Changing The Rules On Regulations

A new directive from President George W. Bush to federal agencies adds layers of bureaucracy to the process of issuing regulations and gives the White House greater control over agencies' rules.

Critics say the directive, issued Jan. 18, will slow down regulation. They say it also shifts regulatory priorities, which were set by Congress in federal laws, away from protection of health and environment to economic rationales.

Some industry groups, including the U.S. Chamber of Commerce, praise the directive. "It's the first truly significant attempt by an Administration to hold federal bureaucrats to account and insist they act with discretion when imposing new and expensive burdens on businesses and consumers," says William Kovacs, the chamber's vice president of environment, energy, and regulatory affairs.

Under the new directive, agencies can regulate only when they can demonstrate to the White House Office of Management & Budget (OMB) that the free market is not producing the desired results of the rule, such as health protection. To show that a new rule is warranted, agencies must identify what economists call "market failures"—such as when an industrial sector with unfettered pollution sells its products more cheaply than it would have had it included the cost of pollution control into the price of its goods.

In addition, the directive requires each agency to have a presidentially appointed "regulatory policy officer." The agency cannot begin work on a new rule—even one required by Congress through a law—until it gets a green light from its regulatory policy officer or unless the head of the agency gives approval.

Also, the directive requires agencies to calculate the costs and benefits of each of the upcoming rules they plan to issue in a calendar year. The Administration will use these economic analyses to set regulatory priorities for that year.

"These cost-benefit analyses are notoriously biased against regulation, especially long-term goals such as preventing global warming or cancers that manifest years after exposure to toxic substances," says Joan Claybrook, president of the activist group Public Citizen.

Finally, the new directive affects guidance documents, which agencies often distribute to companies to help them comply with regulations or to the public at large. Under the directive, these documents must undergo the same rigorous economic cost-benefit analysis and White House review as regulations currently do.

Jamie Conrad, assistant general counsel for the American Chemistry Council, says the directive will affect the guidelines that the Department of Homeland Security is expected to issue along with its chemical security regulation in April. That guidance document will describe the specific standards that chemical plants and other facilities will have to meet under the regulation, he says.