Who’s Afraid of Cost-Benefit Analysis?

Cost Benefit Analysis(1)E&E Daily reported this week that Congressional Democrats are opposing the Regulatory Accountability Act of 2011. H.R. 3010 would codify a requirement for cost-benefit analysis of major regulations in the Administrative Procedures Act. According to the report, John Conyers, ranking member on the House Judiciary Committee stated that the RAA

would amend the Administrative Procedure Act in ways that would effectively halt agency rulemaking and undermine public health and safety rules.

Excuse me?

The guts of the RAA would be to:

  • Require cost-benefit analysis for all rules expected to cost more than $100,000,000
  • Require cost-effectiveness for rules going beyond statutory minimum requirements – If EPA wants to impose rules that would cost more than the minimum requirements necessary to implement a statutory requirement, it must demonstrate that the marginal cost of the increased stringency is outweighed by the marginal benefit.
  •  Set some limits on agency promulgation of guidance. I am particularly taken with the provision that would authorize the Administrator of the Office of Information and Regulatory Affairs to “issue guidelines for use by the agencies in the issuance of major guidance and other guidance.” My Massachusetts readers will recall the effort by NAIOP to require that our MassDEP issue “Guidance on Guidance”, setting ground rules on the use of guidance. The NAIOP ground rules are fairly similar to those in the RAA.

I’m sorry. I am not a political consultant, but I still don’t get the Democrats’ opposition to this. There is definitely stuff in the RAA that is easy not to like. That’s fine, but when Democrats oppose cost-benefit analysis, it just sounds dumb. It plays into the anti-regulatory crowd’s hands. It suggests that there isn’t a regulation out there that Democrats don’t like and that Democrats don’t care whether regulations actually benefit society.

My advice, for what it’s worth? The Democrats should take up the mantle of cost-benefit analysis. Challenge the GOP to demonstrate that they are not simply using cost-benefit analysis as a cudgel to stop all regulations, by making clear that the Democrats regard cost-benefit analysis, not as a way to end regulation, but as a valuable tool to make sure the regulatory process works as it should.

I remain an optimist.

who's afraid

One thought on “Who’s Afraid of Cost-Benefit Analysis?

  1. Seth, While I agree with your position for the most part, I think there needs to be an “escape clause” for EPA’s responsibilities for protection of inherent benefits that cannot be objectively monetized.. Prime example: “biodiversity”, including but not limited to endangered species and ecologically important habitats. Sometimes reasonably monetizing these can occur (e.g,coastal wetlands fisheries and flood protection values, tourism and fisheries support values of reefs and mangroves in a small geographic area like Florida or Belize), Sometimes they cannot, e.g., where the species or habitat is disconnected from human use.People have purported to monetize these “disconnected” inherent values, but never, in my experience, with broadly defensible credibility. So, if the Legislation doesn’t already include such language, I’d suggest requiring EPA to obtain and give weight to robust stakeholder inputs on benefits that may not be readuly monetized..

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