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Penn Law Scholars Offer Advice to Obama Administration on Improving Federal Regulation

April 02, 2009

The federal government should take steps to improve the process of creating new regulations, three scholars at the University of Pennsylvania Law School recommend in comments submitted to the federal government as part of a review process ordered by President Obama.

They suggest seeking greater public input into proposed regulations, forcing regulatory agencies to work more closely together, and evaluating rules not only by using a strict cost-benefit analysis but also by examining whether the regulation’s effects will unduly penalize the poor.
“The time is ripe to instruct agencies to integrate equity considerations into their analyses,” said Matthew D. Adler, the Leon Meltzer Professor of Law. “Only a utilitarian would approve a process for governmental choice that ignores equity. Most economists are not utilitarians.  My guess is that President Obama is not, either.”
Adler and two other members of the Penn Program on Regulation (PPR) – its director, Cary Coglianese, Edward B. Shils Professor of Law and associate dean of the Law School, and Adam Finkel, PPR’s executive director and a fellow at the Law School – made their recommendations in separate, individual filings with the Office of Management and Budget (OMB), which Obama has directed to find ways to improve the regulatory process.
Coglianese, who chaired a nonpartisan task force last year that issued 25 recommendations on improving the transparency of government rule making and enhancing the role of public participation, said that too often “agencies’ rationales for their regulations seem to be little more than after-the-fact rationalizations.”
He added that “when agencies insulate themselves too much from the public, they are more likely to regulate badly and generate distrust.” The task force he chaired recommended that agencies “do a better job of seeking citizen comment early enough in the process to make meaningful changes in proposed regulations” and seek out “all interest groups in an even-handed manner instead of shying away from meeting with any groups at all or meeting only with groups representing just one side of a regulatory issue.”
[In 2006, Coglianese moderated a discussion held at Penn Law among five former administrators of the Office of Information and Regulatory Affairs, the office that oversees federal rulemaking. A copy of those proceedings is available here and was also submitted to OMB this week.]
In his comments to OMB, Adler praised cost-benefit analysis for providing a rigorous, systematic, and implementable framework for evaluating regulatory proposals but criticized federal rulemaking for not also undertaking quantifiable assessments of the distributional effects of these same regulations. For example, in some cases cost-benefit analysis can show that a policy will improve the status quo, but further study would also demonstrate that the policy will increase income inequality. In those cases, agencies should be required to explain why one consideration trumps the other.
“Even when agencies follow a cost-benefit analysis and propose a regulation that scores poorly on an equity test, acknowledging the inequitable impact will spur the political process to address the equity failure,” Adler said.
Finkel recommended that OIRA should be given more authority to require agencies to work collaboratively on issues that cross institutional boundaries. He also called on OIRA to correct the biases he claims have existed in its process of reviewing regulations.
“We need to admit that OIRA has never provided a dispassionate second opinion on agency actions,” he said. “Instead, it has facilitated its own vicious circle of underestimated risk, exaggerated cost, and inadequate solutions.”
Finkel, who led the U.S. Occupational Safety and Health Administration’s regulatory interactions with OIRA from 1995 to 2000, also recommended that the Executive Branch hire more staff capable of evaluating the science behind risk assessments or instruct OIRA to review agency cost-benefit analyses “without second-guessing scientific conclusions outside its expertise.”