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Regulatory Management Assessment: United States

I. Background

The United States occupies an overwhelmingly important position in the world today; for Canada, the regulatory policies and regulatory management practices of the United States has had a major impact on domestic activities. As Canada's major trading partner and sharer of a common border, the American influence on Canadian regulation is pervasive. Thus, it is important to understand the background and initiatives of the United States' activities in regulatory reform and management.

The APAUS Constitution establishes three separate entities of government: Congress, the Executive, and the Judiciary. Very early on, the Judiciary established its right to oversee activities of the Executive through judicial review powers. Legislation generally originates in Congress, being subject to numerous compromises as it works its way through the House of Representatives and the Senate. In this sense, the Executive does not maintain anywhere near the same level of control over legislation as is found in parliamentary democracies. Moreover, while Executive departments and single-headed Executive agencies are viewed as directly subordinate to the President, there also exist "independent regulatory commissions and boards" that are viewed as less subordinate to the President and more dependent on Congress.

Under the US Constitution, the States retain residual power over those matters not delegated to the Federal Government or prohibited to the States. The Federal Government has explicit powers over such matters as interstate commerce, the postal system, granting patents and copyright, coining money and declaring war. In practice, the Federal Government has established strong regulatory power over a number of areas, primarily due to expansive reading over the years of the interstate commerce power and even the postal power. For example, civil rights legislation applying to the states was originally based, for the most part, on interstate commerce powers and the use of the postal service. Federal funding in such matters as education and road building has also allowed considerable control over certain activities otherwise reserved to the states. In addition, there have been broad interpretations of the "implied powers" clause, which states that Congress has the power to make laws necessary and proper for exercising the other powers assigned to it.

Regulatory jurisdiction in major economic areas is often concurrent, with both States and the Federal Government regulating. In many instances, the Federal Government has been at the forefront of regulatory reform (e.g., telecommunications, transport) with the States moving more slowly to open markets.

II. Rulemaking

1. The Administrative Procedure Act

Executive departments and agencies in the United States, such as the Department of Transportation and the Environmental Protection Agency, as well as the independent regulatory commissions and boards, such as the Securities and Exchange Commission, the Federal Communications Commission, and the Federal Trade Commission, enjoy a strong power to issue rules that define and elaborate their enabling legislation. The processes for rulemaking are governed by the U.S. Administrative Procedure Act (APA) and, in some cases, by specific provisions in the enabling legislation of the agency or commission.

The APA, enacted in 1946, provides the essential framework for Federal rulemaking. The statute applies to a broad range of agency decision-making, addressing internal agency procedures and structural arrangements and judicial review. It is a statute of general application so that subsequent statutes must explicitly state any modifications made to the APA rulemaking process. There are basically two methods of creating rules: through adjudication and through rulemaking. Notice and comment rulemaking ("informal rulemaking") is the form that, generally speaking, is subject to regulatory reform provisions, including Executive Orders dealing with regulatory impact analysis. Formal rulemaking is rarely used today.

Notice and comment rulemaking procedures begin with the publication of a Notice of Proposed Rulemaking (NPRM) in the Federal Register. The notice period for comment is generally 30 to 60 days, but may be much longer. Regulators may also provide an Advanced Notice of Proposed Rulemaking (ANPRM), which discusses the intention of developing a rule. Generally, there will be a discussion of the perceived problem and some alternatives that may be examined to deal with the problem. The ANPRM may be quite extensive and invites comment and, possibly, involvement in the rulemaking process. In some cases, an agency may also publish request for information about a problem or to determine if a problem exists that is sufficiently serious to justify additional agency involvement.

The basic notice and comment procedure outlined in the APA has over time acquired gloss. Presidential Executive Orders, discussed below, have imposed analytical requirements that are essentially aimed at controlling the proliferation of regulations. Before publishing the NPRM, the proposed rule will be subject to review by the Office of Management and Budget, discussed below, using criteria for review discussed in Executive Orders.

Statutes governing individual agencies have imposed specific procedural requirements on rulemaking and federal court cases have elaborated requirements for informal rulemaking (as well as formal rulemaking) to be highly responsive to public comments. In other words, additional attempts have been made to structure and fetter agency discretion in the name of deregulation, assignment of rights to interested individuals, and suspicion of government action. The U.S. Supreme Court, for example, has required that an "agency must examine the relevant data and articulate a satisfactory explanation of its action, including a 'rational connection between facts and those choice made.'" 1

The APA grants the right to seek judicial review to persons (domestic or foreign) who are aggrieved or adversely affected by agency action, including rule making. Most statutes establishing regulatory programs also provide for judicial review of agency rules. Litigation regarding rulemaking has become common in the United States and was an important stimulant to the interest in negotiated rulemaking, discussed below.

The APA also allows for the public to petition an agency for the issuance, amendment or repeal of a rule. This provision applies not only to substantive rules, but also to interpretations and statements of general policy and to organizational and procedural rules. It applies to both existing rules and proposed or tentative rules. The APA does not contain any specific provisions regarding requests for rulemaking provisions, although some statutes (e.g., Toxic Substances Control Act) mandate certain procedures. Generally, the agency will use the Federal Register to provide notice that a petition has been filed and respond within a reasonable time period, giving reasons for its response.

2. Negotiated Rulemaking or Regulatory Negotiation

Regulatory negotiation was developed in the United States as an alternative mechanism for rulemaking. Strictly speaking, it may be considered as an adjunct to the APA provisions since it is a procedure to be followed prior to the publication of the NPRM. It was endorsed by Congress in the Negotiated Rulemaking Act of 1990, which establishes basis public notice requirements, including provision of an opportunity for members of the public who believe they are inadequately represented on the committee to apply for membership or better representation.

Regulatory negotiation essentially involves bringing the various interests to a table, providing background support and research as necessary, and allowing them to negotiate a regulatory solution under the guidance of an assigned negotiator. Not all areas are suitable for regulatory negotiation, although experience has shown that the range of subjects may be broader than first imagined. Generally, the number of interests identified should not more than twenty-five. An interest is not the same as a party since some parties or interest groups may in effect represent the same interest. In that case, the groups are asked to choose a representative.

The issue must be "ripe" for rulemaking with a solution possible in light of current knowledge and analytical techniques. Deadlines must be imposed to provide an incentive to negotiate seriously; if the negotiations fail, the agency must be prepared to go forward with its own rulemaking process. In other words, the interests have the opportunity to participate and negotiate to see that their concerns are acknowledged in the final rule or they risk being overtaken by agency procedures that may ultimately not allow them to have as much influence. The agency must have sufficient resources to support the negotiating committee and there must not be a likelihood of unreasonable delay. Government officials may participate to ensure the "public interest" is represented and advise on such matters as the scope of regulatory jurisdiction.

In some cases, the negotiations do not produce a rule but a range of possibilities that may be examined further by the agency. For example, the U.S. Department of Transport had been examining rules for airline pilot hours of work for a number of years with several failures in rulemaking. Regulatory negotiation also failed to produce a specific result, but both the pilot unions and the airlines agreed that they could live with a result within a certain range. Because of internal politics, however, they could not actually agree. The agency chose a rule within that range and faced little opposition to its rulemaking.

Experience has shown that regulatory negotiation may work particularly well when there is general agreement on the need for a regulation, but uncertainty about the appropriate content. Thus, the US Architecture and Transportation Barriers Compliance Board, which is concerned about access for persons with disabilities, has promulgated a number of regulations based on a negotiation process. Currently, it is carrying on at least two regulatory negotiations: proposed Access Guidelines for Outdoor Developed Areas and Access Guidelines for Play Areas. The groups representing interests in the latter negotiation include the National Association of Elementary School Principals, the National Council on Independent Living, the Easter Seal Association and the Playground Equipment Manufacturers.

There have been criticisms of regulatory negotiation and some feel that it has not met its claims of reducing litigation or minimizing adversarial relationships. Where heavily adversarial attitudes already exist, it will probably fail, although some contend it can nurture greater trust and respect among the parties who may "agree to disagree." On the other hand, federal agencies have continued to use this technique, as noted above, and it is apparently gaining widespread acceptance at the state and municipal level.

3. Other Rulemaking Provisions

The Regulatory Flexibility Act directs all agencies to give particular attention to the impact of proposed regulation on small businesses and other small entities (including governments). It requires an agency to consider regulatory alternatives that are less burdensome to small entities and mandates the preparation of a "regulatory flexibility analysis."

The Paperwork Reduction Act was enacted in 1980 and, among other provisions, established the Office of Information and Regulatory Affairs, discussed below. Its intention is to "minimize federal paperwork burden for individuals, small business and State and local government….to minimize the cost of information collection to the Federal Government….and to maximize the usefulness to the Federal Government of the information collected."

The Unfunded Mandates Reform Act of 1995 establishes the requirements for federal agencies to assess the effects of their regulatory actions on State, local and tribal governments and the private sector. The Act was designed to make it more difficult for the Federal Government to make State and local governments pay for programs it was not willing to pay for itself. The Act requires each agency, other than the independent boards and commissions, to prepare written assessments of the effects of any proposed or final rule that contains a Federal mandate that may require an expenditure by a State, local or tribal government, in the aggregate, or the private sector of $100 million or more (adjusted annually for inflation) in any one year. The agencies must also develop an effective process for timely input of the State, local or tribal governments regarding the proposed "significant intergovernmental mandate." This Act requires a report to Congress by the Office of Management and Budget, discussed below.

The Unfunded Mandates Reform Act also requires the Congressional Budget Office (CBO) to estimate the costs of bills with federal mandates reported out of committees. They must provide a detailed cost estimate for each bill containing an annual aggregate impact of $50 million or more on the public sector (state and local governments) or $100 million on the private sector. The Act allows a point of order in both the House and the Senate against any bill or joint resolution reported by an authorizing committee that lacks the necessary estimates from the CBO or that results in direct costs in excess of $50 million a year to state and local governments. A proposed bill is in order if it provides funding to cover any costs in excess of $50 million.

The National Environmental Policy Act (1970) (NEPA) requires all federal agencies to include a detailed environmental impact statement in every proposal for major federal action, including rules, that may significantly affect the quality of the human environment. The environmental impact statement must address the subjects and apply substantive criteria set forth in the Act.

  • Environmental impact of the proposed rule;

  • Adverse environmental effects that cannot be avoided if proposal implemented;

  • Alternatives to proposed action;

  • The relationship between local short-term uses of man's environment and the maintenance and enhancement of long-term productivity; and

  • Any irreversible and irretrievable commitments of resources that would be involved in the proposed action should it be implemented.

The Council on Environmental Quality has issued regulations to implement the procedural provisions of NEPA. Every agency with legislative rulemaking authority should have supplemental regulations establishing its procedures for assessing the need for an environmental impact statement and for obtaining comments on draft statements.

III. Regulatory Reform in the United States

The United States has been a world leader in regulatory reform for nearly thirty years. The first steps in reform were ad hoc responses to concerns that US economic performance suffered from fundamental structural and macroeconomic problems. This perception was strengthened by the oil price shocks of the 1970's. Economic performance had deteriorated in comparison to the 1960's and the economy was sluggish in comparison to Europe and Japan according to measures of unemployment and slower growth per capita. Productivity growth was slow.

At the same time, economic research was casting doubts on the traditional justifications for regulation (e.g., "natural monopolies" were likely much rarer than traditional rationales for regulation would imply). There was evidence that rate-of-return regulation (telecommunications, energy) led to over-investment and excess capacity. Comparisons of airline routes indicated that heavily regulated routes had significantly higher fares. In some industries (e.g., rail) profits were too low because of regulatory restraints on rationalization of routes. Trucking companies were unable to take advantage of operating efficiencies while paying wages that were 30-45 percent higher than those for comparable workers.

It was in this environment that many policy makers began to be convinced that the increasing costs of both social and economic regulation were at least partly to blame for the country's poor economic performance. Interest in regulatory reform was reinforced by concern over budget deficits and sectoral crises. Failures of a major bank and the Penn Central Railroad, as well as weaknesses in key manufacturing sectors such as the automotive industry, reinforced interest in regulatory reform. Regulation was partly responsible for the low profits in banking and railroads and it was hoped that reform would return such industries to profitability and avoid the needs for bailouts. Regulatory reform was also part of an overall strategy to restrain inflation by lowering prices and inflationary expectations and increasing efficiency and overall performance.

Major sectoral reform was initiated. The Airline Deregulation Act was passed in 1978 to phase out fare and route regulation. The Motor Carrier Act of 1980 deregulated inter-state road transport by eliminating restrictions on entry by territory, type of product, backhauls and intermediate service. The Act curtailed price collusion by rate bureaus and deregulated prices. Rail freight rate regulation was nearly completely eliminated by the Staggers Act of 1980. Entry into long-distance telecom was opened up by the AT&T divestiture decision by the courts. Financial services were subject to regulatory reform in several steps allowing interstate branch banking, bank ownership in investment banking and securities brokerages, and eventual integration in financial services, including insurance.

Sectoral regulatory reform brought about substantial gains in labour and capital productivity. Real operating costs fell in many sectors by 25 to 75 percent. Reform stimulated substantial firm restructuring, which improved labour productivity. Entry of non-union competition in traditionally unionized sectors forced concessions on work rules, increasing flexibility and raising labour productivity. Competition with non-union labour reduced wage levels and job security in some cases, however. Initial declines in employment were offset by growth in pre-existing firms as well as by the creation of new firms.

The benefits of sectoral reform, however, have not been distributed evenly across society. For example, internal cross-subsidies in airfares and telecom rates were reduced as rates aligned more with costs. Some consumers faced increased costs; the great majority, however, found prices decreasing substantially in many sectors.

At the same time that significant reforms were being undertaken in sectoral regulation, social regulation continued to grow substantially. Indeed, legislation passed in the late 1960's and 1970's established the base for expanded regulation dealing with consumer protection (fiscal and safety), the environment, and occupational health and safety. This growth of social regulation provided numerous benefits to Americans (and set world standards in some areas) through improved protection to such groups as securities investors, purchasers of prescription drugs and automobiles, and workers. There were notable improvements in the environment.

While impressive benefits were achieved, serious criticisms were also raised about the increase and cost-effectiveness of the "new regulation." Improved sophistication about compliance and compliance costs raised questions about ineffective regulations, poor enforcement practices, and failures to achieve legislative objectives. These concerns are still with us. While specific social regulation may have been controversial, many agreed that it should be cost-effective. In some cases, however, Congress mandated certain approaches irrespective of compliance costs (Clean Air Act) or even relative risks ("Delaney Amendment" 2).

In many ways, it was the social regulation that sparked the interest in the economic analysis of the impact of proposed regulations, the desire to examine the stock of existing regulation, and other reforms to the regulatory process. Generally speaking, the executive departments and agencies have responsibility for social regulation, while the more independent commissions were responsible for the sectoral economic regulation (road and rail transport, communications, airlines). The regulatory management techniques, most of which are applicable only to executive agencies, are discussed below. It is these techniques that have provided examples of a heavily market-based and economic approach to regulatory management. The heavily litigious atmosphere surrounding regulation in the United States (in comparison to Canada and probably any other country) has meant that regulation and its reform has been a bellwether for political and philosophical beliefs. As the OECD has noted:

Regulatory reform connects many threads in American society, and has not been a product of any coherent "deregulation" theory. Rather, debate ranges widely over ideological issues of the role of state in society; pragmatic issues of the quality and cost of public services and protections; economic concepts of regulatory and market failures; federalist issues of the balance between federal powers and state rights; institutional struggles between the powers of the Congress, the President, and the Executive Branch; and constitutional issues of individual property rights versus collective rights.

IV. Regulatory Management Systems

1. Regulatory Policies: Executive Orders

The regulatory policy currently in place in the US Federal Government is Executive Order 12866 issued by President William Clinton. It was subject to minor revisions in Executive Order 13528 issued by President George W. Bush. These statements of presidential regulatory principles are part of regulatory policy development lasting for over thirty years in one form or another. They began with President Nixon's "Quality of Life" program and continued through the 1970's with President Ford's Executive Orders 11821 and 11949, which required the preparation of inflation/economic impact statements. President Carter issued Executive Order 12044, "Improving Government Regulation," and President Reagan formalized the OMB review process with Executive Order 12291 (which remained in place throughout the Reagan and Bush administrations).

In 1993, President Clinton issued Executive Order 12866, which remains in effect today. The Order applies to executive agencies (such as the Department of Transport and the Environmental Protection Agency), but not to independent commissions (such as the Securities and Exchange Commission or the Federal Communications Commission).

The Order sets out the Statement of Regulatory Philosophy and Principles. The Philosophy states that:

  • Federal agencies should promulgate only such regulations as are required by law, are necessary to interpret the law, or are made necessary by compelling public need. Such a need might be material failures of private markets to protect or improve the health and safety of the public, the environment or the well-being of the American people.

  • In deciding whether and how to regulate, agencies should assess all costs and benefits of available regulatory alternatives, including the alternative of not regulating.

  • Costs and benefits must be understood to include both quantifiable measures (to the fullest extent that they can be usefully estimated), and qualitative measures of costs and benefits that are difficult to quantify, but are nevertheless essential to consider.

  • In choosing among alternative regulatory approaches, agencies should select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity), unless a statute requires another approach.

The Principles of Regulation state:

  • Each agency must identify the problem that it intends to address, as well as assess the significance of that problem.

  • Each agency must examine whether regulations (or other law) have created, or contributed to, the problem that a new regulation is intended to correct and whether those regulations (or other law) should be modified to achieve the regulation more effectively.

  • Each agency must identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.

  • In setting regulatory priorities, each agency must consider, to the extent reasonable, the degree and nature of the risks posed by various substances or activities within its jurisdiction.

  • When an agency determines that a regulation is the best available method of achieving the regulatory objective, it must design its regulations in the most cost-effective manner to achieve the regulatory objective. In doing so, the agency shall consider incentives for innovation, consistency, predictability, the costs of enforcement and compliance (to the government, regulated entities, and the public), flexibility, distributive impacts, and equity.

  • Each agency must assess both the costs and benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the regulation justify the costs.

  • Each agency must base its decisions on the best reasonably obtainable scientific, technical, economic, and other information concerning the need for, and consequences of, the intended regulation.

  • Each agency must identify and assess alternative forms of regulation and must, to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt.

  • Wherever feasible, agencies shall seek views of appropriate State, local and tribal officials before imposing regulatory requirements that might significantly or uniquely affect them.

  • Each agency must assess the effects of Federal Regulations on State, local, and tribal governments, including specifically the availability of resources to carry out those mandates and seek to minimize those burdens that uniquely or significantly affect such governmental entities, consistent with achieving regulatory objectives.

  • In addition, as appropriate, agencies must seek to harmonize Federal regulatory actions with related State, local, and tribunal regulatory and other governmental functions.

  • Each agency must avoid regulations that are inconsistent, incompatible, or duplicative with its other regulations or those of other Federal regulatory agencies.

  • Each agency must tailor its regulations to impose the least burden on society, including individuals, businesses of different sizes, and other entities (including small communities and governmental entities), consistent with obtaining the regulatory objectives, taking into account, among things, and to the extent practicable, the costs of cumulative regulations.

  • Each agency must draft its regulations to be simple and easy to understand, with the goal of minimizing the potential for uncertainty and litigation arising from such uncertainty.

The Executive Order analysis requirements apply to "significant" regulatory actions, that is, regulatory actions (including rules) with an impact of over $100 million.

The language in the Executive Order indicating that regulatory action may be required by law refers to statutes that may mandate a particular regulatory action or regulatory approach. For example, the Clean Air Act prohibits the Environmental Protection Agency from considering costs in regulating.

2. Review of Existing Regulations

Section 5 of Executive Order 12866 sets out a framework for the review of existing regulation. Each agency must submit to the Office of Information and Regulatory Affairs (see below) a program, consistent with its resources and priorities, under which it will review existing significant regulations. The objectives are:

  • to determine whether any regulatory actions have become unjustified or unnecessary as a result of changed circumstances;

  • to confirm that regulations that regulations are both compatible with each other and not duplicative or inappropriately burdensome in the aggregate;

  • to ensure that all regulations are consistent with the President's priorities and principles set forth in the Executive Order, within applicable law; and

  • to otherwise improve the effectiveness of existing regulations.

The significant regulations selected for review must be included in the agency's Regulatory Plan. The agency must also identify any legislative mandates that require the agency to promulgate or continue to impose regulations that the agency believes are unnecessary or outdated due to changed circumstances.

The Regulatory Flexibility Act, discussed above, also requires agencies to review rule that have a significant economic impact on a substantial number of small entities within ten years of their publication.

The Office of Management of Budget's Office of Information and Regulatory Affairs has also stimulated the review of existing regulation. In many cases, targets for review were identified by the general public following a request published in the Annual Report to Congress, discussed below.

3. The Office of Management and Budget: Office of Information and Regulatory Affairs

The Office of Information and Regulatory Affairs (OIRA) was established in 1980 within the Office of Management and Budget, an agency within the Executive Office of the President. OIRA is staffed by civil servants, who now have over twenty years' experience with economic analysis and the oversight of compliance with Executive Orders (among other matters). In addition to reviewing draft regulations under Executive Order 12866, OIRA reviews collections of information under the Paperwork Reduction Act 1980 and develops and oversees the implementation of government-side policies in areas of information technology, information policy, privacy, and statistical policy. It is staffed primarily with professionals; most staff are economists, but other disciplines (e.g., a toxicologist) are being added to allow OIRA to address the scientific and technical quality of analysis. The staff is experienced, with senior people having been there a number of years, and specialists being hired at a fairly senior level.

Executive Order 12866 (as amended by Executive Order 13258) requires that, in addition to the review function, OIRA should set out methodology and procedures and provide guidance to agencies and assist the President and other regulatory policy advisors to the President in regulatory planning. The OIRA staff may meet with interested stakeholders; the meeting is conducted by the OIRA Administrator or his delegate and a log, available on the OIRA website, is kept of such meetings. In addition, all substantive communications outside the Executive Branch concerning regulations under review are publicly available and listed on the website. After the rule is published, all documents exchanged between the agency and OIRA are made public.

Where OIRA believes that an agency rule is not consistent with the Executive Order 12866 principles, it may "return" the rule to the agency for further review. Additional effort on the part of the agency is required before the rule can be published in the Federal Register. For example, the agency may not have provided sufficient information or conducted sufficient analysis of alternatives. While an agency can ignore a return letter, it would do so at its practical and political peril. In addition to the role that OMB can play in refusing to allow a rule to go forward (with the President's backing in extreme cases), the process is entirely transparent. The existence of a return letter and lack of adequate response to the letter would invite judicial review of the agency's actions, as well as extensive criticism. While it may be too strong to say that the burden had shifted to the agency to defend its actions as reasonable in a court, the return letter would present a formidable obstacle for the agency to overcome.

In addition to the functions set out in the Executive Orders and legislation discussed above, OIRA reviews proposed regulatory actions that may pose disproportionate environmental or safety risks to children (Executive Order 13045). Under Executive Order 13211, OIRA also reviews the "Statement of Energy Effects" required when a rule may have a significant impact on energy supply, distribution or use.

There are there a number of legislative provisions, some dating back to the 1970's, requiring agencies to assess impacts of proposed rules. In practice, these requirements are rolled up into the general requirements for Regulatory Impact Analysis based on the Executive Orders. A special section in the report on the analysis may be dedicated to the assessment of a particular area, such as impact on small business as required by the Regulatory Flexibility Act.

The Regulatory-Right-to-Know Act, as well as the Unfunded Mandates Reform Act, requires the Office of Management and Budget to present an annual Report to Congress on the Costs and Benefits of Federal Regulation, which deals with estimates of the costs and benefits of federal regulation. This report is discussed further below in the section dealing with "Innovations."

4. The Regulatory Agenda

The Regulatory Flexibility Act, discussed above, requires agencies to publish semiannual regulatory agendas describing regulatory actions they are developing. Executive Order 12866, discussed above, and OMB memoranda establish minimum standards for the agendas, including the specific types of information for each entry. In addition, the Office of Federal Procurement Policy Act Amendments of 1988 require the semiannual publication of a report on procurement regulations. All of these requirements have been pulled together in one semiannual publication, the Unified Agenda of Federal Regulatory and Deregulatory Actions. Agendas cover both executive and independent boards and commissions.

The October edition of the Unified Agenda includes regulatory plans covering the most significant regulatory actions that the agency reasonably expects to issue in proposed or final form during the upcoming fiscal year. The Unified Agenda and the regulatory plans are published in the Federal Register and are available on the web.

The information included in the Unified Agenda includes:

  • The title of the rule

  • Priority of the rule, ranging from economically significant, other significant, substantive but non-significant, to routine and frequent or informational/administrative.

  • Unfunded mandates, if any.

  • Legal Authority and citation to Code of Federal Regulations section that will be affected.

  • Legal deadline, if any (i.e., if the rule is subject to a statutory or judicial deadline).

  • Abstract: brief description of the problem, the need for a federal solution, available alternatives and potential costs and benefits of the action (to the extent available).

  • Timetable.

  • Small entities affected (Regulatory Flexibility Act requirements).

  • Government levels affected.

  • Agency contact (name, title, address, phone number about person knowledgeable about the regulation).

Additional information may be provided at the option of the agency. This might include: compliance costs to the public; affected sectors (identified by Standard Industrial Classification Code); other analysis, such as an environmental impact analysis.

The Unified Agenda is organized according to the stage of the rule, ranging from pre-rule stage (actions agencies might take to determine whether or how to initiate rulemaking) to the final rule stage and long-term actions (items under development but not expected to be completed within twelve months) and completed actions (completed or withdrawn since the last Agenda). The format allows the reader to follow the progress of a rule.

The Regulatory Plan may also contain a statement of need; summary of legal basis for the rule; alternatives; anticipated costs and benefits; risks (magnitude of risk addressed by the action; amount this risk is expected to be reduced by the action; and the relation of this risk to other risks and risk reduction efforts within the agency).

5. The Role of the Courts

Judicial review of agency actions, including rulemaking, has played a major role in structuring rulemaking requirements. As noted, it has added a "gloss" to the Administrative Procedure Act. Many regulatory statutes also provide for pre-enforcement review in the courts and injunctions and declaratory relief may also be sought. For various reasons, some philosophical and some practical, litigation is much more frequent in the United States than in other countries. For example, contingency fees are available in the United States and costs do not "follow the event" (i.e., the loser does not pay the winner's legal costs).

Litigation is thus common in rulemaking proceedings. These proceedings are often characterized by an adversarial approach that can inhibit flexibility, and reduce incentives to innovate and streamline rulemaking. Officials who are highly risk averse may not be willing to find new ways to achieve their policy objectives or experiment with different approaches. New ways of approaching the definition of problems or the development of regulatory alternatives (alternatives to regulation as well as alternative forms of regulations) are inhibited. While the rulemaking structure is characterized by a high degree of transparency, the legalistic and formalized atmosphere can interfere with efforts at regulatory reform.

IV. Competition Policy and Institutions

Competition principles are woven into many regulatory statutes in the US and provided a basis for its early movement in regulatory reform, which inspired regulatory reform in a number of countries, including Canada. The 1887 Interstate Commerce Act and the 1890 Sherman Act form the basis of modern competition policy.

The US concept of competition policy is primarily economic. Its principle aim is to promote consumer welfare, which is also an important aim of regulatory reform. The underlying principles assert that:

  • Consumer welfare is improved by choice, variety, higher quality, lower prices and is protected by eliminating restraints that reduce the impact of consumer preferences in setting prices and output;

  • The competitive process is protected by preserving static and dynamic conditions that discourage collusion and permit efficient entry and innovation; and

  • Efficiency is promoted as competition forces firms to lower costs and respond to market signals.

The US has two competition enforcement agencies: the Antitrust Division of the Department of Justice and the Federal Trade Commission. They are both staffed by lawyers and economists and combine policy expertise and prosecutorial duties. Historically, the parallel structure has not led to conflict, as the two agencies have managed to avoid forum shopping and duplication of efforts. The courts also play a strong role in competition policy in the US. In effect, judicial decisions have helped keep competition policy coherent, despite multiple participants and laws. In at least one case, however, the power of the courts had an unusual result as the judge hearing the AT&T monopoly case became a major de facto regulator of the transition to competition in telecommunications.

The competition enforcement tools are strong, with triple damages and penal sanctions. This has had the effect of alleviating some anxiety about deregulation and regulatory reform by enhancing the credibility of competition policy as the oversight mechanism to deal with market dominance issues. Private litigation has also played a significant role by supplementing government enforcement.

The US competition agencies have also been unusually active in promoting competitive markets and, in selected cases, deregulation. Their advocacy was an important element in the first deregulation successes in airlines and natural gas and continued with trucking, communications, broadcasting and electric power. In recent years, they have intervened in such diverse matters as marine pilotage, airport landing slots, video distribution services and automobile sales.

V. Oversight Role of Congress and Other Institutions

Congress, like the Canadian Parliament, has an oversight role regarding federal agencies (both the independent and executive agencies) that can be exercised through the funding process. Congress also has a system of strong expertly staffed committees that, among other matters, engage in studies and examination of specific regulatory issues. There have been studies on, for example, airline deregulation, the use of sunset provisions, zero-based budgeting; regulatory impact analysis and the regulation of the securities market and other financial institutions. In addition to informing the legislative function (and specifically examining and shaping bills), these committees have often provided a basis for public examination of issues relating to regulatory reform.

In 1996 Congress enacted a new procedure (informally called the Congressional Review Act) under which all federal agencies are required to submit each "rule" (a broadly defined term) to both Houses of Congress and to the General Accounting Office before it can take effect. Implementation of a "major" final rule (one having an annual effect on the economy of $100 million or more) is automatically stayed for 60 days while Congress reviews it.   Other "nonmajor" rules can take effect upon receipt by Congress. There is a procedure for expedited review of major rules if a member introduces a "resolution of disapproval." If the resolution is passed by both the House and the Senate and signed by the President (or enacted over his veto), the rule is null and void. The agency cannot pass a similar rule unless specifically authorized by law. This process has not been used frequently; the only occasion for its use was with "ergonomics" rule promulgated by the Occupational Health and Safety Administration (an executive agency) in 2001.

The General Accounting Office (GAO) is the audit, evaluation and investigative arm of Congress. It examines the use of public funds; evaluates federal programs and activities, and provides analyses, options, recommendations and other assistance to help Congress make effective decisions regarding oversight, policy and funding. The GAO also advises the heads of executive agencies about ways to make government more effective and responsive. The reviews, etc. are available on the GAO website. Among its activities and publications are Best Practices Reviews, comparative benchmarking and Best Practices Methodology studies. The Performance and Accountability reports examine individual programs or agencies. For example, the 2001 report on the Environmental Protection Agency identified important challenges facing the Agency in improving environmental information, developing a comprehensive human capital approach, and strengthening working relationships with the States. In addition, the GAO found that while the Agency had invested considerable time and resources in a variety of initiatives to encourage more effective and cost-efficient environmental protection, current environmental statutes significantly impede regulatory innovation.

VI. Innovations in Regulatory Management

1. Report to Congress on the Costs and Benefits of Federal Regulations

The U.S. Office of Management and Budget, which performs the "gatekeeper" and quality control function for "major" executive agency regulations, is required by law to provide Congress annually with a Report on the Costs and Benefits of Federal Regulations. This report, which is pre-published in draft form for public comment and is subject to expert peer review, reports on the following:

  • An estimate of the total annual costs and benefits, both quantitative and non-quantitative, of federal regulatory programs (which may encompass a number of regulations);

  • An assessment of the direct and indirect impacts of federal rules on the private sector, state and local governments, and the Federal Government;

  • Recommendations for reform or elimination of federal programs or program elements (e.g., regulations);

  • An estimate of the total annual costs and benefits (including quantifiable and non-quantifiable effects) of Federal rules and paperwork, to the extent feasible in the aggregate, by agency and agency program and by major rules;

  • An analysis of the impacts of federal regulation on state, local and tribal government, small business, wages and economic growth; and

  • Recommendations for reform.

Several statutes mandate the elements of the Report to Congress and the current 2003 Draft Report published in the Federal Register will be the sixth report. The Reports (as well as the Executive Orders requiring impact analysis) applies only to the executive agencies (such as the departments) and not to the independent boards and commissions (such as the FTC or the SEC). The Report provides a discussion of the methodologies used to collect the information from agencies. In addition to the analytical information, two points should be noted. The Report is pre-published for public comment and is subject to peer review. This is a substantial addition to transparency and accountability.

The Report is also a forum for the OMB to made recommendations for reform (of the system or of individual regulatory regimes), seek public comment on areas where reform might be required and to provide information on follow-up to earlier reform suggestions. For example, in 2001, the draft OMB Report asked for public suggestions on regulations that presented opportunities for reform. In the 2001 final Report, the OMB prioritized the 71 suggestions it received, and published details of each suggestion. Over the year, it met with agency officials regarding suggestions it had assigned a high priority and reported on actions in the 2002 Report. This process has provided an important impetus to the review of regulations.

Recommendations for reform in this year's Draft Report deal with the revisions to guidelines for regulatory analysis (discussed below); the coordination and management of emerging risks to public safety, health and the environment; and improving the analysis of homeland security regulations. Improving risk analysis and the quality of scientific and technical analysis in decision making is an important priority in the current regulatory management system.

It should be noted, of course, that the data reported by OMB relies on the data produced by agencies in the development of their rules. This data is subject to the same analytical weaknesses that have been noted in reviews of regulatory analysis exercises around the world, including Canada.

2."Prompt" Letters

"Prompt letters" issued by OMB (Office of Information and Regulatory Affairs "OIRA") to stimulate the development of new regulations where regulation may deliver significant benefits in comparison to costs. Regulatory reform has often been thought of as reducing or eliminating regulations. While this element is true, there is also the element of adding regulation where needed. Studies have shown that adding new regulations, while eliminating or reducing others, could have substantial benefits in terms of lives saved, health improvement and cost savings.

The "prompt letter" is an effort to see that such new regulatory proposals are pursued. In 2001, for example, OIRA issued two prompt letters. The first was to the Food and Drug Administration (FDA) dealing with the disclosure of trans fatty acids in the Nutrition Facts panel of food (e.g., the listing on the sides of soup cans or other packaging). The FDA's own preliminary work was that adding trans fatty acids to the list would prevent 7600 to 17100 cases of coronary heart disease and avert 2500 to 5600 deaths annually. Over a twenty-year period, the benefits would dwarf the costs.

The second prompt letter issued in 2001 was to the Occupational Health and Safety Agency and involved automatic external defibrillators. Already required by the Department of Transport to be used by air carriers, they were estimated to save nine lives per year. The view was that similar and even more significant benefits could be achieved by OSHA for a relatively small cost.

Prompt letters are public and are intended to promote transparency and accountability as well as stimulate agency action. The agencies are not required to enact these rules, but there is strong pressure to give priority to examination of these proposals.

3. Peer Review of Regulations

OMB has recommended that agencies sponsor scientific peer review of their work using objective independent experts. The purpose of peer review is to provide an expert review of the use of science that is free from the biases of the regulators and the interested parties. Although peer review is not required, OMB has offered to review draft regulations under a more deferential standard if the technical analysis has been subject to review before being submitted. OMB has suggested that agencies use the following criteria in conducting peer review to ensure that the reviewers are unbiased, objective, and do not reflect any particular ideological position:

  • Select peer reviewers primarily on the basis of necessary technical expertise;

  • Ask peer reviewers to disclose to agencies, before a panel is formed, any prior technical/policy positions on relevant issues;

  • Ask peer reviewers to disclose to agencies, before a panel is formed, their personal and institutional sources of revenue (private and public sector) that may create a real or perceived conflict of interest; and

  • Require that the work of peer review panels be conducted in an open and rigorous manner.

4. Guidelines for Analysis

Guidelines for preparation of regulatory impact analyses are issued by OIRA. Draft revised guidelines have been put out for comment to the public and for expert peer review

Guidelines for the conduct of regulatory reviews date back to the 1970's; the latest in a series of updates was issued for comment last year and is included for additional comment in the draft of the 2003 Report to Congress (see above). For very expensive or burdensome rules (with impacts over $1B per year) a probabilistic analysis of costs and benefits will be required. Most current analyses (as in Canada) present a range for possible values of costs and benefits but do not assign any probabilities to the range. Thus a reader cannot determine whether the high end of benefits of, for example, $10B might have a one percent chance of occurring or is really the most likely outcome. The relationship of costs and benefits can obviously shift in a significant way depending on the probabilities of the values assigned.

A second new requirement is that the summary of a rule be presented in an accounting statement. This would provide annualized monetized, quantified and qualitative benefits and costs for economically significant regulations. In addition, it would provide best estimates and upper and lower bounds for costs and benefits.

5. Increased use of "return letters"

In recent years, OIRA has made more aggressive use of "return letters," sending back proposed rules to the agencies with comments on deficiencies, primarily in the analysis. In a practical sense, agencies must respond and correct the deficiencies before the proposal can go forward for publication in the Federal Register. The quality control function of OIRA has been strengthened.

6. Aggressive use of the Internet to increase public access to OIRA

The U.S. Federal Register has long been a source of information about regulatory proposals, plans to initiate investigations into regulatory proposals, requests for comments and so on. But, like the Canada Gazette, the Register has a selective readership. In addition to information about OIRA, Executive Orders, and other documents relating to the oversight process, the OIRA website will include:

  • lists of regulations currently under review,

  • monthly summaries of agency actions,

  • prompt letters (see above),

  • return letters (which return a proposed rule to the agency for further analysis or consideration-very rare), and

  • information about meetings between OIRA staff and outsideparties.

The agency is also developing a fully integrated electronic system for tracking regulations and public comments to replace the current twenty-year old system.

1 Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983) at 43.

2 The Delaney Amendment to the Food, Drugs and Cosmetic Act of 1958 stated that the Food and Drug Administration could not approve any additive to food that had been found to cause cancer in mans or in animals. As toxicology tests became more sensitive and animals were subject to extraordinary levels of exposure, the "zero tolerance" approach of the amendment (which had been further mandated by the courts when the FDA had attempted to use a more "reasonable exposure" approach and was sued by environmental groups) threatened to not only seriously affect the American food industry but also the general eating habits of Americans. The Amendment was repealed by the Food Quality Protection Act of 1996.


Last Modified:  8/30/2004

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