OIRA Regulatory Review Evolution and Future Impact Analysis

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Summary

• While President Trump has repealed most of President Biden’s OIRA initiatives, they may have a future impact on the OIRA.
• The OIRA and its practices, such as BCA, are considered through a historical lens with consideration of previous US Presidents beyond President Biden"

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Introduction

We read with keen interest Professor Richard L. Revesz’s recent account of how the role of the Office of Information and Regulatory Affairs (OIRA) in regulatory review evolved in the Biden Administration. Since President Biden served only one term and since Proifessor Revesz served as Biden’s OIRA Administrator for only two years (prior to the start of the second Trump Administration), it might be tempting to suspect that durable change was minimal. Indeed, President Trump already has repealed most of President Biden’s regulatory-reform agenda. However, Biden’s OIRA produced several innovations that are worthy of consideration by scholars and practitioners, as we believe that some of them, perhaps in modified form, are likely to reappear in the future.

In this Article, we offer insight into which of the Biden-era innovations may have some durable impact. Readers should recognize that we may harbor biases since we served at OIRA from 2001 through 2006, during the George W. Bush Administration. Indeed, some of the Biden-era innovations changed practices that we played a role in establishing twenty years earlier. We do not address in this comment whether the Biden Administration ensured that each rulemaking had sufficient benefits to justify its costs.

Professor Revesz’s article also provides a new historical account of presidential leadership of regulation based on benefit-cost analysis (BCA). He argues that progressives should be more supportive of BCA because the tool has its origins not under Presidents Richard Nixon and Ronald Reagan (the conventional account), but under Presidents Franklin Delano Roosevelt and Lyndon Baines Johnson. We agree with Professor Revesz’s broader argument that presidential interest in BCA is bipartisan, for reasons that are even more compelling today. However, we critique Professor Revesz’s historical account of presidential oversight of the administrative state. We argue that Professor Revesz understates the role of President Reagan and overstates how much Presidents Roosevelt and Johnson set the stage for centralized review of social regulation using BCA.

We begin with several points of agreement with Professor Revesz about the role of OIRA and BCA in the administrative state. We then discuss some specific Biden-era innovations which may be likely to reappear in future presidential administrations. We conclude with a critique of Professor Revesz’s historical account of BCA and presidential oversight of the administrative state.

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I. Points of Agreement

We start with several key points of agreement with Professor Revesz.

A. Benefits of OIRA’s Managerial Role and Societal Well-Being Perspective

We agree that OIRA brings specialized expertise to regulatory review because it accumulates knowledge through reviews of regulatory analyses and rules prepared by numerous federal agencies. The number and diversity of agencies under review greatly expanded recently, as President Trump required OIRA review of rules from independent agencies, a reform that long has had bipartisan support. As Professor Revesz points out, the Executive Office of the President also has evolved to become increasingly complex—from seven policy components during the Reagan Administration to fifteen under President Biden. Unlike various White House policy councils, OIRA has a substantial and capable career staff that serves across presidential administrations. Finally, new statutes and executive actions increasingly required the coordination of multiple agencies and offices. For OIRA Administrator Revesz, this included, for example, the Inflation Reduction Act and President Biden’s “whole of government” approach to climate and environmental justice. Going forward, additional issues such as national manufacturing policy, permit reform, and emerging technologies such as artificial intelligence will continue to require interagency collaboration. We concur with Professor Revesz that OIRA can make an administration more effective by proactively resolving disagreements, ensuring that both agencies and EOP offices do not act at cross-purposes, and that actions are responsive to the President’s priorities.

OIRA also has deeper knowledge of—and a broader perspective on—BCA than any other single agency; this is important because BCA continues to play an important role in diverse rulemakings. While agencies that are passionately committed to advancing their missions may be vulnerable to “tunnel vision,” OIRA can offer a broader perspective through the benefit-cost framework it manages. We agree with Professor Revesz that BCA is neither “inherently” pro-regulation nor anti-regulation; the focus is on doing more good than harm and thereby maximizing societal well-being.

We also agree with Professor Revesz that OIRA is in a good position to foster the diffusion of best agency practices not only for BCA, but also in areas such as information quality; management of statistical data; public participation in rulemakings; and protection of agency rulemakings from reversal by Congress, courts, or subsequent administrations. And OIRA retains a classic management role as arbiter of interagency disputes, since one agency may not have adequate incentives to account for the interests of another agency during regulatory or deregulation development.

B. Meeting New Demands of Administrative Law

One of Professor Revesz’s insights with which we whole-heartedly agree may be the most valuable, yet most underappreciated. He lucidly explains that the recent evolution of administrative law has made OIRA’s role more important than ever. These changes include Loper Bright Enterprises v. Raimondo overruling Chevron deference to agency interpretations of ambiguous statutes; a new ‘major questions doctrine’ that shifts the power to resolve weighty economic, social, and political issues from agencies back to Congress; increasingly rigorous scrutiny of the reasoning and analysis used to justify regulatory action (e.g., a more muscular arbitrariness standard); the numerous nationwide injunctions from aggressive district court judges; and a potential revival of the nondelegation doctrine. These developments raise challenges for any administration, regardless of its political philosophy.

Professor Revesz states that “the effect of Loper Bright is somewhat difficult to predict” but will increase pressure on agencies to justify how their action is consistent with the “best reading” of the authorizing statute. This will increase the importance of OIRA, providing a forum for experts (in law, analysis and policy) throughout the Executive Branch to weigh in on the agency’s regulation. We agree but would go further.

We believe that Loper Bright not only invites the BCA framework that OIRA manages but necessitates it. As two of Loper Bright’s citations to Michigan v. EPA show, the cost-benefit default rule not only informs the “best reading” of authorizing statutes (e.g., terms that leave agencies with flexibility, such as to regulate as “appropriate” or “reasonable”) but also ensures “reasoned decision making.” “Reasoned decision making,” mandated by the Administrative Procedure Act’s arbitrary and capricious standard and reaffirmed by Loper Bright, requires the consideration of all relevant factors, including costs and benefits and analysis of policy alternatives—unless prohibited by the statute authorizing the rule. And BCA is the only form of regulatory analysis that considers all welfare effects of regulations, while other forms of analysis fall short, often far short. Finally, BCA supports the thoroughness, validity of reasoning, consistency and persuasiveness that under Loper Bright should merit “due respect” from courts for agencies’ statutory interpretations.

Before Loper Bright, courts already were holding that agencies must consider costs and ensure that regulations do more good than harm under the statute authorizing the rule or under the APA’s arbitrary and capricious standard. In many cases, such as Michigan, courts require balancing benefits and costs under both. We think that Loper Bright should accelerate this trajectory toward the cost-benefit state. The probing arbitrariness standard applied by the Supreme Court in Ohio v. EPA further indicates that agencies will have to move beyond conclusory statements to show their rule does more good than harm. Thus, while OIRA always has had a role in the evolution of the cost-benefit state —such as in the Bush 43 era, when we worked with the Environmental Protection Agency (EPA) to design the cost-benefit approach in the Clean Water Act rule upheld in the Supreme Court’s Entergy decision —we envision a much larger role for OIRA going forward.

C. Protecting the Durability of Regulatory Policies

As Professor Revesz explains, OIRA can buttress regulations not only for judicial review, but also for political challenges, especially under the Congressional Review Act (CRA) when the White House changes hands and the incoming president’s party also controls Congress. In our politically polarized times, not only has scrutiny of rules increased from other branches of government, but the consequences of regulatory overreach may be more dire than ever.

Regulators who aggressively push the envelope on their legal authority ultimately may not only jeopardize their policies, but also significantly diminish their agency’s authority in the long run, particularly by creating major risks for litigation or nullification under the CRA. Examples that have backfired on aggressive regulators have mounted in the courts and Congress in recent years.

In response to aggressive assertions of regulatory power, the Supreme Court and the lower courts have checked agencies under many doctrines, including the major questions doctrine; exceeding the “best reading” of the agency’s regulatory authority without Chevron deference; a ‘hard look’ arbitrary and capricious standard; and the failure to reasonably balance costs and benefits, particularly under Michigan v. EPA and Loper Bright. A revived and richer nondelegation doctrine may also be on the horizon. While numerous court decisions struck down regulations of the Obama and Biden administrations, the Trump Administration also has faced many major court challenges, some of which have yet to be resolved. It should be noted that, even where broad policy approaches from agencies may fail, more targeted and better supported initiatives may succeed under intensified judicial review.

Recently, congressional deregulation under the CRA also has substantially increased. Importantly, the enactment of a joint resolution of disapproval not only nullifies the rule but also diminishes the agency’s regulatory authority going forward. A rule disapproved under the CRA “may not be reissued in substantially the same form” in the future without new legislative authority, which currently would require sixty votes in the Senate.

In the twenty years following its enactment in 1996, the CRA was used only once before 2017 to nullify a regulation (in 2001, when newly sworn-in President George W. Bush signed into law S.J. Res. 6, nullifying a controversial ergonomics rule promulgated by the Occupational Safety and Health Administration in the final months of the Clinton Administration). Then during his first term, President Trump signed into law sixteen resolutions of disapproval nullifying Obama Administration rules. On June 30, 2021, President Biden signed into law three CRA resolutions nullifying regulations from President Trump’s first term.

Use of the CRA has reached its highest level during the first year of President Trump’s second term, with twenty-two resolutions of disapproval signed into law as of February 4, 2026. Moreover, some of these disapprovals involve particularly consequential rules. Most notable was the invalidation of three EPA preemption waivers for California to compel electric vehicles under President Biden’s “whole of government” approach to climate policy. These disapprovals and other recent actions have dealt major blows to the Biden Administration’s climate agenda and could sideline such efforts at the federal level for years. Of the forty-two resolutions of disapproval that have become law since enactment of the CRA in 1996 until February 4, 2026, thirty-eight were signed into law by President Trump.

One of the downsides of relying heavily on CRA actions is that the process is somewhat divorced from the BCA framework that has developed since the Reagan years. A rule with positive net benefits may be repealed under the CRA; a rule with insufficient benefits to justify its costs may survive CRA review. Even more problematic, the CRA may not be used to amend a rule to make it more cost-effective; a CRA action is an all-or-nothing enterprise. Although members of Congress may be made aware of the regulatory analyses prepared in support of rulemakings, there is no formal role for BCA under the CRA. Thus, studies are needed to determine whether BCA plays any significant role in the polarized settings for CRA actions.

Notably, not all ambitious rules proposed during the Biden Administration were finalized; some legally dubious rules that might have faced formidable challenges in the courts or Congress were withdrawn after the Republicans gained a trifecta in the November 2024 elections. This avoided potentially larger long-term constraints on the agency’s regulatory authority.

Given different presidential priorities and the relatively small size of OIRA’s staff (between forty and sixty full-time equivalents in the post-1990 period), OIRA does not play each of its roles to an equal degree in each administration. If OIRA serves only some of the above roles, it does not take much accomplishment to justify its modest costs to the taxpayer. For example, if OIRA causes even a single $1 billion rulemaking to have 10% more benefits or 10% fewer costs, the $100 million societal gain pays for OIRA’s annual budget (less than $10 million) ten times over. If OIRA also ensures that net-beneficial rules survive legal or political challenges, its return on investment can soar. It should not be surprising that both Democratic and Republican presidents have retained OIRA since its authorization in 1980 under President Carter’s Paperwork Reduction Act.

II. The Potential Durability of Biden-Era Initiatives

We turn now to an assessment of the potential durability of President Biden’s regulatory reform initiatives. While most of them have already been repealed by President Trump, we argue that several are likely to reappear in the future, at least in some form, because they are sensible and well supported. We also point to a few that might not have legs or will likely reappear only in a modified form.

A. Should the Public Be Permitted to Arrange Electronic Meetings with OIRA to Discuss Rules Under Review?

Prior to the Biden Administration, most OIRA meetings with the public about rules under review were held in person at OMB after a written request was made by an outside party. To make it easier for the public to express their concerns, the Biden Administration made routine use of electronic meetings, so a concerned party did not need to travel to Washington, DC or hire a Washington-based lawyer to make their case to OIRA. While there are benefits to in-person meetings, electronic meetings are likely to continue in the future. There is a risk that the electronic policy could induce more meetings than the small OIRA staff can accommodate, but the new approach to meetings needs to be implemented through at least two administrations to assess the severity of this problem.

B. When Is a Rule Important Enough to Justify OIRA Review?

President Biden’s Executive Order (EO) 14,094 narrowed the basis for deciding whether a rule is significant enough to justify OIRA review. Previously, an OIRA desk officer could insist upon review of a rule if it raised “novel” legal or policy issues even though it was otherwise non-significant. EO 14,094 deleted the role of the OIRA desk officers on novel issues and allowed review of such rules only if the OIRA Administrator personally determined that the rule raised issues of policy significance to the administration (essentially a political test of significance).

We believe that the Biden Administration’s case for altering the role of the OIRA desk officer was not made adequately. No evidence was presented that OIRA desk officers had used the authority inappropriately. Based on our experience, OIRA’s professional staff were quite capable of determining whether a draft rule might raise novel legal or policy issues. When the staff made that determination, there was an opportunity for political officials to weigh in if they disagreed, though we cannot recall disagreeing with the staff. We do not expect this deletion to reappear in the future. If an agency official wishes to dispute an OIRA desk officer’s novelty determination, they can elevate, request a meeting with the OIRA Administrator, and make that case, just as they can with any other significance determination based on the other considerations in EO 12,866.

C. When Should an Agency Be Required to Perform a Benefit-Cost Analysis of a Rule?

In April 2024, President Biden’s EO 14,094 raised the threshold value for a required benefit-cost analysis from an annual regulatory impact on the economy of $100 million to $200 million or more. The threshold had not been updated for inflation since it was first established in the 1970s. The Order also directed OMB, in the future, to update the threshold every three years. Professor Revesz argues that the change will conserve scarce governmental resources by avoiding detailed formal analysis of low-impact rules.

We believe this issue is more complex than it appears at first blush, though there is merit in considering inflation as one factor in a readjustment. First, while Professor Revesz is correct that “$100 million is not what it used to be” due to inflation, the question is whether the costs required to perform BCA for rules with “an annual effect on the economy of $100 million” to $200 million are justified by the benefits of BCA. Professor Revesz assumes the answer is no—but evidently without having conducted any analysis to support his conjecture. He also asserts that the traditional $100 million threshold “was sweeping in more regulations than had initially been intended.” We are unaware of any intention by the original drafters of Reagan’s EO 12,291, Clinton’s EO 12,866, or indeed any other EO, that it apply to a specific number of rules (which inevitably would change over time, depending on the particular statutes being implemented and the policy preferences of each administration). However, we do not doubt that the traditional $100 million threshold was meant to roughly sort high-consequence, higher priority rules that deserved the resources required to perform BCA from those that did not or were less deserving.

Based on our experience, we suspect that the problem may be the opposite of what Professor Revesz assumes: agencies are not conducting too much BCA, they are conducting too little BCA; and even where agencies are conducting BCA, it far too often is of insufficient quality. Other leading scholars who have carefully studied the regulatory process share our perspective. One EPA study found that “the return to society from improved environmental regulations is more than one thousand times EPA’s investment in the benefit-cost analyses.” Finally, as we have discussed above, we believe that going forward under the Loper Bright doctrine agencies will endanger the viability of their regulations if they do not embrace BCA. Thus, we believe it is penny-wise and pound-foolish to curtail BCA. We also were not surprised when President Trump rescinded this change when he rescinded President Biden’s EO 14,094.

That said, it is possible that a new threshold for BCA could reappear in the future, but our hope is that this would be decided based on a broader reanalysis of the threshold. In the future, it would be worth investigating how much the cost of undertaking BCAs has changed since the 1970s. On the one hand, the compensation paid to benefit-cost analysts (especially in contracting firms outside the federal government) has likely grown faster than the rate of inflation, as have wages throughout the information economy. On the other hand, agencies are now better equipped to undertake BCA more efficiently than they were in the 1970s—they have in-house expertise, computerized data systems, OIRA guidelines, agency-specific guidelines, standardized valuation tools (e.g., value of statistical life), templates from previous rulemakings, and access to targeted training courses on how to produce and interpret BCAs. The Society for Benefit-Cost Analysis and the Society of Risk Analysis did not exist in the 1970s; both now play a helpful role in making BCA a more efficient, competent, and accessible process.

Likewise, the benefits of BCA need to be carefully considered. These benefits include not only more efficient, higher quality regulations, but also regulations that are more likely to withstand judicial scrutiny under the Loper Bright doctrine, as well as political scrutiny. In the future, we think that innovations such as artificial intelligence and “big data” platforms could make BCA both more robust and less expensive to undertake than it is today.

Thus, while we believe Professor Revesz has raised a fair point that the requirement for BCA itself should be subjected to periodic BCAs, to our knowledge, he did not perform an adequate analysis to justify curtailing BCA. Indeed, we would not be surprised if future developments in AI increase the applicability of BCA rather than curtail it.

D. When an Agency Performs a Benefit-Cost Analysis, What Rate of Discount Should Be Applied to Benefits and Costs That Occur in the Future?

For rules that have costs and benefits that occur at different times, the rate of discount used in benefit-cost analysis can influence the comparison of rulemaking alternatives. From 2003 to 2023, OIRA—pursuant to OMB Circular A-4—instructed agencies to report estimates of benefits and costs with at least two rates of discount, 3% and 7%. (Prior to 2003, OIRA recommended first a single rate of 10%, which was lowered to 7% in the George H.W. Bush Administration). A single rate was not recommended in 2003 because of a lack of consensus in the economics profession over what that single rate should be.

Biden’s OIRA revisited this issue and, after a rigorous process of peer review and public comment, required agencies to present results using the single rate of 2%. However, most of the peer reviewers did not support selection of a single rate; they preferred presentation of results with more than one rate to avoid false precision. All past presidents of the Society for Benefit-Cost Analysis also opposed use of a single rate. The Trump Administration has returned to the previous practice of presenting results using both 3% and 7%. In the future, we expect that OIRA will require use of multiple rates, but not necessarily 3% and 7%.

For rules with benefits extending many decades into the future (e.g., climate rules), the Biden-era guidance authorizes agencies to use a rate of discount that declines over time. Although the Trump Administration rescinded this authorization, the 2003 OIRA guidance did not preclude agencies from presenting results with a discount rate that declines over time (in addition to results with 3% and 7%). The declining discount rate has significant support in the environmental economics community, and thus likely will become more common in the future.

E. How Can the Value of Ecosystem Services Play a More Prominent Role in BCA?

Ecosystem services are the benefits that humans derive from ecosystems, such as food, water, and air quality. A special focus is often given to rivers, lakes, oceans, wetlands and forests. In recent decades, the fields of ecology and environmental economics have made great strides in elucidating the value of ecosystem services and providing tools for their measurement in BCA. Under Professor Revesz’s leadership, OIRA produced the first formal guidance for agencies on how to better incorporate the value of ecosystem services in BCA of spending projects and regulations. Since this technical guidance is supported by developments in the literature, it is likely to reappear in future administrations. We also believe the guidance might serve as a model for future guidance from OIRA on specialized topics such as the monetary valuation of health and safety improvements, the impacts of regulation on consumption and investment, and the impacts of regulation on trade. Since Circular A-4 is intended as general guidance on BCA, OIRA guidance on specialized topics is likely to require separate publications.

F. Should Benefit-Cost Analysis or Cost-Effectiveness of Future Climate Rulemakings Be Conducted?

Starting with the Obama Administration, agencies monetized the benefits of climate rules using the social cost of carbon (SCC), which is expressed as a dollar value per ton of pollution prevented. Some analysts who favor stringent climate regulations believe that agencies should be using cost-effectiveness analysis (CEA) rather than BCA in climate rulemakings because the SCC ignores important complexities in the climate science (e.g., potentially catastrophic tipping effects). Until the scientific basis of the SCC improves, BCA of climate regulations may have only limited influence on policy. Indeed, the Biden EPA refused to use the SCC and BCA when setting the CO 2 performance limitations for motor vehicles. This is a concern that Biden’s OIRA did not address adequately. An alternative solution would be to conduct both BCA and CEA of climate rulemakings; Biden’s OIRA moved in the opposite direction by weakening the instruction to agencies to conduct CEA as well as BCA of health, safety and environmental rulemakings. If CEA is used without BCA and the SCC, regulators will make intuitive policy judgements as to whether a specific investment in climate mitigation is worthwhile or too expensive.

G. Should Benefit-Cost Analysis of Climate Rulemakings Include Global Benefits?

A related issue with SCC is whether the benefits of U.S. climate-control rulemakings should include benefits that accrue only to the U.S. public, whether all global benefits should be counted, or whether agencies should report separate estimates for national and global benefits. The 2003 guidance, while not addressing climate specifically, called for agencies to give primary emphasis to benefits to U.S. citizens but it also allowed agencies to report benefits and costs that occur to people around the world. The Biden-era guidance emphasizes global benefits by giving agencies the option of not reporting national benefits if it is not practical to estimate them. Given the extent of technical uncertainty in estimating the global SCC, it seems implausible that a rough estimate of the U.S. SCC cannot be provided. We expect future versions of the guidance to require separate reporting of global and national estimates of the benefits and costs of climate rulemakings, thereby allowing policymakers to decide how much to weigh the alternative estimates in decisionmaking.

H. How Should Behavioral Economics Be Integrated into Market-Failure Analysis and Regulatory Design?

Behavioral economics is the study of human behavior using insights from psychology, sociology, and neuroscience as well as economics. It goes beyond classical economics because it explores systematic departures from rational choice, including policy strategies to cope with the limitations of human rationality. The 2003 version of Circular A-4 did not ignore behavioral economics, but the coverage was quite limited. In the twenty years after the publication of OMB Circular A-4, the literature on behavioral economics exploded.

The market failure provision of EO 12,866 has long been neglected by many agencies but emphasized by OIRA. A benefit of the Biden-era version of Circular A-4 is that it offers some explicit guidance to agencies about how to think about market failure and regulatory design using insights from behavioral economics. Whether the revised guidance gets the specifics right is a source of continuing debate within the scholarly community. Since the revised guidance was rescinded by President Trump, there is time to make sure the specifics are correct. There is no question, however, that the Biden-era guidance took a step forward by recognizing the importance of behavioral economics in market-failure analysis and decisionmaking.

We recommend that OIRA launch a robust market failure initiative. We believe this is a golden age of innovation when the need for the federal government and state and local government to avoid unwarranted market disruptions is critical in many cases, while reasonable regulation may be needed in others. To name just one such example, for both economic and national security reasons, it is urgent that the United States maintains its leadership in AI innovation and quickly and greatly increases the energy and infrastructure needed to support it. A market failure initiative could help avoid costly mistakes that inadvertently could harm highly beneficial innovations. The stakes are high.

I. What Type of Distributional Equity Analysis Should Agencies Undertake to Complement Benefit-Cost Analysis?

Since the 1940s, benefit-cost analysis—when implemented using the Kaldor-Hicks test—has been criticized for focusing solely on overall societal efficiency; notions of distributional equity are not incorporated in conventional BCAs. By the end of the Obama Administration, virtually no progress had been made on equity analysis. The issue was not a priority for the Trump OIRA.

Biden’s OIRA took a bold step by authorizing agencies to weight benefits and costs inversely based on household income (i.e., benefits/costs to the poor receive far greater numerical weight than benefits/costs to the rich). Although there were articles supporting this approach in the peer-reviewed literature, there is no definitive scientific case for any specific weighting system, including the conventional approach (i.e., a social value judgment is required about the weights). OIRA’s peer-review and public-comment processes uncovered serious objections to income weighting. Although the Biden-era guidance instructed agencies to present both conventional and income-weighted results of BCA, there was much criticism—and only limited support for­—treating income-weighted results as the primary results of a BCA. Had agencies attempted to implement income weighting on a widespread basis, the technical implementation challenges would have been daunting.

In the future, a more modest approach to distributional analysis could protect the welfare of low-income Americans (e.g., a separate benefit-cost calculation that reveals how rulemaking alternatives affect low-income people); this approach might gain some traction in administrations of both partisan persuasions. The traditional efficiency-based BCA would be presented separately from the BCA for low-income Americans; both would be part of the standard regulatory impact assessment. While there are a range of expert opinions about the best approach, the Biden OIRA made a significant contribution by nudging OIRA and agencies to consider more distributional equity analysis in rulemaking; a comprehensive study of agency RIAs is needed to determine how much practical progress the agencies made on equity analysis under President Biden.

III. Alternative Historical Perspectives

In his article, Professor Revesz seeks to persuade progressives that presidential control of social regulators through BCA is legitimate by pointing to pathbreaking developments in the Franklin D. Roosevelt (FDR) and Lyndon B. Johnson (LBJ) administrations. Like Professor Revesz, we certainly would like to see more support for OIRA and BCA from progressives. However, while there is some merit in the Professor’s argument, there are important limitations as well, which we explain in detail below. Briefly, modern progressives tend to be more concerned about the application of BCA to social regulation of business (e.g., health, safety, and environmental issues) than to traditional economic regulation (e.g., competition issues) and public spending projects (e.g., water resources). As we explain below, FDR and LBJ extended BCA to selected public spending projects but not to regulation of business, so we do not expect progressives to be moved much by the BCA-related developments under FDR and LBJ.

Professor Revesz points to FDR’s creation of the Bureau of the Budget (BOB) as a separate entity from the U.S. Department of the Treasury and BOB’s early role overseeing information collections. Nixon later transformed BOB into the Office of Management and Budget (OMB). Professor Revesz also points to FDR’s interest in evaluating the benefits and costs of public spending projects such as dams and other water resource projects. Why did FDR not apply BCA to federal regulation of business?

FDR had plenty of opportunities to do so. One opportunity emerged during FDR’s multi-year confrontation with the GOP-majority Congress over the amount of power that should be granted to federal departments and agencies. Professor Revesz does not mention that FDR vetoed legislation that would have made the departments and agencies subservient to the federal judiciary. FDR could have, but did not, incorporate BCA checks into this legislation. Compromise legislation, the Administrative Procedure Act (APA) of 1946, was later signed by President Truman; the APA authorized judicial review of agency action but declined to place federal departments and agencies in the judicial branch. Neither FDR nor Truman insisted that the APA require an explicit balancing of benefits and costs of regulation. Another opportunity occurred earlier, in 1936, when the U.S. Congress mandated that a flood control project funded by the U.S. Army Corps of Engineers must have “benefits to whomsoever they may accrue [that] are in excess of the estimated costs.” FDR and Congress made no effort to extend this analytic practice to regulations of the private sector.

In fairness, BCA was in its infancy in the Roosevelt era. Two British economists, Nicholas Kaldor and John Hicks, published the pioneering theoretical papers on the social efficiency test in BCA in 1939. Even in the water resources area, where BCA was applied first, BCA was not utilized in U.S. project decisionmaking until the 1950s. As Professor Revesz points out, there was no practical guidance for comparing costs and benefits until the Green Book of 1950, so it may be unrealistic to expect that FDR would have been a pioneer of BCA of regulation. Risk assessment tools, which are essential for estimating the risk-reduction benefits for BCA of health and safety regulations, such as chemical exposure regulations, were pioneered by EPA in the 1970s. And the applied methods for monetizing the benefits of social regulation—both revealed preferences and stated preferences—were not established until the 1960s and 1970s.

Professor Revesz is also correct that President Johnson was not only a champion of Great Society anti-poverty and economic development programs; he favored formal evaluations to determine whether spending programs were effective in achieving their social goals. Formal evaluation of federal spending was first recommended in 1947 by the Commission on the Organization of the Executive Branch of the Government (also known as the first Hoover Commission, as it was chaired by former President Herbert Hoover). The Kennedy and Johnson administrations fostered formal program evaluation as part of the performance-based budgeting process.

The practical implementation of performance budgeting began at the U.S. Department of Defense in the 1950s, where Robert McNamara, who served as Secretary of Defense under Presidents Kennedy and Johnson, pioneered the Planning Programming Budgeting System (PPBS). McNamara began with analytic applications to costly weapon systems and later extended PPBS throughout the Defense Department. PPBS featured not BCA but CEA, which is a close cousin of BCA. CEA measures effectiveness in natural, unmonetized units (e.g., payload capacity of a weapon system or number of tooth cavities prevented) whereas BCA, whenever feasible, expresses effectiveness and any other benefits in monetary units and determines whether the benefits justify the costs. The Department of Defense drew on analytic expertise from the RAND Corporation, a national security think tank that had spun out of the Air Force after World War II. One of the strongest proponents of PPBS was McNamara’s deputy, Dr. Alain Enthoven, who hired analysts from industry and universities to help implement PPBS. President Johnson was so impressed with McNamara’s initiative that, in October 1965, he extended the requirement for PPBS to spending programs throughout the federal government, including the Great Society anti-poverty programs and economic development programs.

The reaction of progressives to formal analytic methods was influenced by the activities of the “Whiz Kids,” ten ambitious analysts from the statistical-control arm of the Air Force (the most famous being Robert McNamara) who were hired as a group by Ford Motor Company after World War II. They brought the new tools of systems analysis, a broader term that includes CEA and BCA, to Ford and private industry first, and later to the defense and civilian sides of the federal government.

However, BCA of private-sector regulation did not begin in the Johnson Administration. Influenced by the Whiz Kids, a team at the U.S. Army Corps of Engineers, which reported to Dr. Enthoven, invented the idea of applying systems analysis to federal regulation of the private sector as well as federal spending programs. They found no support for this idea in the Johnson Administration (except at the Army Corps); several analysts at the Corps, who were inspired by McNamara and Enthoven, later moved to BOB and OMB where they found receptive ears for BCA of private-sector regulation in the Nixon Administration.

The Kennedy-Johnson Administration’s experience with systems analysis and PPBS was by no means an unqualified success. At the Pentagon, masterful systems analyses addressed virtually every aspect of U.S. military strategy against the Viet Cong and the North Vietnamese. Putting the war effort into rational performance indices proved to be enormously challenging. The tools were ultimately maligned when they were misused by the RAND Corporation, which was under great pressure from the Air Force to show progress against the North Vietnamese; RAND studies made extraordinary yet unverified claims of bombing effectiveness. Other exquisite RAND studies, which revealed the real motives of the Viet Cong, received less attention. Not surprisingly, many progressives—who were active in the anti-war movement—developed some skepticism about the formal analytic tools.

Perhaps more importantly, PPBS was never embraced by the Congress in legislation, in part because the administrative process of PPBS—which was created separately from the standard budget process—proved to be a bureaucratic nightmare. Professor Revesz notes only in a footnote that PPBS died quickly in the Nixon Administration; what survived were the analytic tools and a new generation of analysts who had applied them to problems as diverse as health care quality and military strategy. In the 1990s, formal evaluations of budgetary programs were mandated by the Government Performance and Results Act.

Many Americans know little about Richard Nixon other than that he was the only president to resign from office due to revelation of criminal behavior. Less is known about Nixon’s hand in the expansion of social regulation of business for clean air, clean water, safe drinking water, toxic substances control, endangered species protection, worker safety and health, automotive safety, childhood poisoning prevention, consumer product safety, pesticide safety, environmental impact statements, the rights of women, anti-smoking efforts, voting rights for young adults, rights of the disabled, and telecommunications reform. Nixon was dubbed “the last liberal Republican.” Even less well known is the business community’s backlash against Nixon; Nixon’s response was an executive initiative to supervise social regulators using BCA. Nixon made limited progress on his BCA policy because it was revolutionary and encountered stiff resistance from progressives. The practical implementation of formal analysis of social regulation unfolded during the Ford and Carter administrations through the work of the Council on Wage and Price Stability, the Council of Economic Advisors, and OMB, but only a limited number of regulations were analyzed, and regulators often ignored the results.

The regulatory agencies and progressive Democrats in Congress strongly opposed the efforts to apply BCA to social regulation.

President Reagan was the first to formally require BCA of private-sector regulation (including social regulations), as Ford and Carter had formally required analysis of only costs and regulatory effectiveness, a form of CEA. Professor Revesz states that the Reagan benefit-cost order and the OIRA’s new role were not a “disruptive change.” This statement is not correct, as Reagan’s program was so disruptive that it triggered a backlash in Congress that almost led to OIRA’s abolition.

In Executive Order 12,866, President Clinton, seeking to address concerns about overreliance on quantitative BCA, modified Reagan’s benefit-cost test (to benefits must “justify,” not “outweigh,” costs) to account for qualitative impacts. The Clinton order, like the Reagan order, also directs agencies to “maximize net benefits,” but unlike the Reagan order, explicitly includes “distributive impacts” and “equity.” Clinton’s nuanced benefit-cost test was retained by each succeeding administration. While it is possible that further changes could come in President Trump’s second term, to date he has retained Clinton-era Executive Order 12,866 and extended it to the so-called independent agencies, a change we and many others have long supported.

The bottom line is that it was Nixon and Reagan who played the pivotal roles in the history of BCA of social regulation. Neither FDR nor LBJ initiated this agenda. Given a proper understanding of this history, we should not expect that progressives will be easily persuaded to join Professor Revesz’s call for a stronger role for BCA and OIRA in social regulation. For progressives, BCA and social regulation may remain a somewhat uneasy marriage.

Conclusion

Now that we are well into the second year of the second Trump Administration, it is tempting for scholars of regulatory review to focus only on current developments, without reflecting on what happened in the Biden era. That would be a mistake. Much can be learned from OIRA’s initiatives in the Biden era and, as we have argued, some of Professor Revesz’s initiatives could lead to long-term changes in White House oversight and in analytic practices at OIRA and federal regulatory agencies.

Professor Revesz’s impression is that the revised OIRA guidelines for BCA received a “predominantly positive response.” Our impression is that the reception in the relevant expert communities was mixed. We fear that future administrations may be more inclined, based on the Biden-era experience, to change the guidance in ways that comport with their political philosophy toward regulation. While that may be inevitable, we would prefer that OIRA practices retain the bipartisan orientation that has been evident since President Clinton revised OIRA’s mandate through EO 12,866 and Circular A-4 was issued in the George W. Bush Administration. Although we considered a new executive order on regulatory review when we began our service at OIRA in 2001, we became convinced—particularly by the wise advice of OIRA’s professional staff—that the better course was to retain EO 12,866 in the interests of stability in the regulatory review process. On the details of BCA practices, what should be most important is what new textbooks on BCA recommend and what methods analysts use in future peer-reviewed applications of BCA in the literature. OIRA guidance that is disconnected from the state of the art will not be sustainable or credible.

In the future, we believe OIRA’s staffing will need to increase significantly since the volume and depth of its workload has greatly expanded, including reviewing rules of the so-called independent agencies and meeting new demands of administrative law. Unfortunately, OIRA’s staff and resources have declined significantly since the early 1980s (when it had up to ninety-seven staff), even as its responsibilities have markedly increased and agency staff roughly doubled. We suggest that OIRA’s staff and resources be commensurately increased, though we acknowledge that this case is awkward to make during a period when the Trump Administration and Congress are slashing agencies’ budgets.

We think that both sides of the political spectrum could benefit from the invaluable insights of Professor Revesz. The goal of benefit-cost analysis is neither inherently pro-regulation nor anti-regulation, but to enhance societal well-being. Benefit-cost analysis not only is inevitable, it is desirable; when the government takes important actions, it must know the consequences. Recent developments in administrative law and politics demand effective management of the regulatory state through the benefit-cost framework. There is an enormous return on investment in OIRA for more evidence-based, efficient and sustainable rulemakings—whether they be regulatory or deregulatory—that can stand the test of time. Thus, OIRA’s role has never been more important.

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Endnotes

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Authors

John Graham

Indiana University

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Paul Robert Noe

American Forest & Paper Association

...

View Bio →

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Authors

John Graham

Indiana University

Paul Robert Noe

American Forest & Paper Association

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Committees

This content was produced by:

• Comparative Administrative Law Committee