agencies, but so far only EPA has provided extensive cost estimates. The upward creep of average regulatory costs could have major implications for the regulatory debate.
The Regulatory Program is a valuable resource for examining the state of regulation in terms of rules reviewed and finalized, but a broader view of upcoming rulemakings or regulations requires a look at the Unified Agenda of Federal Regulations. The Agenda is a hefty, twice yearly "summary" document (l,285 pages not counting the index) compiled by the Regulatory Information Service Center that surveys regulatory activities planned for the following 12 months. As noted at the outset of this paper, the April 30, 1992 edition of the Unified Agenda contains 4,186 entries from 59 federal departments and agencies. The October 1992 edition contains 4,909 entries, but the figure is less representative because many of the rules had been deferred to the October edition from earlier in the year due to the

moratorium." D. The State of Federal Agency Employment
Employment at the 18 most active rule producing bodies (in terms of rules reviewed between 1981 and 1991) followed a milder version of the "pendulum" pattern exhibited by Federal Register pages and total rules reviewed. 38 Civilian employment at these federal departments and agencies dropped until around 1986, then began a gradual climb that apparently still continues (See Figure 9). According to the Federal Civilian Workforce Statistics, Federal non-defense employment at these 18 departments and agencies dropped during the 19805, hitting lows of 993,000 in 1982 and 998,000 in 1986. Staffing in 1991

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reached 1,094,900, a level 7.7 percent higher than before E.O. 12291 was issued in 1981) and 9.7 percent higher than in 1986. Since 1986, roughly the turning point at which regulations renewed their advance, 97,000 new non-defense employees have been added at the 18 most active rulemaking departments and agencies.

IV. Which Agencies Are Responsible for the Flood of Regulations?
Costs, Federal Register page counts) rules reviewed, the absence of benefit calculations, new growth in published final rules, and employment trends appear to confirm that federal regulation is mounting a substantial comeback. Setting aside the fact that many rules are driven by statute, which agencies and departments are the "faces" behind the general surge? Fully in accord with Pareto's unofficial law of nature, roughly 20 percent of the federal agencies account for 80 percent of the rules reviewed by OIRA each year. More specifically and for example, the top ten rule-producing agencies in 1990 comprised 19 percent of the 53 agencies whose activities were monitored that year, and accounted for 81.5 percent of the total number of rules issued. This general relationship was equally valid back in 1981, when the top ten's share of rules was 86.1 percent. Even more revealing, the top five rule-producing agencies in 1990 -- Health and Human Services, Agriculture, Commerce, Transportation, and the Environmental Protection Agency -- accounted for 62.9 percent of the total number of rules reviewed that year. The top five counted for about 71.6 percent of the total back in 1981 (See Figure 10). Health and Human Services, which was not in the top five in 1981, increased in prominence over the decade while the Department of the Interior dropped aside. Although the proportion of rulemaking by the top five departments and agencies declined over the decade, rulemaking remains heavily concentrated, probably more so than the public is aware. The component of total major rules produced by the top five agencies is even more concentrated (though not graphically illustrated here): the top five rulemaking agencies accounted for 65 percent of all major rules reviewed in 1981; and increased their share to 76.8 percent in 1990. While concentration in rules reviewed is useful for gaining a loose perspective on which agencies are the engines of regulation, one must be cautious (as with Federal Register page counts) against drawing unwarranted inferences about regulatory burdens from concentration. Note, for example, that Figure 10 further accents the dramatic decrease in EPA's share of the number of rules reviewed -- from 26.5 percent in 1981 to only 8.1 percent in 1990 -- yet the costs EPA imposes are rising in both absolute and relative terms. Note also that concentration in overall rules has decreased while concentration in major rules has increased over the decade. Concentration is a serviceable tool, but it can never be wholly descriptive of regulatory activities because, say, 10 rules from EPA are not necessarily comparable to 10 rules from the Occupational Safety and Health Administration or the Department of the Interior in terms of the costs and burdens they impose. Instead, the aim here is to emphasize that only a relative handful of agencies account for most of the annual rule output, and that this handful tends to account for a rather stable proportion. In the proper context, that knowledge may have important implications for the targeting of

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future policy initiatives. For instance, if USDA's staggering costs are not offset by comparative "social" benefits (borrowing the regulators' terminology), it should quickly be squeezed out of the top five.

V. Beyond Regulatory Review: Overhauling the Regulatory Process
Given that regulatory review as conducted by recent administrations has been unequal to the task of rolling back the regulatory enterprise, what are the prospects for reform under the new administration? Whatever the merits of any particular rule, the central fact about the existing regulatory enterprise is the haphazard manner in which rules are made a part of American life. Increasingly, the bulk of regulations take effect without having been aggressively reviewed or justified and with no factual knowledge about their benefits. Improving management of the regulatory enterprise calls for changes both internal and external to the executive branch's review functions. Either effort faces obstacles. Internal changes, for instance at OIRA, have narrow potential because of narrow enforcement authority, while external changes are likely to face political opposition even if they do not enhance existing executive review. Any effective external reform means Congress and the agencies must relinquish the power to regulate without demonstrating a genuine need for a rule, a power which now unquestionably exists. While internal changes could be more cosmetic than substantive, they shouldn't necessarily be ignored. They might, for example, emerge out of the observation that a loose 80/20 rule applies to the federal agencies' activities. That is (keeping in mind that costs can be masked behind the number of rules), since it is known that a relative handful of agencies are responsible for the bulk of new regulatory burdens, reviewers might concentrate their efforts on that few. Meaningful executive or legislative regulatory reforms must carefully heed the Such reforms should: recognize the probability of political " failure rather than market failure (that the government's solution may have unintended consequences worse than the market "imperfection" allegedly being corrected by regulation); emphasize the efficacy of property rights assignment in the preservation of resources and the elimination of externalities; recognize the desirability of market-oriented alternatives over command options; attempt to increase agency cost disclosure and secure more informative risk assessments; and minimize government's exploitation of regulation as a means of escaping the necessity to tax and spend openly. Greater force of law could be marshalled behind benefit-cost analysis, though it is a highly imperfect technique subject to manipulation, and therefore one in need of checks and balances. (To the extent the other reforms could be institutionalized to protect citizens' individual rights, however, they could limit misuse of benefit-cost analysis.) Optimally, a binding regulatory budget should be enacted since it would create incentives that indirectly promote many of these incremental reforms. Anyone or combination of these measures would tend to promote the cost-effective outcomes which have been the goal of regulatory review. Some of them -- particularly the regulatory budget -- would tend to decentralize the review process, yet they would likely preserve a coordinating and cost-monitoring role for central reviewers like OIRA.

redistributive nature of regulation.
II

13
A. Changes within OmA Obviously, increased dollars and staff could enhance OIRA's thoroughness (or that of a subsequent review body). Where political circumstances prevent increasing the resources devoted to regulatory review, OIRA management might shift personnel and funds to concentrate on 10 key agencies (or some subset of the 10, such as the top five), and perhaps acquire additional help by "detailing," or borrowing, employees from the federal agencies and departments. However, since OIRA already grants special attention to major rules, and since the top few agencies characteristically account for most major rules, OIRA already concentrates its resources for the most part, so this is a limited or even naive option. Alternatively, economists at the targeted agencies whose job it is to assess benefits and costs of regulations and prepare RIAs could be increased by moving economics divisions or personnel out of other less active agencies. This could amplify the scrutiny afforded to new regulations without expanding the resources at OMB.39 Agency economists, deployed among agencies where they are objectively the most useful for managing the regulation flow, could provide greater assurance that more complete benefit-cost analyses were being carried out even without changes at OIRA. Rising cost trends during the past 12 years and the limited scrutiny that even major rules are afforded strongly hint that costs of "minor" rules are largely ignored. Recall that minor rules make up around 96 percent of the absolute number of regulations reviewed, Even during the Carter review programs, when the $100 million major-rule threshold originated, there were a "suspiciously large number of regulations ... projected to cost $9095 million.":" In other words, a substantial number of "minor" rules may have exceeded the threshold but were understated just enough by agencies to squeak past reviewers. Costs of minor rules can easily be downplayed since explicit analysis is not required and review is accordingly less rigorous. A partial remedy may lie in the fact that E,O. 12291 permits the Director of OMB to order rules to be treated as major even when at first blush they do not appear to be, thereby automatically activating the RIA requirement. If this option remains under the new administration, it could be invoked more liberally to force agencies to demonstrate, on paper, that all rules satisfy a minimal benefit-cost calculus. On the other hand, future reviewers should recognize Hopkins's concern that some aggressive agencies may strategically adapt their behavior to the likelihood of review, and present major rules larger than what they would actually be willing to accept in order to preserve room for negotiation and give the appearance of compromise and reasonableness. 41 The total interaction between this possibility and understatement of minor rule costs is not clear; these forces work against one another. Future empirical studies may tell the tale of the conflicting incentive effects of E.O. 12291 's $100 million threshold, and perhaps will hint at better OIRA-initiated strategies. The above suggestions are not meant to be exhaustive.

14 B. Executive Initiatives
Since benefit calculations for two-thirds of 1992 's expected final major rules were absent, adoption and enjoyment of the moral high ground by regulators seems a difficult position to defend. While benefit-cost analysis cannot hope to capture fully all the complex relationships that will be affected by a regulation, progress in reforming regulation can be made if those emphasizing benefits and those emphasizing costs speak the same language rather than improperly frame the regulatory debate as an epic clash between "lives" versus "dollars." On a limited basis, common units of "measurement" can be established given our current knowledge, perhaps through new executive orders that build on wisdom gained from E.O. 12291. Future executive orders can also require greater regulatory scrutiny than presently exists, and can require the systematic elimination of outmoded or ineffective rules. Note, however, that legislative deadlines and strictures still will apply, limiting the effectiveness of any executive initiatives.

Establish common units of measurement for benefits and costs: No matter how aggressive OIRA or any subsequent review body becomes unilaterally, the fact that costs of health and safety regulations are measured in dollars while benefits are so often presented in "lives saved" effectively rules out objective benefit-cost analysis satisfactory to everyone. Do benefits outweigh costs if a rule costing $1 billion will save 1,000 lives? How about if the rule saves 75 lives, or only one life? These are unanswerable questions out of context: the answers depend upon the accepted role of government, the extent of other risks, what alternatives the resources could have been used for, the wealth of the nation, the means of financing the reduction in risk, cost-effectiveness, the source of the hazard, and many more factors. These complexities partly explain agencies' indifference to rigorously calculating benefits beyond a minimum quantitative assessment or even a mere assertion that benefits are present. If life is "priceless," whether one or 1,000, what would be gained by precision? The moral overtones of such questions, coupled with the difficulty of expressing the nuances of relative risks to the public, have kept the critics of regulation on the defensive. This posture naturally benefits those who favor greater regulation even when their claims are highly dubious. Translating benefits and costs into common units of measurement, however, would level the playing field and underscore relative agency effectiveness.
While important as a unilateral executive measure, even an explicit commitment by policymakers to common-unit-of-measurement benefit-cost analysis would not be a panacea: "costs" are a vastly more complex phenomenon than a concrete-bound political process will likely appreciate. The abstract notion that actual costs are experienced primarily internally -as a mental evaluation -- by each affected individual and are therefore not subject to measurement by the decisionmaker, and the facts that certain costs are experienced prior to the passage of a regulation (the costs typically used to justify the rule) while other costs are created by the decision are impossible to communicate, let alone translate into coherent policy. 42 Attempts to approach the necessary precision will not be esteemed by regulators, who usually regard engineering or compliance costs as sufficiently descriptive of the burdens imposed by rules. Even so, securing universal recognition among regulators of the

15
legitimacy of benefit-cost tradeoffs and of the need to communicate benefits and costs in common terminology to a lay public would be a giant step forward. At present, many policy makers do not accept such notions in rulemaking at all, nor do they see a pressing need to balance their rules against those of other agencies. Common units of measurement can be at least approximated, by either (1) making benefits directly comparable across agencies, or (2) explicitly presenting benefits and costs in terms of lives saved or lost. (1) Frame benefits in terms of "life-years saved" to facilitate cross-agency comparisons: When the typical health and safety regulation is said to save lives, the savings or benefits generally occur over the lifetime of members of an affected population, about 70 years. Brian Mannix argues that the savings are perhaps more accurately portrayed as "lifeyears" or improvements in life expectancy" -- as savings of minutes, hours, or years at the end of an affected population member's lifetime. This metric is a less emotional way of comprehending a complex reality at the same time it more accurately presents the workings of a regulation that affects a population. The life-years " approach would also naturally tend to emphasize risk reductions for children, often regarded as a sensitive sub-group. Converting benefits to life-years would make comparisons and selections among regulatory alternatives, even across agencies, easier and more meaningful. Ultimately, the public would be able to make better-informed regulatory choices through its elected representatives. Other methods of making benefits comparable across agencies should be explored and developed as well.
II

(2) Convert regulatory costs into lives lost: A substantial body of literature is growing around the concept that wealthier individuals are healthier, primarily because they can better provide for basic needs and enjoy luxury items that reduce risk. The corollary, of course, is that poorer individuals are less healthy. Excessive regulatory costs will entail job losses and reduced incomes for many workers, with the consequences that these artificially poorer individuals are forced to forego preventive health care, more nutritious food, safety apparatus like smoke detectors, fire extinguishers, cars with air bags, and adequate family insurance protection. The key concept regulators must recognize is that lost incomes can potentially entail loss of life or reduced health states just as perceived regulatable hazards can. A rule costing many millions or billions of dollars per life saved may indirectly cause more deaths than it prevents." While the "break-even" point may be open to intense debate, the concept is not.

Reinstate a regulatory reprieve: As noted earlier, the Bush regulatory moratorium of
1992 never appreciably or permanently reduced the forward march of federal regulation. One problem was that agencies were being asked to "tell us what you did badly" -- a task at odds with agency self-interest. Furthermore, agencies were simply taking on too much in 90 days, far less time than would be needed to examine all the data that could have been generated by an intense, thorough audit. Total savings from the moratorium have been pegged in the low tens of billions of dollars, much of it attributable to EPA, but hard evidence of cost savings is not readily available. Additionally, topping the moratorium with a regulatory "weeding" is a much more onerous project than was appreciated by the 1992

16 effort and will require a more sustained program, because getting regulations off the books requires following the same laborious public notice and comment procedures required of a new rule. "Going back and reviewing stuff is as hard as drafting regulations. 1145 Short of a moratorium, instituting some form of mandatory periodic review at the agencies is a minimum requirement of sensible agency management. President Clinton can set certain standards by which agencies routinely evaluate outstanding rules: What impact on health and safety are current reporting requirements having? Which rules can be eliminated or relaxed without becoming bogged down in scientific disputes over risk assessment? Is the reported data being used at all? Where can risk tolerances be raised? Does the rule justify the health costs it imposes (such as the health costs of advertising restrictions on some badly needed drug)? While such questions can help distill routine procedures that weed out burdensome and harmful rules, the problems of agency self-policing will persist, and the inability to alter statutory mandates still could lead to legislative gaming.

Require lower RIA thresholds and "sunsetting II for non-statutory rules: An energetic
executive's hands are far from tied. Even without wading hip-deep into the regulatory process by reinstating a regulatory moratorium or devising criteria for a mandatory periodic review, the executive can, to a limited extent, automatically reduce the number of rules that escape analysis simply by lowering the threshold at which written Regulatory Impact Analyses are required. As shown, the current $100 million threshold translates into written analysis for only a handful of rules. More rules would be brought within that review umbrella simply by lowering the threshold to $50 million, $25 million, or zero. Lowering the threshold, of course, will not automatically improve the sloppy manner in which costs and especially benefits are currently computed in RIAs. Improving the calculation and presentation of regulatory benefits by expressing benefits and costs in the same terms (as suggested above) remains essential, no matter how low the threshold is set. The president also could require agency-generated regulatory requirements to "sunset" or expire within a given period of time unless they are re-proposed, with public notice and comment, by the issuing agency. Rules failing a benefit-cost test on the second go-round or rules that become outdated would be automatically eliminated.

Issue an executive order for risk assessment: A risk assessment order could help separate policy issues from scientific ones. It is a policy decision rather than a purely scientific or descriptive one to determine, for instance, what level of risk tolerance is appropriate in a given circumstance (such as whether a risk of one in a million or one in 10,000 is reasonable). Science merely describes the level of a hazard; it does not reveal or specify the appropriate trade-off between the hazard at issue and other reducible risks a society or individual faces. For example, so long as public funds are involved, policymakers should offset the lives saved by asbestos removal with those that could have been saved by allocating those same funds to childhood immunization programs or to the construction of divided highways. It also is a policy rather than scientific decision to require that risks be expressed by agencies as best estimates rather than entirely as worst-case assumptions.

17 Focusing on the latter can itself carry a risk of concealing probable risks while emphasizing less likely ones.

c.

Legislative Initiatives

Any of the executive-initiated process reforms covered above could be implemented with greater effect by the legislature since the standards would then apply to all regulations, rather than simply those open to unilateral change by the executive branch. Measures such as sunsetting requirements and a moratorium or periodic regulatory housecleaning obviously would have far more impact as legislative actions. Other critical legislative measures that would enhance the executive branch's regulatory scrutiny, such as strengthening OIRA (or its successor) and reinforcing the Paperwork Reduction Act by closing loopholes that allow agencies to escape some paperwork review requirements, have been recommended by James C. Miller III and Phillip Mink.46 A more sweeping alternative they cite is the enactment of a regulatory budget that would cap the total amount of regulatory compliance costs that agencies, taken together, may impose upon the economy. Whatever the means chosen, the ultimate end of regulatory reform, broadly construed, should be to eliminate the institutional or structural ability of regulators to gain by masking regulatory costs or otherwise transferring them to others unfairly or without their consent. Competent and constructive legislative reforms must have greater appreciation of these "political failures" and install process mechanisms that prevent manipulation of either benefit-cost analysis or the regulatory budgeting process -- the most powerful regulatory policing tools the Congress can require short of abolishing preemptive regulation altogether.

Require benefit-cost standards with due process or "takings" provisions for all new regulations: A benefit-cost standard alone is not a check on the growth of government or on
regulatory excess. The subjective nature of costs and benefits -- the fact that benefits and costs are not externally observable in any meaningful sense -- will always elude the best intentions of any third-party governmental decision-maker. Arbitrarily high intensities assigned to benefits experienced or assumed benefits can theoretically make any proposed regulation viable if costs are not taken seriously, which is exactly what has been happening to major rules under E.O. 12291. Benefit-cost analysis that focuses on societal net benefits alone, such as typical analysis of environmental regulation, will naturally fail to take into account transfers of wealth. Unless Congress imposes appropriate checks, "society" will unfairly work to gain benefits for itself by forcing a few unfortunates to shoulder regulatory costs. A benefit-cost standard that systematically can impose the entire costs of a rule on a few political losers -such as private landowners -- when the regulation purportedly benefits society in general will be a standard biased toward excessive regulation. Regulation is overly cheap relative to other goods in such a regime, and society naturally "buys" too much. The net public benefit standard, then -- the goal of benefit-cost as currently construed -- is in no way synonymous with fairness, but represents a crude form of nearsighted

18 utilitarianism, or a policy of "greatest good for the greatest number," which must be carefully guarded against. The resulting taking of private resources without compensation can be one of the more pernicious aspects of regulation, whether it occurs as wealth transfers between competing interest groups or as outright losses to individuals and society. Compensation for property owners in appropriate circumstances is not only fair; it tempers knee-jerk regulation by requiring regulatory advocates to share in the costs of their demands rather than shifting all those costs to others. Compensation should be a core component of any enhanced benefit-cost standard. A notable example of the compensation principle in action is the efforts of the group Defenders of Wildlife to preserve wolves on Western ranches by paying $5,000 to landowners who successfully rear wolf pups on their property. 47 Another example is Illinois's proposed Cash for Clunkers program, which allows firms to delay certain air pollution controls when they purchase pre-1980 automobiles from their owners and junk them. Such old cars, while they account for only 10 percent of the road fleet, generate an estimated 30 percent of auto emissions." With little abstraction, similar compensation or buyback principles can be tailored to preservation of wetlands, spotted owls, and to numerous other ecological concerns.

Enact a regulatory budget that statutorily prohibits input or product bans: A
comprehensive regulatory budget would probably be the single most effective mechanism for managing the regulatory enterprise, because it would limit the total amount of regulatory costs imposed upon the economy and perhaps indirectly force agencies to adopt some combination or all of the above reforms in the process. The weightiest criticism leveled against the regulatory budget -- interestingly a criticism most often heard from advocates of regulatory reform -- is that the budget's compliance cost calculations would become intractable. How would we know that an agency is within its budget? (Compliance cost allowances would presumably be based upon the potential benefits that could reasonably fall within a given agency's jurisdiction.) It is obviously true that cost calculations would be complex, would require numerous hours to collect and certify, and would be potentially misleading for the reasons expressed above (i.e., agencies would attempt to emphasize "compliance" costs rather than base opportunity costs, lost profits, wealth transfers, or postdecision costs). But what ideal are the regulatory budget's cost calculations being compared to by critics? Budget cost information would be far easier to manage than separate cost and benefit calculations for every single rule, which airtight benefit-cost analysis or a "perfect" version of the current review program would necessitate. Moreover, agency incentives to hide or understate compliance costs by simply banning products or inputs can be eliminated by prohibiting agencies from banning altogether, except in the most extreme, isolated circumstances. That alone would remove one of the biggest uncertainties surrounding regulatory cost calculations. There is abundant reason for such restraint on agencies. An agency is not omniscient: the mere fact that in its prevailing context of knowledge an agency may be unable to "think" of a way to render a certain chemical, input, or product safer does not preclude the

19
possibility of someone else doing so directly, or otherwise minimizing effective exposure to the hazard and reducing it to a far-above-tolerable level. Agencies' penchant for banning is the stealth force behind such current initiatives as toxics use reduction, source reduction, and pollution prevention, and regulatory reformers stand to lose a major war if they do not assume an aggressive posture on this matter. Agencies must be permitted only to set standards for effective exposure in given instances where risks are present, rarely should agencies have the ability to ban outright; there are no non-hazardous substances under the

sun."
Regulators are not now rigorously calculating benefits, nor is there any structural or incentive-based reason for them to do so. Under a regulatory budget, this indifference would no longer be a concern in the sense that it is now. A budget would formally relieve agencies of their benefit calculation responsibilities altogether, because at agencies there exist inherent and irreconcilable conflicts between political rewards and admitting that a rule has no benefits. Under a regulatory budget, agencies would concentrate on properly assessing the costs of their initiatives (though it would be to their advantage to monitor benefits to keep their allotted budget from being revoked or transferred to other agencies). Beyond eliminating an otherwise politically insurmountable conflict of interest, relieving agencies of the duty of calculating benefits would automatically cut agency workloads (conceivably) by up to half that required of them under the alternative of a hyper-stringent benefit-cost regime, freeing resources to focus on keeping costs within budget and selecting only the most urgent targets for regulation. The task of allocating the compliance costs that a given agency or department could impose within the strictures of its individual budget would necessarily become a competitive endeavor. Since agencies have differing impacts on human health and the economy, individual agency budgets will be unequal. Among third-party monitors of the federal bureaucracy, a statistic apt to become popular under a regulatory budget would be the "cost of the last life saved" at a given agency. The calculation of such figures by outsiders for the purpose of cross-agency comparisons would likely become fixtures of public health and public policy literature, and these findings would serve a crucial function: they would fuel a competitive arena in which regulatory "benefits" are actively calculated and monitored by non-agency personnel rather than primarily the agency. Pressure would be placed on an agency to save lives at low cost or have its budget transferred to another agency that can do better with the same resources. Put simply, a regulatory budget would force health and safety agencies to compete with one another on the most consequential regulatory "bottom line" of all: that their least effective mandates save more lives per dollar (or correct some alleged market imperfection better) than another agency's rules do. Ideally, the overall regulatory budget (say as a percentage of GDP, for argument's sake) would be allocated such that further reshuffling of regulatory cost caps among health and safety agencies could save no more lives. Of course, under a budget, agencies have an incentive to underestimate compliance costs while regulated parties have an incentive to overstate them. Toward ensuring that

20 regulatory costs are truthfully computed and the budget cap is not exceeded, self-correcting mechanisms (in addition to the removal of agencies' rights to ban) could be devised that would tend to force agency cost estimates and the regulated parties' cost calculations to converge over time, which would assist in the formation of future budgets and streamline the overall process. An example is an agency's setting of non-compliance fees to be paid by those unable to obey a particular regulation, such as a pollution-emission standard. If a noncompliance fee is set too high, an agency unnecessarily depletes part of its budget allowance and cannot address other potentially more serious hazards; too Iowa fee and firms pay to "opt out" and the regulatory goal is never met." The true cost of the regulatory goal tends to emerge from these interactions as agencies are forced to direct their budgets toward real hazards or lose their budget share to another agency.

VI. Conclusion
The regulatory history since 1980 reveals a newly intensifying regulatory burden in spite of formalized regulatory review, a burden little affected even by a presidential moratorium. Costs of regulation are up while benefits are more ambiguous (or conspicuously absent) than ever; Federal Register page counts are moving apace again; the total number of proposed and finished regulations reviewed is rising (and jumped up sharply in 1991); major rules reviewed increased dramatically; final rule documents, though they had been declining in the late 1980s, reflect increased regulatory activity; and agency employment is up. Any such metric regarded in isolation wouldn't necessarily be cause for alarm. But taken together, these trends point to a regulatory process that itself is in need of greater regulation. Moreover, these burdens are mounting without any guarantee of concurrent benefits: in 1992 alone, 57 new major regulations were expected to be finalized, with annual costs of $15 billion according to conservative agency estimates, yet benefits to health are "known" for only 28 percent of them, and benefits of any kind "known" for only 33 percent. Hopkins's analysis implies that there have been some significant and lasting successes in regulatory reform over the last decade or so, at least in terms of declining economic regulation in some sectors. Yet environmental and health and safety regulations -- and their accompanying paperwork requirements -- are increasingly overtaking these successes. While a satisfactory theory of regulatory growth must await a cogent explanation of why health and safety regulation has grown even as economic regulation has decreased," an improved regulatory review process in the executive branch can begin placing appropriate constraints on what clearly remains a largely unmanaged process. Further steps, far more fundamental in their recognition of the recent regime's failures, and therefore far more politically contentious, call for coping with the legislative realities that prevent the making of legitimate regulatory assessments, and that consequently prevent rational, informed action from being taken. Genuine regulatory reforms -- such as a workable regulatory budget -- must come through institutional changes that tightly specify the purpose and reach of regulation while preventing uncompensated wealth transfers away from non-negligent parties. Regulatory reform, as opposed to tinkering, will require a perhaps unprecedented relinquishing of power

21 by agencies and legislators. The benefit-of-the-doubt give way to one that demands proof. standard that regulators enjoy must

22

Evidence and Authorities 1. This title is reminiscent of Harold Fleming, Ten Thousand Commandments: A Story of the Antitrust Laws. New York: Prentice-Hall, 1951. While the subject matter has changed,
trends in regulation renew its appropriateness. 2. Quoted in "Rafts of Regulations," Editorial in the Orange County Register. December 27, 1991. Friday,

3. Chris DeMuth, "Constraining Regulatory Costs, Part One: The White House Review Programs," Regulation, January/February 1980, pp. 16 and 20. 4. A. B. Laffer, V.A. Canto & Associates, "The Ubiquitous Regulatory Wedge," March 13, 1992. An ordinary least squares estimation of this relationship was found to be statistically significant by Citizens for a Sound Economy Foundation. In a simple OLS model with 55 observations (years 1936-91), weighted pages is negatively correlated with economic performance, with an R-squared of 50.6 percent and a t-statistic of -7.37. 5. In 1981, Thomas D. Hopkins, et. al. prepared an analysis of the regulatory interventions of the Council on Wage and Price Stability. Since its establishment in 1974, the Council had intervened in over 300 rulemaking and ratemaking proceedings of 27 federal agencies. "The Council's filings ... have consistently opposed government intervention in properly functioning competitive markets, and have consistently supported a reduction in regulation where markets could function properly in its absence." In the report, Hopkins examined the effectiveness of the Council's 1978 interventions by comparing initial regulatory proposals with final rules. Of the 24 (out of 31) proposals for which final rules had been issued, the group found 17 showed improvement in terms of economic efficiency. A Review of the

Regulatory Interventions of the Council on Wage and Price Stability: 1974-1980.
Manuscript, January 1981. 6. Thomas D. Hopkins, "The Costs of Federal Regulation," Journal of Regulation and Social Costs. Volume 2, Number 1, March 1992, p. 25. Costs are presented in 1988 dollars. 7. "Need for Monitoring Federal Regulations Continues, Quayle Says," Daily Report for Executives, Bureau of National Affairs, August 10, 1992. p. A-9. 8. "Gray, Boskin to Supervise Implementation of Regulatory Moratorium, 9. 1988 GDP data from Economic Report of the President. billion/$4900.4 billion = .08. Rule Reviews,"

Daily Report for Executives, Bureau of National Affairs, January 30, 1992. p. A-4.
February 1992. $392

10. Paul R. Portney, "Policy Watch: Economics and the Clean Air Act," Journal of Economic Perspectives. Volume 4, Number 4, Fall 1990, p. 179.

23 11. "Baucus Calls RCRA Amendments Uncertain: EPA Says S. 976 Could Cost $46 Billion, II Daily Report for Executives, Bureau of National Affairs, July 14, 1992, p. A-l3. 12. See, for example, Robert Crandall, "The Clean Air Act at Twenty," Journal of Regulation and Social Costs. Volume 1, Number 1, September 1990. 13. For a highly accessible overview, see Robert Crandall, Why is the Cost of Environmental Regulation So High? Center for the Study of American Business, Policy Study Number 110, February 1992. 14. Output for bureaus is not directly measurable, but must be inferred from the level of activity. This creates a slippage in the ability to closely monitor agency effectiveness. See William A. Niskanen, Jr. Bureaucracy and Representative Government. Chicago: AldineAtherton, 1971. 15. A prominent empirical study of Federal Trade Commission antitrust rulings finds considerable support for the hypothesis of systematic congressional influence (in this case congressional oversight committees) over that agency's decisions. Barry Weingast and Mark Moran, "Bureaucratic Decision Making or Congressional Control? Policy making by the Federal Trade Commission," Journal of Political Economy. 1983, Vol. 91, No.5, pp. 765800. See also Roger Faith, Donald Leavens, and Robert Tollison, "Antitrust Pork Barrel, " Journal of Law and Economics. October 1982, Vo1. 15, pp. 329-342. 16. Jonathan Rauch, "The Regulatory President," National Journal. 2903. November 30, 1991, p.

17. The theoretical groundwork for later empirical studies was most completely presented in Sam Peltzman, "Toward a More General Theory of Regulation," Journal of Law and Economics, August 1976, Volume 19, pp. 211-240. 18. For the seminal discussion on group behavior and free-riding see Mancur Olson, The

Logic of Collective Action (Cambridge: Harvard University Press, 1965).
19. For development of the idea of "demanders and suppliers of wealth transfers" and extensive empirical tests using the 50 states as experimental "laboratories," see Robert E. McCormick and Robert D. Tollison, Politicians, Legislation, and the Economy: An Inquiry into the Interest Group Theory of Government (Boston: Martinus Nijhoff, 1982). 20. James C. Miller III, William F. Shughart II, and Robert D. Tollison, "A Note on Centralized Regulatory Review," Public Choice. 1984, 43, p. 83. 21. Dennis C. Mueller, Public Choice II (Cambridge: Cambridge University Press, 1989), p.245. 22. "Bush to Extend Regulatory Moratorium for 90 Days or Longer," Daily Report for

Executives, Bureau of National Affairs, April 24, 1992, p. A-20.

24 23. Fact Sheet on the President's Regulatory Reform Initiative, The White House, April 29, 1992, p. 1. 24. "Memorandum for Certain Department and Agency Heads. Subject: Reducing the Burden of Government Regulations," White House Memo signed by President Bush, January 28, 1992. 25. In 1991, total rules reviewed at the 20 most active agencies were as follows (in descending order): Agriculture (418), Health and Human Services (402), Transportation (257), Commerce (208), Environmental Protection Agency (185), Justice (133), Housing and Urban Development (125), Education (124), Interior (115), Office of Personnel Management (87), Veterans Affairs (71), Treasury (52), Labor (47), State (46), General Services Administration (37), Small Business Administration (34), Energy (33), Defense (25), Railroad Retirement Board (21), Federal Emergency Management Agency (19). From the 1992-93 Regulatory Program of the United States Government, p. 606. 26. Summarized in "Executive Order No. 12291: Annual Report for 1990," Regulatory Program of the United States Government, Appendix IV, p. 703. 27. "Reforming Regulation and Managing Risk Reduction," Government for Fiscal Year 1993, Part One. pp. 402-406. Budget of the United States

28. Agencies are often chastised for undercounting regulatory costs, such as by counting only "engineering" costs in their RIAs. They habitually neglect the tolls product bans and command-and-control rules take on consumer welfare. A prominent example of an agency's underestimation of regulatory costs was presented in Citizens for a Sound Economy Foundation's comments to OIRA on EPA's Clean Air Act permitting regulations. CSEF demonstrated that actual costs of implementing the rules would be 100 times higher than EP A's estimate. 29. "Regulatory Reform and Program for 1993," Budget Baselines, Historical Data, and Alternatives for the Future, January 1993, pp. 114-115. 30. 1992-93 Regulatory Program of the United States Government, "Introduction," p. 35.

31. 1992-93 Regulatory Program, p. 611.
32. "New requirement[s]" and "revision[s] to existing requirements" are shown net of "elimination of existing requirements." The final rule document category "all other" is omitted since these "others" include non-OIRA-reviewed items such as agency schedule changes, workshop notices, corrections, notices, administrative trivia (i.e., "x" will now be handled by ... ), and rules that apply only to the agencies themselves. These "others" do not directly represent new regulatory burdens and so are excluded as a component of final rule pages (although there may be some correlation with the level of other final rule documents and regulatory outcomes). The four kinds of final rule documents and the numbers of each

25 are listed in the 1992-93 Regulatory Program of the United States Government, Appendix IV, p.623. 33. The Regulatory Program provides the numbers of proposed and final rule documents, but not the number of pages they occupy, so number of pages devoted to each kind of document is estimated on a percentage basis rather than directly observed. The embedded assumption in the estimate of pages devoted to final rules is that proposed rule documents and final rule documents are roughly equal in length. p. 623. 34. Alan Carlin, Environmental Investments: The Cost of a Clean Environment, A Summary, EPA-230-12-90-084, December 1990, p. vii. 35. Hopkins, 1992, p. 18. 36. 1990 Regulatory Program of the United States Government, Appendix IV, p. 707. 37. Telephone conversation with Mark G. Schoenberg, Executive Director of the Regulatory Information Service Center, December 7, 1992. 38. The 18 most active are taken from the 20 most active for the decade (1992-93 Regulatory Program, p. 609), but leaving aside the departments of Defense and State. For reference, the list is the same as that provided in footnote 25, except the Railroad Retirement Board is excluded and NASA is added. 39. Economics divisions within regulatory agencies sometimes are barely more popular than the economists at OIRA. An economics staffer at the Department of Health and Human Services reported that exasperated regulation writers within HHS sometimes ask if she works for OIRA. 40. Chris DeMuth, January/February 1980, p. 21.

41. Hopkins, 1981, p. v. See also Chris DeMuth [footnote 3 above, p. 21], who voices the same concern. 42. See James Buchanan, Cost and Choice. pp. 38-50, for an important description of the subjectivity of costs. 43. Brian Mannix, "Buying Time: A Perspective on Risk-Reducing Regulation," Manuscript, Buckland Mill Associates, 1992. 44. See Ralph Keeney, "Mortality Risks Induced by Economic Expenditures," Vol. 10, No.1, 1990, p. 147-159.

Risk Analysis,

45. Quote by Linda Fisher, who oversees EPA pesticide regulation. Bob Davis, "Bush Preparing Program for Agencies to Weed Out Federal Rules Periodically, II Wall Street Journal, September 4, 1992.

26 46. James C. Miller III and Phillip Mink, "The Ink of the Octopus: An Agenda for Deregulation," Policy Review, Summer 1992, pp. 4-12. 47. Terry L. Anderson, "Wolves in the Marketplace," Wall Street Journal, 1992.

48. Stevenson Swanson, "State Program Gets 1st Beaters Off Road," Chicago Tribune, October 29, 1992, Section 2, p. 2. 49. See the work of Dr. Bruce Ames for surprising descriptions of the "hazards" of natural, rather than manmade, chemicals. Natural substances -- such as coffee and celery -- are often many times "riskier" than suspect manmade carcinogens. 50. See Lawrence J. White, "Truth in Regulatory Budgeting," Regulation, March/ April 1980, pp. 44-46. 51. As noted by Robert Crandall in "General Discussion" on Sam Peltz man , "The Economic Theory of Regulation After a Decade of Deregulation," Brookings Papers on Economic Activity: Microeconomics, 1989, p. 59.