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First-year grades on Obama regulatory reform.

On January 18, 2011, President Obama issued Executive Order 13563, which promises to "protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation." The order instructs federal agencies to reform their regulatory process, demanding that they "modify, streamline, expand or repeal" burdensome regulations Somewhat predictably, the press was quick to hail this move as an example of the president tacking to the center by executing a common-sense, good government reform that everyone would presumably applaud.


Enough time has gone by for us to ask fairly whether the order has changed anything. By any objective measure the answer would be a resounding no Compared to the virtual avalanche of new rules and regulations emanating from this administration, the amount of regulations that have been repealed or modified amounts to a warm snowball.

In an ongoing project, the American Action Forum tracks all regulations that impose a private-sector, intergovernmental, or paperwork burden cost a tally that includes all deregulatory measures. In 2011, there were 12 proposed or final regulations that purported to reduce compliance costs or paperwork burden, and the administration estimated that these measures would save American businesses $1.36 billion, as well as 4.7 million paperwork burden hours. However, before allowing the administration to declare this process a success, a caveat should be noted: that billion or so in compliance savings occurred concomitantly with roughly $231 billion in new costs imposed by regulations issued in 2011.

Moreover, as one looks closely at the 12 "reforms," one becomes underwhelmed by their scope. Consider what is supposedly the largest deregulatory action: a proposed rule under Medicare and Medicaid that would reform hospital and critical access programs. The administration estimates savings from this rule of $942 million and a reduction of 9.6 million paperwork burden hours. Without the paperwork savings from the proposal, however, the 11 other deregulatory measures would actually impose 4.9 million additional hours of manpower to comply.

The next two largest deregulatory acts, which have often been hailed by Office of Information and Regulatory Analysis administrator Cass Sunstein and President Obama himself, are the Environmental Protection Agency abandoning of the "spilled milk" final rule (officially, the "Oil Spill Prevention, Control, and Countermeasure for Milk" rule) and the proposed relaxing of the gasoline vapor recovery rule. The spilled milk rule would have required farmers and other industrial handlers to treat a milk spill the same as a petroleum spill-undertaking costly, labor-intensive cleanup efforts-under the reasoning that milk fat is a type of oil. The vapor recovery rule requires some gas stations to use vapor recovery systems, a requirement that is becoming unnecessary because of federally required vapor control systems on new cars. Supposedly, these two reforms will yield $231 million in combined savings for affected businesses.

However, many scholars have disputed the savings in the repeal of the spilled milk rule. George Washington University professor (and former acting OIRA administrator) Susan Dudley noted last year that "these aren't costs that milk producers ever incurred.... Yet, EPA is now taking credit for 'saving' millions for a Bush initiative aimed at avoiding a statutory interpretation that never existed-except in the minds of a few zealous EPA staffers." In addition, although the EPA's vapor recovery proposed rule could save $88 million, the proposal has not yet been implemented. The Unified Agenda does not list a timeline for a final rulemaking, but Cass Sunstein, director of OMB's Office of Information and Regulatory Affairs, seemed to indicate a final rule was inevitable, noting "modern vehicles already have effective air pollution control technologies."

Another regulatory rescission involved a final rule implementing the Medical Loss Ratio Requirements (the federally stipulated minimum that health insurers can spend on medical services) under the Affordable Care Act. An earlier version of the administration's rule imposed more than $230 million in costs and 1.2 million in paperwork burden hours. The administration estimates that the revised version of-the rule will lower that cost by $7.2 million-that is, 3 percent. The idea that anyone would interpret this tiny change as alleviating a large burden on business is absurd on its face.

This is not the only "savings" from minute tweaking of one of the administration's own rules. The Federal Railroad Administration's "Positive Train Control Systems" rule imposes more than $13 billion in long-term costs with benefits so far below that amount that even Sunstein admitted it did not come close to passing any cost-benefit analysis. To mollify businesses forced to comply, the administration again passed a new rule that lessens the costs of compliance by $818 million a pittance in the context of the original rule. The new rule comes with roughly $150 million of additional labor costs on its own, incidentally.

Taken together, no one would think to consider these 12 regulatory actions as a fundamental change of administration regulatory philosophy. They consist of either the issuance of minor rules that slightly lessen the burden of much costlier regulations or the removal of a handful of inconsequential regulations. Only an administration that apparently believes economic activity is impervious to anything government throws in its way would openly boast of such "reform" efforts. The Obama administration values style over substance, clever marketing angles, and well-publicized examples, and so it naturally assumes that it can convince the populace of its newfound friendliness to business despite all evidence to the contrary.

Failure to perform | To date, only 10 agencies have formal deregulatory actions published in the Federal Register. Obviously, this cannot be the full extent of regulatory reform, lest President Obama admit his effort is an abject failure. All cabinet-level agencies have submitted preliminary and final review plans, while a few independent agencies have submitted a "plan to plan" without taking any quantifiable deregulatory actions. There is some debate as to whether independent agencies are under any obligation to comply with EO 13579 and, as a result, most have neglected to issue any formal proposed or final rules in response to the order, let alone bother to quantify future rescissions.

For example, the Commodity Futures Trading Commission noted, "After the substantial completion of the promulgation of final rules under the Dodd-Frank rulemaking process ... the Commission intends to begin the process of the periodic, retrospective examination of the remainder of its regulations." The CFTC must also still form a "Regulatory Review Group" to implement any plan. Given that Dodd-Frank rulemaking will continue into 2013, with more than 42 planned rulemakings, it will take some time for the CFTC to formulate deregulatory actions.

The Securities and Exchange Commission took a similar track, inviting "interested members of the public to submit comments to assist [the SEC] in considering the development of a plan for the retrospective review of its regulations." To date, the SEC has proffered seven questions for public comment, but the docket reveals few public comments and suggestions. The Federal Reserve Board, Federal Deposit Insurance Corporation, Federal Trade Commission, National Credit Union Administration, and Office of the Comptroller of the Currency have completely ignored the executive order thus far.

In short, a year of ostensible regulatory review has produced nothing that remotely resembles what anyone would consider genuine reform, It is clear that EO 13579 has failed to motivate independent agencies to act, and the cabinet-level departments that cannot legally evade the order have produced the merest hint of regulatory roll-back. The result: deregulation amounts to a pittance compared to the flood of new regulatory initiatives issued in 2011.

Dwarfed by new rules | In a twist of bureaucratic irony, the same day the Wall Street Journal ran a Sunstein op-ed proclaiming how the Obama reform agenda will save Americans billions of dollars, the Federal Register published a proposed EPA regulation on air emissions from natural gas fracking operations. The regulation is estimated to cost U.S. businesses at least $740 million. Less than a month later, the agency finalized greenhouse gas standards for medium- and heavy-duty engines and vehicles. Those standards are estimated to cost Americans more than $8 billion during the life of the program. No administration official took to the pages of the Wall Street Journal to tout either measure.

In fact, the billions of dollars Sunstein trumpeted in his Wall Street Journal piece have been largely illusory thus far, with the final deregulatory rules totaling just $187.4 million in savings by administration math. This number is likely a gross overestimation of the actual savings realized by American businesses due to this initiative. With an estimated $231 billion in compliance costs for regulations the Obama administration issued in 2011-another number that is undoubtedly well wide of the mark when it comes to the true costs to businesses to meet the new standards-the notion of this administration providing any "regulatory relief" becomes patently absurd.

Style over substance | Taking all of the administration's estimates as gospel-a task that must ignore any incredulity-there are still dozens of economically significant regulations for every feigned attempt at deregulation. Although the president has joined his predecessors by issuing an executive order promoting reform, he has fallen in line with the bureaucratic group-think that rewards political allies and often ignores private-sector burdens, and the regulatory state continues to grow by leaps and bounds. And for that, his regulatory reform can only be construed as a failure in its ostensible purpose.


American Action Forum

IKE BRANNON is director of economic policy and SAN BATK1NS is director of regulatory policy at the American Action Forum.
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Title Annotation:Briefly Noted
Author:Brannon, Ike; Batkins, Sam
Geographic Code:1USA
Date:Mar 22, 2012
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