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President Bush signed an executive order yesterday granting political appointees oversight over agencies' regulatory agendas. The order would give the Office of Management and Budget new power to question, delay or alter federal guidance documents on topics ranging from traffic safety to global warming.
Environmentalists and public interest groups assailed the changes to the Clinton-era executive order, with the watchdog group Public Citizen calling the Bush amendments "an unacceptable power grab" and an attempt "to change the law by executive fiat."
But the plan was praised by industry groups, including the National Association of Manufacturers and the U.S. Chamber of Commerce, which said the order would "tame an out-of-control regulatory system."
Under revised Executive Order 12866, each agency must install a presidential appointee as its "regulatory policy officer," reporting to the agency head and involved "at each stage of the regulatory process." The Clinton order created the policy officer post but did not specify what type of agency employee should fill it.
Agencies will not be able to begin developing any rule without the approval of the political appointees, who will also oversee a yearly listing of their agencies' "best estimate of the combined aggregate costs and benefits" of all planned regulations.
Agencies must also submit to OMB the "specific market failure" that each proposed regulation would address, to determine "whether any new regulation is warranted."
The order also changes the way agencies handle guidance documents. They will now be subject to pre-publication review by the White House through OMB, which already had the power to review proposed federal regulations.
The order divides guidance documents into two classes, creating a new group of "significant" documents for which OMB could demand "additional consultation" before allowing their public release.
"Significant" documents include those that would "lead to an annual impact of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local or tribal governments or communities."
The original Clinton executive order applied that definition only to proposed regulations, not guidance documents.
Reaction
One regulatory expert critical of the Bush executive order said the seemingly broad definition of "significant" guidance documents could create trouble for the everyday business of agencies, creating headaches for agency attorneys.
Agencies "give guidance in speeches, in informal letters to people throughout the government, and they also put out guidance documents, which is what OMB is trying to get at -- something that may as well be a regulation," said Rena Steinzor, a law professor affiliated with the Center for Progressive Regulation. "All of this stuff could be swept up -- it would congeal the process."
But the portion of the executive order of most concern, Steinzor said, is the attempt to require a "regulatory budget" from each agency, focusing on the cost-benefit analysis of each proposed regulation.
"What it's designed to do is make agencies like EPA that promulgate rules that are very sweeping and have lots of implications stand out," Steinzor said. "It's like a hit list."
But Tom Firey, a policy analyst with the libertarian Cato Institute, took a more positive view of the Bush executive order, which he said could curb abuses of guidance documents. "At least in some cases, guidance documents have been used to extend rulemaking and regulating beyond the regulatory process," he said.
The change eliminates agencies' "incentive to use a guidance document when possible to achieve a certain objective, because of the ease of publication," said Rosario Palmieri, directory of energy and resources policy at the National Association of Manufacturers. "We think it's incumbent upon agencies to say, 'Here's what we're going to do.'"
As for the idea of a regulatory budget, Firey said he favors the approach but believes it is "wide open for abuses from both sides."
That a regulation's costs should outweigh its benefits is the idea at the heart of a regulatory budget, Firey said. "But it depends on how you calculate benefits and costs," leaving a large amount of wiggle room.
Firey pointed to the market failure clause as the key piece of the Bush order and said he was surprised that groups like Public Citizen and OMB Watch were upset about it. "The foremost argument for why we should regulate pollution, for example, is usually a market failure argument," he said.
Palmieri of NAM said the market failure clause was "interesting," but that he was still reviewing it. The market failure language was not part of an earlier federal review of good guidance practices, he said.
One point on which Firey and Steinzor agreed: their objection to installing political appointees as top agency regulatory officers.
"This opens up the possibility of further politicizing the [regulatory] process," Firey said, though he said he believe the Bush administration was asserting more authority over the regulatory process because Congress has "largely removed itself from the obligation of defining what its regulations are."
Steinzor compared the move to grant more power to political appointees to the Soviet system of placing minders on nuclear submarines, "to make sure the captains pulled the nuclear trigger."
Susan E. Dudley connection?
Sources on both sides of the issue also pointed to a connection between the new executive order and the work of controversial OMB nominee Susan E. Dudley.
Dudley, the former director of regulatory policy studies at the Mercatus Center, is the Bush administration's nominee to head OMB's regulatory arm, the Office of Information and Regulatory Affairs.
Facing an uphill confirmation process in the Senate, the White House is preparing to appoint Dudley as a senior adviser to the OMB office, a position she is expected to take up later this month. Dudley would ostensibly be in charge of enforcing the new policies outlined in President Bush's executive order (Greenwire, Jan. 11).
The document already bears her mark, Steinzor said. The market failure clause "is Susan Dudley," she said.
Also drawing the Dudley connection was OMB Watch, in an analysis released last night. The market failure standard "has been advocated by Dudley. ... [D]espite the failure to confirm her [in the Senate], the administration has used the executive order as a backdoor means to implement the Dudley philosophy."
But Cato's Firey, who said he is a friend of Dudley's, questioned what kind of effect she and OIRA can have on the regulatory process.
"When [Dudley] accepted this appointment, I really wondered why she took it," Firey said. "Regulation seems to happen regardless of what OMB and OIRA and cost-benefit analyzers come up with. It's whatever the politicos in charge want."
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