# Cost-Benefit and Other Analysis Requirements in the Rulemaking Process

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## Record

- **Collection:** Congressional research report
- **Document type:** CRS Report
- **Published:** December 9, 2014
- **Citation:** R41974

## Text

Cost-Benefit and Other Analysis
Requirements in the Rulemaking Process
-name redacted-, Coordinator
Analyst in Government Organization and Management
December 9, 2014

Congressional Research Service
7-....
www.crs.gov
R41974

Cost-Benefit and Other Analysis Requirements in the Rulemaking Process

Summary
Regulatory analytical requirements (e.g., cost-benefit and cost-effectiveness analysis) have been
established incrementally during the last 40 to 50 years through a series of presidential and
congressional initiatives. The current set of requirements includes Executive Order 12866 and
Office of Management and Budget (OMB) Circular A-4, the Regulatory Flexibility Act (RFA),
and the Unfunded Mandates Reform Act (UMRA). These requirements vary in terms of the
agencies and rules they cover, and the types of analyses that are required. For example, a
regulatory analysis under the Regulatory Flexibility Act is not required if the agency head
certifies that the rule will not have a “significant economic impact on a substantial number of
small entities.”
The most extensive and broadly applicable of the requirements are in Executive Order 12866 and
OMB Circular A-4, but they do not apply to independent regulatory agencies. The statutes that
provide rulemaking authority to independent regulatory agencies often require them to “consider”
regulatory costs and benefits, and they often have less explicit requirements for cost-benefit
analysis, if any. An OMB report indicated that independent regulatory agencies provided some
information and costs and benefits in 76 of the 118 major rules they issued from FY2003 to
FY2012. Cabinet departments and other agencies estimated monetary costs and benefits for some,
but not all, of their rules.
Several bills have been introduced in the 113th Congress that would codify and/or expand the
current requirements for cost-benefit analysis. Congress could decide to keep the existing
analytical framework in place, or could enact one or more of these reform proposals. Another
more comprehensive approach could be to consolidate all of the analytical requirements in one
place, and perhaps expand those requirements to include more agencies or rules, or to require
different types of analysis. To do so, or to simply cover independent regulatory agencies by the
executive order, the President could arguably amend Executive Order 12866 and OMB Circular
A-4, or Congress could enact legislation. Any such changes must be cognizant of the state of
existing law and practice in this area, and the resources and data required for agencies to carry out
the analyses.

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Cost-Benefit and Other Analysis Requirements in the Rulemaking Process

Contents
Introduction...................................................................................................................................... 1
Cross-Cutting Regulatory Analysis Requirements .......................................................................... 2
Presidential Initiatives ............................................................................................................... 2
Executive Order 12866........................................................................................................ 3
Executive Orders 13563 and 13579 .................................................................................... 8
Analytical Requirements in Other Executive Orders .......................................................... 8
Congressional Initiatives ......................................................................................................... 11
Unfunded Mandates Reform Act....................................................................................... 11
National Environmental Policy Act................................................................................... 12
Regulatory Flexibility Act ................................................................................................. 12
Paperwork Reduction Act.................................................................................................. 14
Coverage of Analytical Requirements Varies .......................................................................... 15
Analytical Requirements Applicable to Selected Independent Regulatory Agencies .................... 16
Economic Analysis and Banking Agencies ............................................................................. 16
Board of Governors of the Federal Reserve System ......................................................... 17
Securities and Exchange Commission .............................................................................. 17
Federal Deposit Insurance Corporation............................................................................. 18
Commodity Futures Trading Commission ........................................................................ 19
Comptroller of the Currency ............................................................................................. 20
Summary of the OIG Reports............................................................................................ 20
Consumer Financial Protection Bureau............................................................................. 21
Consumer Product Safety Commission ................................................................................... 22
Implementation of Cost-Benefit Requirements ............................................................................. 22
OMB Annual Reports on Costs and Benefits .......................................................................... 23
Previous OMB Reports ..................................................................................................... 24
December 2013 GAO Report .................................................................................................. 25
Regulatory Reform Legislation in the 113th Congress ................................................................... 26
Concluding Observations............................................................................................................... 26
Congressional Options............................................................................................................. 27
Codification of Executive Order’s Requirements ............................................................. 29
Contextual Considerations ................................................................................................ 30

Tables
Table 1. Depth and Coverage of Analytical Requirements Vary ................................................... 16
Table 2. Independent Regulatory Agencies and Cost-Benefit Analysis: FY2003 Through
FY2012 ....................................................................................................................................... 24

Contacts
Author Contact Information........................................................................................................... 31
Acknowledgments ......................................................................................................................... 31

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Cost-Benefit and Other Analysis Requirements in the Rulemaking Process

Introduction
A common concern voiced by proponents of regulatory reform in recent decades has been that the
costs associated with certain regulations outweigh the benefits that the regulations are intended to
provide. Another, and somewhat related, view is that more intelligent regulatory policies could
achieve the same social goals (e.g., cleaner environment, safer workplaces) at less cost, or could
achieve more ambitious goals at the same cost.1 To improve the quality and effectiveness of
federal rules and minimize burden, regulatory reform proponents have frequently advocated
greater use of a range of analytic tools during the rulemaking process, including cost-benefit
analysis (sometimes referred to as benefit-cost analysis) and cost-effectiveness analysis.2
Cost-benefit analysis, in this context, involves the systematic identification of all of the costs and
benefits associated with a forthcoming regulation, including nonquantitative and indirect costs
and benefits, and how those costs and benefits are distributed across different groups in society. A
proposed regulatory requirement is judged to pass the “cost-benefit test” if the sum of its
anticipated benefits outweighs, or otherwise justifies, the sum of its present and future costs in
present value terms. Cost-effectiveness analysis seeks to determine how a given goal can be
achieved at the least cost. In contrast to cost-benefit analysis, the concern in cost-effectiveness
analysis is not with weighing the merits of the goal, but with identifying and comparing the costs
of alternatives to reach that goal (e.g., in terms of dollars per life saved).
The prospective (also known as ex ante) estimates of benefits and costs that are done before rules
are issued are necessarily uncertain and heavily dependent on numerous assumptions. Particularly
difficult to quantify are long-term or uncertain effects of rules where subtle interactions between
various factors are often not well understood or directly measurable. Cost-benefit analysis is
particularly controversial when it seeks to rationalize inherent value trade-offs and to place a
value on benefits not traded in the market (e.g., health or lives).3 Also, Congress has required
cost-benefit analysis in some statutes (as discussed in detail later in this report), prohibited it in
other statutes,4 and not precluded it in still other statutes.5 These issues notwithstanding, many
economists believe that, when used carefully and with adequate data, cost-benefit analysis can be
an effective tool in regulatory decision making.6
1

See, for example, Tammy O. Tengs and John D. Graham, “The Opportunity Costs of Haphazard Social Investments
in Life-Saving,” in Risks, Costs, and Lives Saved: Getting Better Results from Regulation, Robert W. Hahn, ed. (New
York: Oxford University Press, 1996). For a counter argument, see Richard W. Parker, “Grading the Government,” The
University of Chicago Law Review, vol. 70 (Fall 2003), pp. 1345-1486.
2
See, for example, Cass R. Sunstein, The Cost-Benefit State: The Future of Regulatory Protection (Chicago: American
Bar Association, 2002); and Robert W. Hahn and Cass R. Sunstein, “A New Executive Order for Improving Federal
Regulation? Deeper and Wider Cost-Benefit Analysis,” Working Paper 02-4, AEI-Brookings Joint Center for
Regulatory Studies, March 2002.
3
See, for example, Lisa Heinzerling and Frank Ackerman, Pricing the Priceless: Cost-Benefit Analysis of
Environmental Protection (Washington: Georgetown University, 2002).
4
Whitman v. American Trucking Associations, 531 U.S. 457 (2001).
5
Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208 (2009).
6
See Kenneth J. Arrow, et al., Benefit-Cost Analysis in Environmental, Health, and Safety Regulation: A Statement of
Principles (Annapolis: The Annapolis Center, 1996). More recently, an analysis of the comments submitted to the
Office of Management and Budget in 2009 regarding possible changes to Executive Order 12866 concluded that none
of the commenting regulatory scholars advocated that cost-benefit analysis should be abandoned, or that cost-benefit
analysis alone should be the determinative factor in regulatory decisionmaking. See Helen G. Boutrous, “Regulatory
(continued...)

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Although many federal agencies are currently required to prepare cost-benefit analyses and costeffectiveness analyses for certain rules before they are published in the Federal Register,
proposed legislation has been introduced in the 113th Congress to expand those requirements to
more agencies and more types of rules, and to produce more detailed analyses. This report
identifies a number of those bills, but first describes the existing requirements for cost-benefit and
other types of analysis in the federal rulemaking process. It also discusses options for changing
the current set of analytical requirements. The report does not, however, attempt to address issues
related to the quality of the analyses that agencies develop, or whether agencies use the results of
cost-benefit analyses to guide decision making.7

Cross-Cutting Regulatory Analysis Requirements
The current set of regulatory analytical requirements has been established incrementally during
the last 40 to 50 years through a series of presidential and congressional initiatives, including
statutes, executive orders, circulars, and other documents. Those initiatives vary in terms of the
agencies and rules they cover, and the types of analyses that are required. Most of the analytical
requirements cover Cabinet departments and “independent agencies” such as the Environmental
Protection Agency (EPA), but some also cover “independent regulatory agencies” such as the
Securities and Exchange Commission (SEC), the Federal Communications Commission (FCC),
and the Nuclear Regulatory Commission (NRC).8

Presidential Initiatives
Each President within the past 40 years has required some form of regulatory analysis before
agencies’ rules are published in the Federal Register. For example:
•

In 1971, President Nixon required agencies to develop a summary of their
regulatory proposals, a description of the alternatives that they considered, and
the costs of those alternatives.9

•

In 1974, President Ford required agencies to develop an “inflation impact
statement” for each major proposed rule.10

(...continued)
Review in the Obama Administration: Cost-Benefit Analysis for Everyone,” Administrative Law Review, vol. 62
(Winter 2010), pp. 252-253.
7
Various studies have been done over the years assessing the quality of agencies’ cost-benefit analyses. See, for
example, U.S. General Accounting Office, Regulatory Reform: Agencies Could Improve Development, Documentation,
and Clarity of Regulatory Economic Analyses, GAO/RCED-98-142, May 26, 1998; Richard D. Morgenstern, ed.,
Economic Analyses at EPA: Assessing Regulatory Impact (Washington: Resources for the Future, 1997); and Robert
W. Hahn, ed., Risks, Costs, and Lives Saved: Getting Better Results from Regulation (Washington: AEI Press, 1996).
8
As used in this report, the term “independent regulatory agencies” refers to the boards and commissions identified as
such in the Paperwork Reduction Act (44 U.S.C. § 3502(5)), including the SEC, the FCC, the NRC, and the Federal
Energy Regulatory Commission. The term “independent agencies” refers to other agencies that answer directly to the
President, but are not part of Cabinet departments (e.g., EPA, the Social Security Administration, and the General
Services Administration).
9
For more information on this initiative, see http://www.thecre.com/ombpapers/20060130_nixon.html.
10
Executive Order 11821, “Inflation Impact Statements,” 39 Federal Register 41501, November 29, 1974.

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•

In 1978, President Carter required agencies to prepare a regulatory analysis that
examined the cost-effectiveness of the alternative regulatory approaches for
major rules.11

Current broadly applicable cost-benefit analysis requirements in the rulemaking process are
primarily traceable to President Reagan’s Executive Order 12291, which was issued in February
1981.12 Under that executive order, the “covered agencies” (Cabinet departments and independent
agencies, but not independent regulatory agencies) were generally required to (1) refrain from
taking regulatory action “unless the potential benefits to society for the regulation outweigh the
potential costs to society,” (2) select regulatory objectives to maximize net benefits to society, and
(3) select the regulatory alternative that involved the least net cost to society. The order also
required covered agencies to prepare a “regulatory impact analysis” for each “major” rule, which
was defined as any regulation likely to result in (among other things) an annual effect on the
economy of $100 million. Those analyses were required to contain a description of the potential
benefits and costs of the rule, a determination of the net benefits of the rule, a description of
alternative approaches that could substantially achieve the regulatory goal at lower cost, and an
explanation of why those approaches were not selected.

Executive Order 12866
Executive Order 12291 remained in place until September 1993, when President Clinton issued
Executive Order 12866.13 The Clinton executive order, which is still in effect, revoked the Reagan
order, but established analytical principles and requirements that are similar (although not
identical) to those it replaced. For example, in its “Statement of Regulatory Philosophy” in
Section 1(a), Executive Order 12866 states that the “covered agencies” (again, Cabinet
departments and independent agencies, but not independent regulatory agencies)14
should assess all costs and benefits of available regulatory alternatives, including the
alternative of not regulating. Costs and benefits shall be understood to include both
quantifiable measures (to the fullest extent that these can be usefully estimated) and
qualitative measures of costs and benefits that are difficult to quantify, but nevertheless
essential to consider. Further, 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 regulatory approach.

Section 1(b) of Executive Order 12866 delineates certain “Principles of Regulation” that covered
agencies “should adhere to” (to the extent permitted by law and where applicable). For example,
the agencies are told that they should

11

Executive Order 12044, “Improving Government Regulations,” 43 Federal Register 12661, March 24, 1978.
Executive Order 12291, “Federal Regulation,” 46 Federal Register 13193, February 19, 1981.
13
Executive Order 12866, “Regulatory Planning and Review,” 58 Federal Register 51735, October 4, 1993. To view a
copy of this order, see http://www.whitehouse.gov/omb/inforeg/eo12866.pdf.
14
Section 3(b) of Executive Order 12866 states that “‘Agency,’ unless otherwise indicated, means any authority of the
United States that is an “agency” under 44 U.S.C. 3502(1), other than those considered to be independent regulatory
agencies, as defined in 44 U.S.C. 3502(10).” Although the cost-benefit and rule submission requirements in the
executive order do not apply to independent regulatory agencies, some parts do (e.g., Section 4(b) relating to the
Unified Regulatory Agenda, and Section 4(c) relating to the Regulatory Plan).
12

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•

design their regulations “in the most cost-effective manner to achieve the
regulatory objective. In doing so, each 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”;

•

assess both the costs and the benefits of their intended regulations 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
intended regulation justify its costs”;15 and

•

tailor their regulations “to impose the least burden on society, including
individuals, businesses of differing sizes, and other entities (including small
communities and governmental entities), consistent with obtaining the regulatory
objectives, taking into account, among other things, and to the extent practicable,
the costs of cumulative regulations.”

The heart of the economic analysis requirements is in Section 6 of Executive Order 12866, which
differentiates between “significant” and “economically significant” rules. “Significant” rules are
defined as those that satisfy any of four conditions:
(1) Have an annual effect on the economy 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;
(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by
another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees,
or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal
or policy issues arising out of legal mandates, the President’s priorities, or the principles set
forth in this Executive order.16

Rules fitting the first of these conditions are often referred to as “economically significant” or
“major” regulatory actions.17
Section 6(a)(3)(B) of Executive Order 12866 states that, for each “significant” regulatory action,
covered agencies are to provide to the Office of Information and Regulatory Affairs (OIRA)
within the Office of Management and Budget (OMB) a general “assessment of the potential costs
and benefits of the regulatory action.” However, Section 6(a)(3)(C) of the executive order states
that, for each “economically significant” regulatory action, agencies are to also provide to OIRA
(unless prohibited by law):

15
The requirement that agencies adopt regulations only if the benefits “justify” the costs was seen as a somewhat
different threshold than the one in Executive Order 12291, which had required agencies to determine that regulatory
benefits “outweigh” the costs.
16
Section 3(f) of Executive Order 12866.
17
The definition of an “economically significant” regulatory action is very similar to the definition of a “major rule”
under the Congressional Review Act (5 U.S.C. § 804(2)): “(A) an annual effect on the economy of $100,000,000 or
more; (B) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government
agencies, or geographic regions; or (C) significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises
in domestic and export markets.”

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(i) An assessment, including the underlying analysis, of benefits anticipated from the
regulatory action (such as, but not limited to, the promotion of the efficient functioning of
the economy and private markets, the enhancement of health and safety, the protection of the
natural environment, and the elimination or reduction of discrimination or bias) together
with, to the extent feasible, a quantification of those benefits;
(ii) An assessment, including the underlying analysis, of costs anticipated from the
regulatory action (such as, but not limited to, the direct cost both to the government in
administering the regulation and to businesses and others in complying with the regulation,
and any adverse effects on the efficient functioning of the economy, private markets
(including productivity, employment, and competitiveness), health, safety, and the natural
environment), together with, to the extent feasible, a quantification of those costs; and
(iii) An assessment, including the underlying analysis, of costs and benefits of potentially
effective and reasonably feasible alternatives to the planned regulation, identified by the
agencies or the public (including improving the current regulation and reasonably viable
nonregulatory actions), and an explanation why the planned regulatory action is preferable to
the identified potential alternatives.

In emergency situations, or when an agency is required by law to act more quickly than normal
review procedures allow, the rulemaking agency is required to comply with the order’s
requirements “to the extent practicable.”18 Section 10 of Executive Order 12866 states that
nothing in the order affects otherwise available judicial review,19 and it goes on to say that the
order “is intended only to improve the internal management of the Federal Government and does
not create any right or benefit, substantive or procedural, enforceable by law or equity by a party
against the United States, its agencies or instrumentalities, its officers or employees, or any other
person.”

OMB Circular A-4
In January 1996, OIRA published a document that described “best practices” for preparing the
economic analyses called for by the executive order.20 In essence, the best practices document
said that the analysis should (1) clearly state the need for the proposed action (e.g., market
failure) and make clear why federal regulation (as opposed to other methods such as state
regulation or subsidies) is the appropriate solution, (2) clearly show that the agency considered
the most important alternative approaches, and (3) assess the incremental costs and benefits of the
proposed action. The best-practices document also stated that cost-effectiveness analysis should
be used where possible to evaluate alternatives.

18

Section 3(a)(3)(D) of Executive Order 12866.
The Administrative Procedure Act (APA) provides that “final agency action for which there is no other adequate
remedy in a court [is] subject to judicial review.” 5 U.S.C. §§ 702, 704. Judicial review may be invoked under the APA
if a plaintiff is “adversely affected or aggrieved” by any final agency action “within the meaning” of the statute at issue.
5 U.S.C. § 702. For more information, see CRS Report R41546, A Brief Overview of Rulemaking and Judicial Review,
by (name redacted) and (name redacted).
20
This “best practices” document was developed by an interagency group co-chaired by the Administrator of OIRA
and a member of the Council of Economic Advisors. The document was revised and issued as guidance in 2000. To
view a copy of the best practices document, see http://www.whitehouse.gov/omb/inforeg/riaguide.html.
19

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In September 2003, OMB and the Council of Economic Advisors finalized OMB Circular A-4 on
“Regulatory Analysis,” which refined and replaced the 1996 best practices document.21 The
circular states that it was “designed to assist analysts in the regulatory agencies by defining good
regulatory analysis ... and standardizing the way benefits and costs of Federal regulatory actions
are measured and reported.”22 It also states that a “good regulatory analysis should include the
following three basic elements: (1) a statement of the need for the proposed action, (2) an
examination of alternative approaches, and (3) an evaluation of the benefits and costs—
quantitative and qualitative—of the proposed action and the main alternatives identified by the
analysis.”23
•

With regard to need, OMB Circular A-4 states that the agency should describe
the statutory or judicial directives that authorize the action, and describe the
problem that it intends to address. The underlying problem can involve a market
failure (e.g., a monopoly that adversely affects consumers, or inadequate
information about a product) or other social purposes (e.g., to combat
discrimination). The statement of need should also consider other alternatives to
federal regulation, including the option of state or local regulation.

•

After determining that federal regulation is needed, OMB Circular A-4 requires
the agency to consider a “reasonable number” of alternative regulatory
approaches available within the statutory authority provided to the agency. For
example, the circular says agencies should consider different compliance dates,
enforcement methods, levels of stringency, requirements based on firm size or
geographic region; performance standards instead of design standards, market
approaches instead of direct controls; and informational measures instead of
regulation.

•

With regard to analytical approaches, the circular states that agencies should use
both cost-benefit analysis and cost-effectiveness analysis. When all benefits and
costs can be expressed in monetary units, cost-benefit analysis can clearly
indicate which approach is most efficient in terms of net benefits.24 However, in
many (and perhaps most) cases, agencies are not able to express all of the
benefits or costs in monetary units. In such cases, OMB Circular A-4 states that
cost-benefit analysis “is less useful, and it can even be misleading, because the
calculation of net benefits in such cases does not provide a full evaluation of all
relevant benefits and costs.”25 Analysts should therefore attempt to quantify
benefits or costs as much as possible (e.g., tons of pollution avoided, or the
number of children who will not suffer discrimination), and “exercise
professional judgment” in determining whether non-quantified factors are
important enough to justify consideration of the regulation.

21

OMB Circular A-4, “Regulatory Analysis,” September 17, 2003. The circular is available at
http://www.whitehouse.gov/omb/assets/regulatory_matters_pdf/a-4.pdf. The circular took effect for economically
significant proposed rules on January 1, 2004, and for economically significant final rules on January 1, 2005.
22
Ibid., p. 1.
23
Ibid., p. 2.
24
For example, if Option A has expected costs of $100 million and expected benefits of $200 million, the net benefits
are $100 million. If Option B has expected costs of $200 million, and expected benefits of $400 million, the net
benefits are $200 million. In this scenario, Option B produces the largest net benefits.
25
OMB Circular A-4, p. 10.

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Although some contend that certain benefits cannot be monetized (e.g., deaths or illnesses
avoided),26 agencies have developed a variety of methods of doing so, often by determining the
number of “statistical lives” that the rules are expected to extend or save, and then multiplying
that number by an estimated “value of a statistical life” (VSL).27 OMB Circular A-4 notes that
academic studies have identified VSLs from $1 million to $10 million, but it does not recommend
that agencies use a particular VSL. In 2009, the Department of Transportation’s (DOT’s) VSL
was $6.0 million while the Environmental Protection Agency’s (EPA’s) VSL was nearly $7.9
million.28
OMB Circular A-4 describes cost-effectiveness analysis as a way to “identify options that achieve
the most effective use of the resources available without requiring monetization of all of relevant
benefits or costs.”29 It allows analysts to compare a set of regulatory actions with the same
primary outcome. For example, the analysis may indicate that one option costing $100 million is
expected to save 50 lives (i.e., $2 million per life saved), while another option costing $200
million is expected to save 200 lives during the same period (i.e., $1 million per life saved).
The circular also discusses a variety of other economic analysis issues, including measuring costs
and benefits against a baseline (i.e., the way the world would look absent the proposed
regulation); discounting when benefits and costs do not occur within the same time period; and
how uncertainty should be treated (e.g., ranges, probability distributions, and estimates of
expected value). For particularly large rules with annual economic effects of $1 billion or more,
agencies are instructed to
present a formal quantitative analysis of the relevant uncertainties about benefits and costs.
In other words, you should try to provide some estimate of the probability distribution of
regulatory benefits and costs. In summarizing the probability distributions, you should
provide some estimates of the central tendency (e.g., mean and median) along with any other
information you think will be useful such as ranges, variances, specified low-end and highend percentile estimates, and other characteristics of the distribution.30

Finally, OMB Circular A-4 provides guidance on the regulatory accounting statements that are
required under the Regulatory Right-to-Know Act,31 and summarizes analytical requirements in
other statutes and executive orders.

26
Lisa Heinzerling and Frank Ackerman, “Pricing the Priceless: Cost-Benefit Analysis of Environmental Protection,”
Georgetown University, 2002.
27
For a summary of those efforts, see CRS Report R41140, How Agencies Monetize “Statistical Lives” Expected to Be
Saved By Regulations, by (name redacted).
28
Ibid.
29
OMB Circular A-4, p. 11.
30
Ibid., p. 40.
31
In 2001, Section 624 of the Treasury and General Government Appropriations Act, 2001, (31 U.S.C. § 1105 note),
sometimes known as the “Regulatory Right-to-Know Act,” put in place a permanent requirement for an OMB report on
regulatory costs and benefits. Specifically, it requires OMB to prepare and submit with the President’s budget an
“accounting statement and associated report” containing an estimate of the total costs and benefits (including
quantifiable and nonquantifiable effects) of federal rules and paperwork, to the extent feasible, (1) in the aggregate, (2)
by agency and agency program, and (3) by major rule. The accounting statement is also required to contain an analysis
of the impacts of federal regulation on state, local, and tribal governments, small businesses, wages, and economic
growth.

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Executive Orders 13563 and 13579
Executive Order 13563, issued by President Obama in January 2011, reiterated many of the
general principles of regulation in Executive Order 12866.32 For example, it says covered
agencies (Cabinet departments and independent agencies) must (to the extent permitted by law):
(1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its
costs, (2) tailor regulations to impost the least burden on society, and (3) select regulatory
approaches that maximize net benefits. It also directs agencies to “use the best available
techniques to quantify anticipated present and future benefits and costs as accurately as possible.”
Section 6 of the executive order requires covered agencies to develop a plan under which they
would periodically review their existing significant rules. Although the executive order does not
apply to independent regulatory agencies, a February 2011 memorandum from the OIRA
Administrator encouraged those agencies to “give consideration to all its provisions.”33
In July 2011, President Obama issued Executive Order 13579, “Regulation and Independent
Regulatory Agencies.”34 The executive order encouraged independent regulatory agencies to
comply with some of the principles in Executive Order 13563 that were directed to Cabinet
departments and independent agencies (e.g., public participation, integration and innovation,
flexible approaches, and science), and said independent regulatory agencies “should” develop a
plan for the periodic review of their rules. In a separate memorandum issued the same day as the
executive order, the President said he was doing so with “full respect for the independence of
your agencies.”35 Executive Order 13579 does not, however, directly apply the cost-benefit
principles in Executive Orders 12866 or 13563 to independent regulatory agencies, and does not
require them to conduct any type of economic analysis before issuing their rules.

Analytical Requirements in Other Executive Orders
In addition to the broadly applicable analytical requirements in Executive Order 12866 and
related guidance, several other executive orders have required covered agencies (Cabinet
departments and independent agencies) to analyze their regulations for particular purposes. For
example:
•

Executive Order 13045 on “Protection of Children from Environmental Health
Risks and Safety Risks,” issued in April 1997, requires each covered agency, “to
the extent permitted by law and appropriate, and consistent with the agency’s
mission,” to “address disproportionate risks to children that result from
environmental health risks or safety risks.”36 For any substantive rulemaking
action that “is likely to result in” an economically significant rule that concerns

32

Executive Order 13563, “Improving Regulations and Regulatory Review,” 76 Federal Register 3821, January 21,
2011.
33
Memorandum from Cass R. Sunstein, Administrator of OIRA, “Executive Order 13563, ‘Improving Regulation and
Regulatory Review’,” February 2, 2011, available at http://www.whitehouse.gov/sites/default/files/omb/memoranda/
2011/m11-10.pdf.
34
Executive Order 13579, “Regulation and Independent Regulatory Agencies,” 76 Federal Register 41587, July 14,
2011.
35
See http://www.whitehouse.gov/the-press-office/2011/07/11/memorandum-regulation-and-independent-regulatoryagencies.
36
Executive Order 13045, “Protection of Children From Environmental Health Risks and Safety Risks,” 62 Federal
Register 19883, April 23, 1997.

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“an environmental health risk or safety risk that an agency has reason to believe
may disproportionately affect children,” the agency must provide OIRA with “an
evaluation of the environmental health or safety effects of the planned regulation
on children,” as well as “an explanation of why the planned regulation is
preferable to other potentially and reasonably feasible alternatives considered by
the agency.”
•

Executive Order 13132 on “Federalism,” issued in August 1999, requires covered
agencies to prepare a “federalism summary impact statement” whenever they
issue a rule that has “significant federalism implications.”37 The assessment is to
contain “a description of the extent of the agency’s prior consultation with State
and local officials, a summary of the nature of their concerns and the agency’s
position supporting the need to issue the regulation, and a statement of the extent
to which the concerns of State and local officials have been met.” The executive
order says the consultation and impact statement requirements apply “to the
extent practicable.”38

•

Executive Order 13175 on “Consultation and Coordination with Indian Tribal
Governments” requires covered agencies to “have an accountable process to
ensure meaningful and timely input by tribal officials in the development of
regulatory policies that have tribal implications.” In addition, the order states that
no agency shall promulgate a regulation that has tribal implications and preempts
tribal law without first consulting with tribal officials, providing OMB with a
“tribal summary impact statement,” and making available to OMB any written
communications the tribal officials submitted to the agency.39

•

Executive Order 13211, issued in May 2001, requires covered agencies (to the
extent permitted by law) to prepare and submit to OMB a “Statement of Energy
Effects” for “significant energy actions.”40 The statement, which is to be
published in the proposed rule and the final rule, is to include a detailed
statement of “any adverse effects on energy supply, distribution, or use” for the
action, and reasonable alternatives and their effects.

None of these executive orders apply to independent regulatory agencies, and all of them give
federal agencies substantial discretion to define key terms (e.g., “disproportionately affect,”
“significant federalism implications,” and “significant energy actions”) that determine the degree
to which they cover agencies’ rules.

37

Executive Order 13132, “Federalism,” 64 Federal Register 43255, August 10, 1999.
Executive Order 12612, the previous executive order on federalism, also gave federal agencies broad discretion to
determine the applicability of its requirements. GAO examined the implementation of this order and concluded that its
analytical requirements were rarely implemented. See U.S. General Accounting Office, Federalism: Previous
Initiatives Have Had Little Effect on Agency Rulemaking, GAO/T-GGD-99-3, June 30, 1999.
39
Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments,” 65 Federal Register
67249, November 9, 2000. This executive order was re-emphasized in a memorandum from President Obama in 2009;
see Memorandum for the Heads of Executive Departments and Agencies, “Tribal Consultation,” November 5, 2009, at
http://www.whitehouse.gov/the-press-office/memorandum-tribal-consultation-signed-president.
40
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or
Use,” 66 Federal Register 28355, May 22, 2001.
38

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Supplemental Publications
On October 28, 2010, OMB published an agency checklist for the regulatory impact analyses
required by Executive Order 12866 and OMB Circular A-4.41 It contains repeated references to
provisions in the executive order and the circular, and states that nothing in the checklist “alters,
adds to, or reformulates existing requirements in any way.” Among other things, the checklist
asks whether the agency’s analysis (1) has a reasonably detailed description of the need for the
regulatory action, (2) explains how the action will meet that need, (3) quantifies and monetizes
the expected costs and benefits of the action to the extent feasible, (4) explains and supports a
reasoned justification that the benefits of the regulatory action justify the costs, (5) assesses the
potentially effective and reasonable alternatives to the action (including at least one alternative
that is more stringent and one that is less stringent), and (6) explains why the planned regulatory
action is preferable to those alternatives.
On February 7, 2011, OMB published a document entitled Regulatory Impact Analysis:
Frequently Asked Questions.42 Again, OMB said “nothing said here is meant to alter existing
requirements in any way.” Among other things, OMB indicated the following:
•

A rule may be considered “economically significant” if it is expected to have
$100 million in costs, benefits, or transfers in any one year, and rules that do not
cross that threshold but could adversely affect a small sector of the economy and
would threaten to create significant job loss would still be considered
“economically significant.”

•

Agencies’ regulatory impact analyses should be presented in plain language, and
should include a clear executive summary of their central conclusions and an
accounting statement with a table summarizing the expected costs, benefits, and
transfers.

•

When considering regulatory alternatives, agencies should begin by asking
whether to regulate at all, and should consider deferring to regulation at the state
or local level. If federal regulation is needed, agencies should consider analyzing
at least three options: the preferred option, a more stringent option, and a less
stringent one. Agencies should also generally include a sensitivity analysis
showing how results can vary with changes in assumptions, data, and analytical
approaches.

In August 2011, OMB issued a primer to “assist agencies in developing regulatory impact
analyses (RIAs), as required for economically significant rules by Executive Order 13563,
Executive Order 12866, and OMB Circular A-4.” The primer contains nine steps for conducting a
proper regulatory impact analysis: (1) describe the need for the regulatory action; (2) define the
baseline; (3) set the time horizon of analysis; (4) identify a range of regulatory alternatives; (5)
identify the consequences of regulatory alternatives; (6) quantify and monetize the benefits and
costs; (7) discount future benefits and costs; (8) evaluate non-quantified and non-monetized
benefits and costs; and (9) characterize uncertainty in benefits, costs, and net benefits.43
41

See http://www.whitehouse.gov/sites/default/files/omb/inforeg/regpol/RIA_Checklist.pdf for a copy of the checklist.
See http://www.whitehouse.gov/sites/default/files/omb/assets/OMB/circulars/a004/a-4_FAQ.pdf for a copy of this
document.
43
See http://www.whitehouse.gov/sites/default/files/omb/inforeg/regpol/circular-a-4_regulatory-impact-analysis-a(continued...)
42

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Congressional Initiatives
Congress has also required federal agencies to analyze the effect of certain rules before they are
issued. Some of the requirements are potentially applicable to a range of agencies and regulations,
while other requirements are focused on particular agencies or types of rules (e.g., those affecting
the environment or small businesses). In addition to the cross-cutting requirements discussed
below, there are many other requirements that are tied to particular agencies and statutes. For
example, Section 1102(b) of the Social Security Act (42 U.S.C. §1302(b)) requires the
Department of Health and Human Services to prepare a regulatory impact analysis if a rule may
have a significant impact on the operations of a substantial number of small rural hospitals.44

Unfunded Mandates Reform Act
The statutory provisions that most closely approximate the types of analysis required in Executive
Order 12866 are in Title II of the Unfunded Mandates Reform Act (UMRA) of 1995 (2 U.S.C.
§§1532-1538).45 Before promulgating a rule containing a mandate that may result in the
expenditure of $100 million or more in any one year by the private sector, or by state, local, and
tribal governments in the aggregate, UMRA requires covered agencies (Cabinet departments and
independent agencies, but not independent regulatory agencies) to prepare a written statement
containing (among other things) a “qualitative and quantitative assessment of the anticipated costs
and benefits ... as well as the effect of the Federal mandate on health, safety, and the natural
environment.” The written statement is also generally required to include estimates of future
compliance costs, and any disproportionate budgetary effects on particular regions, governments,
or segments of the private sector, and estimates of effects on the national economy, including
effects on job creation, productivity, full employment, and international competitiveness. OIRA
has primary responsibility for monitoring agency compliance with Title II of UMRA, and
publishes an annual report on the implementation of Title II.46 UMRA provides for limited
judicial review of agency compliance with these analytical requirements. Specifically, Section
401(a)(2)(B) states that if an agency fails to prepare the written statement required in Section 202,
“a court may compel the agency to prepare such written statement.”
As the Government Accountability Office (GAO, formerly the General Accounting Office)
pointed out several times during the past 15 years, however, UMRA’s analytical requirements do
not apply to most economically significant rules, give agencies substantial discretion regarding
their implementation, and do not require agencies to do much more than is already required in
Executive Order 12866. For example, the requirements in Section 202 of UMRA are not triggered
if the agency issues a final rule without a previous notice of proposed rulemaking. (About half of
(...continued)
primer.pdf for a copy of this document.
44
42 U.S.C. § 1302. The department is not required to prepare the analysis if the final rule is issued without a prior
notice of proposed rulemaking.
45
For an overview of UMRA, see CRS Report R40957, Unfunded Mandates Reform Act: History, Impact, and Issues,
by (name redacted) and (name redacted).
46
In recent years, OIRA’s annual report on UMRA has been combined with its report on the costs and benefits of
federal regulations. See, for example, Office of Management and Budget, Office of Information and Regulatory
Affairs, 2010 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State,
Local, and Tribal Entities, available at http://www.whitehouse.gov/sites/default/files/omb/legislative/reports/
2010_Benefit_Cost_Report.pdf.

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all final rules do not have a prior proposed rule.)47 Also, UMRA does not apply unless there are
“expenditures” of at least $100 million in a year (which may not be the same as “impact on the
economy” or even “cost”), and does not apply to “voluntary” programs or conditions of federal
financial assistance. Agencies do not have to estimate certain effects if they determine such
estimates are not “reasonably feasible.” In February 1998, GAO reported that, because of the way
the statute was written, Title II of UMRA had little effect on agencies’ rulemaking actions during
its first two years of implementation.48 In May 2004, GAO again reported that UMRA’s written
statement requirements did not apply to most major or economically significant final rules issued
in 2001 and 2002, even though some of the rules “appeared to have potential financial impacts on
affected nonfederal parties similar to those of the actions that were identified as containing
mandates at or above the act’s thresholds.”49 In February 2011, GAO reiterated these conclusions,
noting that there are at least 14 reasons why a rule would not be considered a “mandate” under
UMRA.50

National Environmental Policy Act
Other statutory analytical requirements have been enacted with regard to particular issues or
constituencies. For example, the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C.
§§4321-4347) requires federal agencies to include in every recommendation or report related to
“major Federal actions significantly affecting the quality of the human environment” a detailed
statement on the environmental impact of the proposed action.51 The environmental impact
statement must delineate the direct, indirect, and cumulative effects of the proposed action.
Agencies are also required to include in the statement (1) any adverse environmental effects that
cannot be avoided should the proposal be implemented, (2) alternatives to the proposed action,
(3) the relationship between local short-term uses of the environment and the maintenance and
enhancement of long-term productivity, and (4) any irreversible and irretrievable commitments of
resources that would be involved if the proposed action should be implemented. As discussed in a
separate CRS report, just about every word in the term “major Federal actions significantly
affecting the quality of the human environment” has been disputed, scrutinized, and defined by
the courts.52

Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) of 1980 (5 U.S.C. §§601-612) requires federal agencies to
assess the impact of their forthcoming regulations on “small entities,” which the act defines as
47

U.S. General Accounting Office, Federal Rulemaking: Agencies Often Published Final Actions Without Proposed
Rules, GAO/GGD-98-126, Aug. 31, 1998.
48
U.S. General Accounting Office, Unfunded Mandates: Reform Act Has Had Little Effect on Agencies’ Rulemaking
Actions, GAO/GGD-98-30, February 4, 1998.
49
U.S. General Accounting Office, Unfunded Mandates: Analysis of Reform Act Coverage, GAO-04-637, May 12,
2004.
50
Testimony of Denise M. Fantone, Director, Strategic Issues, U.S. Government Accountability Office, before the
Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform, House
Committee on Oversight of Government Management, available at http://www.gao.gov/products/GAO-11-385T.
51
For more information, see CRS Report RL33152, The National Environmental Policy Act (NEPA): Background and
Implementation, by (name redacted).
52
CRS Report RS20621, Overview of National Environmental Policy Act (NEPA) Requirements, by (name red
acted).

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including small businesses, small governmental jurisdictions, and certain small not-for-profit
organizations. Under the RFA, Cabinet departments and independent agencies as well as
independent regulatory agencies must prepare a “regulatory flexibility analysis” at the time
proposed and certain final rules are issued. The RFA requires the analysis to describe, among
other things, (1) the reasons why the regulatory action is being considered; (2) the small entities
to which the proposed rule will apply and, where feasible, an estimate of their number; (3) the
projected reporting, recordkeeping, and other compliance requirements of the proposed rule; and
(4) any significant alternatives to the rule that would accomplish the statutory objectives while
minimizing the impact on small entities.53
However, these analytical requirements are not triggered if the head of the issuing agency
certifies that the proposed rule would not have a “significant economic impact on a substantial
number of small entities.” The RFA does not define “significant economic impact” or “substantial
number of small entities,” thereby giving federal agencies substantial discretion regarding when
the act’s analytical requirements are initiated. Also, the RFA’s analytical requirements do not
apply to final rules for which the agency does not publish a proposed rule, and some agencies do
not consider an RFA analysis to be required if the rule is expected to have significant positive
effects on small entities.54
The RFA initially did not permit judicial review of agencies’ actions under the act. However,
amendments to the act in 1996 as part of the Small Business Regulatory Enforcement Fairness
Act (SBREFA, 5 U.S.C. §601 note) permitted judicial review regarding, among other things,
agencies’ regulatory flexibility analyses for final rules and any certifications that their rules will
not have a significant impact on small entities. As a result, a small entity that is adversely affected
or aggrieved by an agency’s determination that its final rule would not have a significant impact
on small entities could seek judicial review of that determination within one year of the date of
the final agency action. In granting relief, a court may remand the rule to the agency or defer
enforcement against small entities. For more than 25 years, however, courts have ruled that
agencies need not prepare regulatory flexibility analyses if the effects of a rule on an industry are
indirect.55 Therefore, for example, if a federal agency is issuing a final rule establishing a health
standard that is implemented by states or other entities, the federal agency issuing the rule need
not prepare a regulatory flexibility analysis even if it is clear that the implementation ultimately
will have significant effect on a substantial number of small entities.56
53

Section 1100G of the Dodd-Frank Act added a requirement to § 603 of the RFA that for covered rules, the Consumer
Financial Protection Bureau should include of a number of specific items in their impact analysis, including “any
projected increase in the cost of credit for small entities.”
54
See, for example, U.S. Department of Health and Human Services, “Patient Protection and Affordable Care Act;
Establishment of Consumer Operated and Oriented Plan (CO-OP) Program,” 76 Federal Register 43237, July 20, 2011,
in which the department said that the Centers for Medicare and Medicaid Services interprets the RFA analysis
requirement “as applying only to regulations with negative impacts.” However, the department said it routinely
prepares a voluntary analysis when there are significant positive impacts.
55
See, for example, Mid-Tex Electric Cooperative, Inc. v. FERC, 773 F.2d 327, 343 (D.C. Cir. 1985).
56
For example, when EPA published a final rule establishing national ambient air quality standards (NAAQS) for
particulate matter in October 2006, the agency certified the rule as not triggering the RFA “because NAAQS
themselves impose no regulations on small entities.” In its cost-benefit analysis for the rule, EPA estimated the cost of
installing controls to meet the health standard at $5.6 billion in 2020. See U.S. Environmental Protection Agency,
“National Ambient Air Quality Standards for Particulate Matter; Final Rule,” 71 Federal Register 61144, 61217. (EPA
made the same argument in other rules. See U.S. Environmental Protection Agency, “Primary National Ambient Air
Quality Standard for Sulfur Dioxide,” 74 Federal Register 64810, at 64865, December 8, 2009; and “National Ambient
Air Quality Standards for Carbon Monoxide,” 76 Federal Register 8158, at 8195, February 11, 2011.) In a similar case
(continued...)

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GAO has examined the implementation of the RFA several times within the past 20 years, and a
recurring theme in GAO’s reports is a lack of clarity in the act and a resulting variability in its
implementation. For example, in 1991 GAO reported that each of the four federal agencies that it
reviewed had a different interpretation of key RFA provisions.57 In 1994, GAO again reported that
agencies’ compliance with the RFA varied widely from one agency to another and that agencies
were interpreting the statute differently.58 In a 1999 report, GAO concluded that agencies had
broad discretion to determine what the statute required.59 In a 2000 report, GAO said that the
Environmental Protection Agency (EPA) had certified more than 95% of its final rules issued in
the late 1990s, and characterized EPA as having a “high threshold” for analysis (albeit within the
discretion permitted in the statute).60 In all of these reports, GAO suggested that Congress
consider clarifying the act’s requirements and/or give the Small Business Administration (SBA)
or some other entity the responsibility to develop criteria for whether and how agencies should
conduct RFA analyses.61 In 2001, GAO testified that the promise of the RFA may never be
realized until Congress or some other entity defines what a “significant economic impact” and a
“substantial number of small entities” mean in a rulemaking setting.62 However, other observers
have indicated that the definitions of these terms should remain flexible because of significant
differences in each agency’s operating environment.63

Paperwork Reduction Act
Other analytical requirements pertain to certain aspects of the rulemaking process, albeit not the
rules themselves. The Paperwork Reduction Act (PRA) (44 U.S.C. §§3501-3520) was originally
enacted in 1980, but was subsequently amended in 1986 and again in 1995. One of the purposes
of the PRA is to minimize the paperwork burden for individuals, small businesses, and others
resulting from the collection of information by or for the federal government. The act generally
defines a “collection of information” as the obtaining or disclosure of facts or opinions by or for
an agency (Cabinet departments and independent agencies as well as independent regulatory
(...continued)
(American Trucking Associations, Inc. v. U.S. Environmental Protection Agency, 175 F.3d 1027 (D.C. Cir. 1999)),
affirmed in part and reversed in part, Whitman v. American Trucking Associations, 532 U.S. 457 (2001), the U.S. Court
of Appeals for the District of Columbia ruled that EPA had complied with the RFA because the states, not EPA, had
the direct authority to impose requirements to control ozone and particulate matter consistent with EPA health
standards.
57
U.S. General Accounting Office, Regulatory Flexibility Act: Inherent Weaknesses May Limit Its Usefulness for Small
Governments, GAO/HRD-91-16, January 11, 1991.
58
U.S. General Accounting Office, Regulatory Flexibility Act: Status of Agencies’ Compliance, GAO/GGD-94-105,
April 27, 1994.
59
U.S. General Accounting Office, Regulatory Flexibility Act: Agencies’ Interpretations of Review Requirements Vary,
GAO/GGD-99-55, April 2, 1999.
60
U.S. General Accounting Office, Regulatory Flexibility Act: Implementation in EPA Program Offices and Proposed
Lead Rule, GAO/GGD-00-193. September 20, 2000, p. 31.
61
Section 612 of the RFA requires the SBA Chief Counsel for Advocacy to “monitor” agencies’ compliance with the
RFA, but does not require SBA to issue binding rules defining key terms.
62
U.S. General Accounting Office, Regulatory Flexibility Act: Key Terms Still Need to Be Clarified, GAO-01-669T,
April 24, 2001.
63
See, for example, page 17 of the SBA Office of Advocacy’s guidance on the implementation of the RFA, available at
http://www.sba.gov/sites/default/files/rfaguide.pdf, which says “Significance should not be viewed in absolute
terms….” For more information on the RFA, see CRS Report RL34355, The Regulatory Flexibility Act:
Implementation Issues and Proposed Reforms, coordinated by (name redacted).

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agencies) by 10 or more nonfederal persons. Many information collections, recordkeeping
requirements, and third-party disclosures are contained in or are authorized by regulations as
monitoring or enforcement tools. In fact, these paperwork requirements are the essence of many
agencies’ regulatory provisions.64 The PRA requires agencies to justify any collection of
information from the public by establishing the need and intended use of the information,
estimating the burden that the collection will impose on respondents, and showing that the
collection is the least burdensome way to gather the information.
The original PRA established OIRA to provide central agency leadership and oversight of
government-wide efforts to reduce unnecessary paperwork burden and improve the management
of information resources. Agencies must receive OIRA approval (signified by an OMB control
number displayed on the information collection) for each collection request before it is
implemented, and those approvals must be renewed at least every three years. Failure to obtain
OIRA approval for an active collection, or the lapse of that approval, represents a violation of the
act, and triggers the PRA’s public protection provision. Under that provision, no one can be
penalized for failing to comply with a collection of information subject to the act if the collection
does not display a valid OMB control number.65 OIRA can disapprove any collection of
information if it believes the collection is inconsistent with the requirements of the PRA.
However, multi-headed independent regulatory agencies can, by majority vote of the leadership,
void any OIRA disapproval of a proposed information collection.66

Coverage of Analytical Requirements Varies
As the above discussion indicates, the cross-cutting executive order and statutory analytical
requirements vary substantially in terms of the types and amount of analysis required, and the
agencies and rules that they cover:
•

Executive Order 12866 and OMB Circular A-4 contain the most detailed
requirements, and cover all rules with a $100 million annual “effect on the
economy,” but the executive order and the circular do not apply to independent
regulatory agencies.

•

The Unfunded Mandates Reform Act contains analytical requirements that are
somewhat similar to those in Executive Order 12866, but it applies to only a
small percentage of the rules that are covered by the executive order because of
substantial limitations in the scope of the act’s requirements (e.g., UMRA does
not apply to independent regulatory agencies, or to rules that are conditions of

64

For example, Environmental Protection Agency’s Toxics Release Inventory (TRI) program is essentially a database
created through collections of information imposed on businesses to inform the public about chemical hazards in their
communities. TRI reports require businesses in certain industries to report the quantity of any of more than 600
chemicals entering each environmental medium on site, transfers of the chemical in wastes to off-site locations, on-site
treatment methods and efficiency, and source reduction and recycling activities.
65
For an up-to-date inventory of OMB-approved information collections, see http://www.reginfo.gov/public/do/
PRAMain.
66
44 U.S.C. 3507(f). For more information on the PRA, see CRS Report R40636, Paperwork Reduction Act (PRA):
OMB and Agency Responsibilities and Burden Estimates, by (name redacted) and (name redacted). The authors
of that report have left CRS; questions about its content may be directed to the coordinator of this report, (name red
acted).

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financial assistance, rules issued without a notice of proposed rulemaking, or
rules that do not require $100 million in “expenditures” in a year).
•

The Regulatory Flexibility Act is broader than either the executive order or
UMRA in that it covers independent regulatory agencies, but the RFA does not
apply to rules issued without a notice of proposed rulemaking, or to rules that the
agencies certify will not have a “significant economic impact on a substantial
number of small entities.” Some agencies certify that more than 90% of their
rules will not have that impact, and therefore are not required to do the analysis.

•

The Paperwork Reduction Act covers independent regulatory agencies, but it
only covers agencies’ collections of information, not the rules themselves.

Table 1 below summarizes this information, showing that the requirement with most extensive
analytical requirements and broad coverage (Executive Order 12866) does not apply to
independent regulatory agencies, and the requirements that do apply to independent regulatory
agencies (the RFA and the PRA) are more limited in the types of analysis required.
Table 1. Depth and Coverage of Analytical Requirements Vary
Analytical Requirement

Cabinet Departments and
Independent Agencies

Independent Regulatory
Agencies

Extensive Analytical Requirements and Broad Rule Coverage
Executive Order 12866 and OMB
Circular A-4

Yes

No

Limited Analytical Requirements and/or Narrow Rule Coverage
Other executive orders

Yes

No

Unfunded Mandates Reform Act

Yes

No

NEPA

Yes

Yes

Regulatory Flexibility Act

Yes

Yes

Paperwork Reduction Act

Yes

Yes

Source: CRS.

Analytical Requirements Applicable to Selected
Independent Regulatory Agencies
Although independent regulatory agencies are not covered by the analytical requirements in
Executive Order 12866 and OMB Circular A-4, that lack of coverage may be ameliorated if the
individual statutes that provide rulemaking authority to these agencies require cost-benefit or
other types of economic analysis. This section of the report examines the analytical requirements
in the underlying statutes for selected independent regulatory agencies.

Economic Analysis and Banking Agencies
Because of concerns regarding the implementation of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (P.L. 111-203, July 21, 2010), on May 4, 2011, the 10 Republican

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Senators on the Senate Committee on Banking, Housing, and Urban Affairs jointly requested that
the offices of the inspectors general (OIGs) for five independent regulatory agencies in the
banking area provide them with information about the economic analysis requirements applicable
to rulemaking in those agencies.67 The five agencies were the Board of Governors of the Federal
Reserve System, the Securities and Exchange Commission (SEC), the Commodity Futures
Trading Commission (CFTC), the Office of the Comptroller of the Currency (OCC) within the
Department of the Treasury, and the Federal Deposit Insurance Corporation (FDIC). The five
OIGs provided written responses to the Senators in June 2011, and those responses are
summarized below.

Board of Governors of the Federal Reserve System
The OIG for the Board of Governors of the Federal Reserve System said that statutes related to
the board’s rulemaking authority, including the Federal Reserve Act and the Bank Holding
Company Act of 1956, “generally do not require economic analysis as part of the agency’s
rulemaking activities.”68 The OIG noted the applicability of the PRA and the RFA to the Board’s
rulemaking, but said they only require “narrowly tailored evaluations of the rulemaking’s
paperwork burden and effect on small entities, respectively.”69

Securities and Exchange Commission
The SEC OIG report identified several statutory provisions that require the commission to
analyze the impact of its rules.70 For example, the report noted that the National Securities Market
Improvement Act (15 U.S.C. §77b(b)) requires the SEC to consider whether an action “will
promote efficiency, competition, and capital formation” whenever it is “engaged in rulemaking
and is required to consider or determine whether an action is necessary or appropriate in the
public interest.” Also, Section 23(a)(2) of the Securities Exchange Act of 1934 (15 U.S.C.
§78w(a)(2)) states that:
The Commission and the Secretary of the Treasury, in making rules and regulations pursuant
to any provisions of this chapter, shall consider among other matters the impact any such rule
or regulation would have on competition. The Commission and the Secretary of the Treasury
shall not adopt any such rule or regulation which would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of this chapter. The Commission and
the Secretary of the Treasury shall include in the statement of basis and purpose incorporated
in any rule or regulation adopted under this chapter, the reasons for the Commission’s or the
Secretary’s determination that any burden on competition imposed by such rule or regulation
is necessary or appropriate in furtherance of the purposes of this chapter.

67

The Senators also asked the OIGs to describe internal policies and procedures governing economic analyses of
proposed rules, the degree to which agency staff understand and follow applicable requirements, the qualifications of
the staff who conduct the analyses, and other aspects of those analyses.
68
Office of the Inspector General, Board of Governors of the Federal Reserve System, “Response to a Congressional
Request Regarding the Economic Analysis Associated with Specified Rulemakings,” June 13, 2011, p. 6.
69
Ibid., p. 7.
70
Office of the Inspector General, U.S. Securities and Exchange Commission, “Report of Review of Economic
Analyses Performed by the Securities and Exchange Commission in Connection with Dodd-Frank Rulemakings,” June
13, 2011, available at http://www.sec-oig.gov/Reports/AuditsInspections/2011/Report_6_13_11.pdf (hereinafter
referred to as “OIG/SEC”).

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The OIG noted that the RFA and the PRA apply to SEC rulemaking, and that Executive Order
12866 and OMB Circular A-4 do not apply. Nevertheless, the OIG said that “SEC Chairmen have
made a commitment to Congress that the SEC will conduct cost-benefit or economic analyses in
connection with its rulemaking activities,”71 and said that “the Commission’s current rulemaking
procedures are closely aligned with the requirements” of the executive order and the circular.72
The OIG also noted that the SEC’s website states that “we take into account benefits and costs in
our rulemakings [and] assess alternative regulatory approaches,” and that the SEC chairman
stated during a congressional hearing in March 2011 that the SEC does conduct cost-benefit
analyses.73
However, the OIG also pointed out that another SEC commissioner stated in a May 2011 speech
that the “Commission has not engaged in a cost-benefit analysis of the rulemakings that were
essentially dictated by the law.”74 She reportedly went on to say that “By limiting our cost-benefit
analysis to those measures over which the Commission has full discretion, we fail to consider all
the costs and benefits that will result from a particular regulatory action.”75

Federal Deposit Insurance Corporation
The FDIC OIG report noted the applicability of the RFA and the PRA, and said that the “Small
Business Regulatory Enforcement Fairness Act also requires the FDIC to conduct cost-benefit
analyses of final rules.”76 However, that act only requires agencies to submit a cost-benefit
analysis to the Government Accountability Office if the agency has prepared one for the final rule
at issue.77 The report noted that FDIC is not covered by Executive Orders 12866 and 13563 or
OMB Circular A-4, but said the agency had issued a Statement of Policy on the Development and
71

In support of this statement, the OIG noted that SEC Office of General Counsel officials quoted former SEC
Chairman Arthur Levitt, who said there was an expectation that the SEC would perform cost-benefit analyses as part of
the rulemaking process. See OIG/SEC, p. 4.
72
OIG/SEC, p. 4.
73
Ibid., p. 5, citing testimony by SEC Chairman Mary Shapiro before the Subcommittee on Financial Services and
General Government, House Committee on Appropriations, March 15, 2011.
74
Ibid., pp. 5-6, citing a speech by Commissioner Kathleen Casey at an SEC open meeting regarding rules for
Nationally Recognized Statistical Rating Organizations held on May 18, 2011.
75
In a somewhat related development, on July 22, 2011, the U.S. Court of Appeals for the District of Columbia vacated
an SEC final rule on proxy access, saying the Commission acted arbitrarily and capriciously for having failed to assess
the economic implications of a rule adequately. Business Roundtable v. SEC, D.C. Cir., No 10-1305, July 22, 2010. In
particular, the Court said (on p. 7 of the opinion) that the SEC had “inconsistently and opportunistically framed the
costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be
quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial
problems raised by commenters.” Citing an earlier case (Chamber of Commerce v. SEC, 412 F.3d 133, 143 (D.C. Cir.
2005)), the Court said that the agency has a “statutory obligation to determine as best it can the economic implications
of the rule.” Some observers believe that this case has “elevated the importance of economic analysis in rulemaking to
implement” the Dodd-Frank Act. See, for example, Yin Wilczek, “D.C. Circuit’s Proxy Access Ruling Raises
Importance of Economic Review, Panel Says,” BNA Daily Report for Executives, August 2, 2011, p. EE-4; and David
S. Hilzenrath, “Wall Street Finds Relief in Court from SEC Rules,” Washington Post, August 12, 2011, p. A-10.
76
Office of the Inspector General, Federal Deposit Insurance Corporation, “Evaluation of the FDIC’s Economic
Analysis of Three Rulemakings to Implement Provisions of the Dodd-Frank Act,” Report No. EVAL-11-003, June
2011, p. 1 of the Executive Summary. The report is available at http://www.fdicoig.gov/reports11%5C11-003EV.pdf,
and is hereinafter referred to as “OIG/FDIC.”
77
Specifically, the portion of SBREFA known as the Congressional Review Act states that rulemaking agencies must
submit to GAO, and make available to each house of Congress, “a complete copy of the cost-benefit analysis of the
rule, if any” (5 U.S.C. 801(a)(1)(b)(i)).

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Review of FDIC Regulations and Policies that “generally addresses the spirit of, and principles
found in, the two executive orders and OMB guidance.”78
In terms of agency-specific requirements, the FDIC OIG report identified Section 302 of the
Riegle Community Development and Regulatory Improvement Act (12 U.S.C. §4802(a)), which
states:
In determining the effective date and administrative compliance requirements for new
regulations that impose additional reporting, disclosure, or other requirements on insured
depository institutions, each Federal banking agency shall consider, consistent with the
principles of safety and soundness and the public interest - (1) any administrative burdens
that such regulations would place on depository institutions, including small depository
institutions and customers of depository institutions; and (2) the benefits of such regulations.

Commodity Futures Trading Commission
The June 2011 CFTC OIG report noted that Section 15(a) of the Commodity Exchange Act (7
U.S.C. §19(a)) requires the agency to consider costs and benefits before issuing certain
regulations.79 Specifically, Section 15(a) states the following:
Before promulgating a regulation under this chapter ... , the Commission shall consider the
costs and benefits of the action of the Commission. The costs and benefits of the proposed
Commission action shall be evaluated in light of - (A) considerations of protection of market
participants and the public; (B) considerations of the efficiency, competitiveness, and
financial integrity of futures markets; (C) considerations of price discovery; (D)
considerations of sound risk management practices; and (E) other public interest
considerations.80

In light of this requirement, in September 2010, the CFTC Office of General Counsel and Office
of Chief Economist created a template for a uniform cost-benefit analysis methodology to be used
in Dodd-Frank Act proposed rules.81 That template stated, in part, that Section 15(a) “does not
require the Commission to quantify the costs and benefits of a rule or to determine whether the
benefits of the order outweigh its costs; rather, it requires that the Commission ‘consider’ the
costs and benefits of its actions.”82 It went on to say that CFTC “could in its discretion determine
that, notwithstanding its costs, a particular rule is necessary or appropriate to protect the public
interest or to effectuate any of the provisions or accomplish any of the purposes of the Act.”
78

OIG/FDIC, p. 1 of the Executive Summary.
Office of the Inspector General, U.S. Commodity Futures Trading Commission, “A Review of Cost-Benefit
Analyses Performed by the Commodity Futures Trading Commission in Connection with Rulemakings Undertaken
Pursuant to the Dodd-Frank Act,” June 13, 2011, available at http://www.cftc.gov/ucm/groups/public/@aboutcftc/
documents/file/oig_investigation_061311.pdf, and is hereinafter referred to as “OIG/CFTC.” The CFTC OIG had
previously issued an April 15, 2011, report in response to a congressional request entitled “An Investigation Regarding
the Cost-Benefit Analyses Performed by the Commodity Futures Trading Commission in Connection with
Rulemakings Undertaken Pursuant to the Dodd-Frank Act,” available at http://www.cftc.gov/ucm/groups/public/
@aboutcftc/documents/file/oig_investigation_041511.pdf.
80
Subsection (a)(3) states that these requirements do not apply to “(A) An order that initiates, is part of, or is the result
of an adjudicatory or investigative process of the Commission. (B) An emergency action. (C) A finding of fact
regarding compliance with a requirement of the Commission.”
81
OIG/CFTC, Exhibit 1.
82
OIG/CFTC, p. 3.
79

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In May 2011, the same two offices developed “Staff Guidance on Cost-Benefit Considerations for
Final Rulemakings under the Dodd-Frank Act.”83 In that guidance, CFTC staff were told to
“consider costs and benefits in the Final Rulemakings utilizing the principles set forth in
Executive Order 13563 in a manner that is reasonably feasible and appropriate, and consistent
with the underlying statutory mandate [in Section 15(a) of the Commodity Exchange Act].”
Rulemaking teams were allowed to “choose ... quantitative analysis to respond to comments
received.”84 The guidance goes on to say that additional analysis is primarily needed when the
comments raise specific concerns about costs and benefits, and that “[q]uantitative benefits need
not always be greater than costs because there may be a statutory mandate or policy rationale
behind the rule.”85

Comptroller of the Currency
Section 315 of the Dodd-Frank Act amended the PRA (44 U.S.C. §3502(5)) to designate OCC,
which is an agency within the Department of the Treasury, as an independent regulatory agency.
Prior to the Dodd Frank Act, OCC was not considered an independent regulatory agency and
therefore was subject to Executive Order 12866 and OMB Circular A-4, as well as the Unfunded
Mandates Reform Act. OCC still remains a component of the Department of the Treasury, but
because it is designated as an independent regulatory agency under the PRA, OCC is no longer
subject to those requirements.
After discussing the applicability of analytical requirements in the RFA and the PRA, the
Treasury OIG report86 noted requirements in the Riegle Community Development and Regulatory
Improvement Act (“Riegle Act,” 12 U.S.C. §4802(a)), which states:
In determining the effective date and administrative compliance requirements for new
regulations that impose additional reporting, disclosure, or other requirements on insured
depository institutions, each Federal banking agency shall consider, consistent with the
principles of safety and soundness and the public interest - (1) any administrative burdens
that such regulations would place on depository institutions, including small depository
institutions and customers of depository institutions; and (2) the benefits of such regulations.

The term “Federal banking agencies” is defined in Section 4801 of the Riegle Act (12 U.S.C.
§1813) as the “Office of the Comptroller of the Currency, the Office of Thrift Supervision, the
Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance
Corporation.” Therefore, although its OIG did not mention it, the Board of Governors of the
Federal Reserve System also appears to be covered by this requirement.

Summary of the OIG Reports
Although the OIG reports identified statutory cost-benefit requirements that are applicable to all
five of the independent regulatory agencies, those requirements are not as directive or as detailed
83

Ibid., Exhibit 2.
Ibid., Exhibit 2, p. 3.
85
Ibid., Exhibit 2, pp. 6-7.
86
Office of the Inspector General, Department of the Treasury, “Dodd-Frank Act: Congressional Request for
Information Regarding Economic Analysis by OCC,” June 13, 2011, available at http://www.treasury.gov/about/
organizational-structure/ig/Documents/OIG-CA-11-006.pdf.
84

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as those in Executive Order 12866 or OMB Circular A-4. The statutory requirements often only
require the agencies to “consider” costs and benefits, but do not specifically require the agencies
to conduct a detailed analysis or to demonstrate that the benefits of their rules exceed or justify
the costs. For example:
•

The National Securities Market Improvement Act requires the SEC to “consider”
whether an action “will promote efficiency, competition, and capital formation,”
and the Securities Exchange Act of 1934 requires the agency to “consider” the
impact that a rule would have on competition.

•

The Riegle Act requires the FDIC, the OCC, and the Board of Governors of the
Federal Reserve System to “consider ... any administrative burdens that such
regulations would place on depository institutions ... [and] the benefits of such
regulations.”

•

The Commodities Exchange Act requires CFTC to “consider the costs and
benefits of the action of the Commission.”

That lack of specificity notwithstanding, however, it is unclear how these agencies will be able to
“consider” regulatory costs and benefits if they do not perform some type of systematic economic
analysis of their proposed regulations. In the previously mentioned July 2011 decision by the U.S.
Court of Appeals for the District of Columbia involving an SEC rule, the court said that the
agency has a “statutory obligation to determine as best it can the economic implications of the
rule.”87

Consumer Financial Protection Bureau
Although not included in the 10 Senators’ May 4 letter to the OIGs, the Bureau of Consumer
Financial Protection (often referred to as the Consumer Financial Protection Bureau, or CFPB)
within the Federal Reserve System is also expected to issue Dodd-Frank Act regulations that will
be of interest to financial institutions, the public, and Congress. CFPB was created by Title X of
the Dodd-Frank Act, which consolidated many federal consumer protection responsibilities into
the bureau. The act transferred supervisory and enforcement authority over a number of consumer
financial products and services to the bureau on July 21, 2011. Title X and Title XIV of the act
contain numerous provisions that require or permit the CFPB to issue regulations implementing
the statute’s provisions.88
Section 1022(b)(2)(A) of the Dodd-Frank Act (12 U.S.C. §5512) establishes certain “standards of
rulemaking” for CFPB. Specifically, it states that
the Bureau shall consider—(i) the potential benefits and costs to consumers and covered
persons, including the potential reduction of access by consumers to consumer financial
products or services resulting from such rule; and (ii) the impact of proposed rules on
covered persons, as described in section 1026, and the impact on consumers in rural areas.
87

Business Roundtable v. SEC, D.C. Cir., No 10-1305, July 22, 2010, citing Chamber of Commerce v. SEC, 412 F.3d
133, 143 (D.C. Cir. 2005).
88
For information on the rules that CFPB are expected to issue, see CRS Report R41380, The Dodd-Frank Wall Street
Reform and Consumer Protection Act: Regulations to be Issued by the Consumer Financial Protection Bureau, by
(name redacted). For more information on CFPB itself, see CRS Report R41338,
The Dodd-Frank Wall Street
Reform and Consumer Protection Act: Title X, The Consumer Financial Protection Bureau, by (name redacted).

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Therefore, CFPB, like the other banking agencies, appears to be required to “consider” costs and
benefits before issuing its rules, but is not specifically required to prepare detailed cost-benefit
analyses to accomplish that goal.

Consumer Product Safety Commission
On July 7, 2011, the Subcommittee on Oversight and Investigations of the House Committee on
Energy and Commerce held a hearing at which several independent regulatory agencies testified
about their response to the issuance of Executive Order 13563.89 One of the agencies represented
at the hearing was the Consumer Product Safety Commission (CPSC). CPSC Commissioner
Robert S. Adler testified that the commission has been required since 1981 amendments to the
Consumer Product Safety Act to “conduct an extensive cost-benefit analysis when we promulgate
safety rules.” He said these provisions “easily match, if not surpass, in their stringency and scope
the cost-benefit provisions of the various executive orders on cost-benefit analysis recommended
by the Office of Management and Budget.” Specifically, he noted a number of provisions in the
agency’s organic statute that require the CPSC to conduct a regulatory analysis prior to issuing a
consumer product safety rule.90 Commissioner Adler also noted, however, that the agency has
issued only nine mandatory safety rules in the last 30 years, “opting instead to work with the
voluntary standards sector and to negotiate individual Corrective Action Plans for the recall of
specific hazardous products.”91 He also said that certain labeling requirements do not require the
same level of regulatory analysis as other types of safety rules.
Another perspective was offered by CPSC Commissioner Anne M. Northup, who said that most
of the regulations mandated by the Consumer Product Safety Improvement Act of 2008 (CPSIA)
are not required to be issued pursuant to the above-mentioned provisions that require cost-benefit
analysis, and that the commission “has never conducted a full cost-benefit analysis of any
regulation we have promulgated under the CPSIA.”92 She also said that such an analysis would
reveal that many of the regulations that the act required to be issued “cannot be justified.”

Implementation of Cost-Benefit Requirements
As noted previously in this report, Executive Order 12866 requires covered agencies to prepare
cost-benefit analyses only if their rules are expected to be “economically significant” or “major”
(e.g., are expected to have a $100 million annual effect on the economy). A 2011 CRS report
examined 100 rules issued during calendar year 2010 that OIRA and the agencies considered to
be “major,” and concluded that 37 of the rules appeared to be major because they involved annual
transfers of $100 million in funds from one party to another party, most commonly the transfer of
federal funds to the recipients of those funds (e.g., grants, food stamps, Medicare or Medicaid
funds, special pay for members of the military, and crop payments).93 Ten other rules appeared to
89

U.S. Congress, House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, The
Views of the Independent Agencies on Regulatory Reform, 112th Cong., 1st sess., July 7, 2011, H.Hrg. 112-71
(Washington: GPO, 2011).
90
15 U.S.C. §2058(f).
91
Ibid., pp. 13-28.
92
Ibid., pp. 29-53.
93
CRS Report R41651, REINS Act: Number and Types of “Major Rules” in Recent Years, by (name redacted) and
(continued...)

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be major because they were expected to prompt $100 million or more in annual consumer
spending, or because they were establishing fees for the reimbursement of particular federal
functions (e.g., issuance of passports and oversight of the nuclear power industry). Thirty-nine
rules appeared to be major because they were expected to result in at least $100 million in annual
compliance costs, regulatory benefits, or both. In 20 of those 39 rules, estimated annual costs and
benefits were both expected to exceed $100 million. In 14 of the 20 rules, the agencies’ lowest
estimates of regulatory benefits were larger than the highest estimated compliance costs. In only
one rule were the lowest costs greater than the highest benefits, and the agency indicated that this
result was caused by the lack of discretion provided in the underlying statute.94

OMB Annual Reports on Costs and Benefits
OMB’s annual reports on the costs and benefits of regulations also indicate the extent to which
federal agencies are estimating the costs and benefits of their rules.95 In the 2013 report, reflecting
rules issued during FY2012, OMB reported that executive agencies issued a total of 47 major
final rules.96 Twenty-two of these rules are considered “transfer” rules, which involve monetary
transfers. The issuing agencies quantified the amount of the transfer for all but two of these rules.
For 14 of the remaining 25 rules, the issuing agencies quantified and monetized both benefits and
costs, with annual costs estimated to be between $14.8 billion and $19.5 billion, and annual
benefits estimated at between $53.2 billion and $114.6 billion. For the other 11 rules, the agencies
monetized only costs or benefits, but not both.
The OMB report also indicated that independent regulatory agencies issued 23 major final rules
during FY2012. Seventeen of these 23 rules included some information on the associated costs
and benefits. Seven of these rules provided monetized costs, while none provided monetized
benefits. The SEC monetized costs for 3 of its 5 rules and 2 of the 3 rules that were issued jointly
with the CFTC. The CFTC issued 10 rules in FY2012, 2 of which had monetized costs. There
were also 2 rules issued by the CFPB, which included neither monetized costs nor benefits. OMB
said that even when these agencies did cost-benefit analyses, it did “not know whether the rigor
of the analyses conducted by these agencies is similar to that of the analyses performed by
agencies subject to OMB review.”97 OMB went on say the following:
We emphasize that for the purposes of informing the public and obtaining full accounting, it
would be desirable to obtain better information on the benefits and costs of the rules issued

(...continued)
(name redacted). The definitions of “economically significant” and “major” are almost identical.
94
Other rules appeared to be considered major because of increased costs or prices (albeit less than $100 million per
year), or for multiple reasons.
95
In 2001, Section 624 of the Treasury and General Government Appropriations Act, 2001, (31 U.S.C. § 1105 note),
sometimes known as the “Regulatory Right-to-Know Act,” put in place a permanent requirement for an OMB report on
regulatory costs and benefits. Specifically, it requires OMB to prepare and submit with the President’s budget an
“accounting statement and associated report” containing an estimate of the total costs and benefits (including
quantifiable and nonquantifiable effects) of federal rules and paperwork, to the extent feasible, (1) in the aggregate, (2)
by agency and agency program, and (3) by major rule.
96
Office of Management and Budget, 2013 Report to Congress on the Benefits and Costs of Federal Regulations and
Unfunded Mandates on State, Local, and Tribal Entities, May 2013, available at http://www.whitehouse.gov/sites/
default/files/omb/inforeg/2013_cb/2013_cost_benefit_report-updated.pdf.
97
Ibid., p. 35.

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by independent regulatory agencies. The absence of such information is a continued obstacle
to transparency, and it might also have adverse effects on public policy.98

Previous OMB Reports
Previous OMB reports evidenced the same patterns of analysis. For example:
•

In the 2012 report (reflecting rules issued during FY20011), OMB reported that
executive agencies issued 53 major final rules, of which 30 were budgetary
transfers. For 12 of the remaining 23 rules, both costs and benefits were
quantified, with estimated benefits between $34.3 billion and $89.5 billion and
estimated costs between $5.0 billion and $10.1 billion. For nine additional rules,
the issuing agency was able to identify either costs or benefits, but not both.
Independent regulatory agencies issued 17 major final rules in FY2011. None of
these included monetized benefits, while six included monetized costs (one from
the NRC and five from the SEC).99

•

In the 2011 report (reflecting rules issued during FY2010), OMB reported that
executive agencies issued 66 major final rules. Thirty-two of these rules were
budgetary transfers. Eighteen of these rules included monetized costs and
benefits, with combined estimated benefits between $18.8 billion and $86.1
billion and estimated costs between $6.5 billion and $12.5 billion. For 10
additional rules, the issuing agency monetized costs or benefits, but not both.
Independent regulatory agencies issued 17 major final rules. None of these rules
included monetized benefits, while eight included monetized costs. Six of these
rules were issued by the SEC, one was issued by the NRC, and one was jointly
issued by the Federal Reserve System and the FTC.100

Appendix C of the 2013 OMB report provided information on the number of major rules issued
by independent regulatory agencies during the 10-year period from October 1, 2003, through
September 30, 2012. That information, shown in Table 2 below, indicates that 64% of agency
rules included information on either associated costs or benefits.
Table 2. Independent Regulatory Agencies and Cost-Benefit Analysis:
FY2003 Through FY2012
Major Rules Issued

Major Rules with Some Benefit
or Cost Information

Consumer Financial Protection
Bureau

2

2

Commodity Futures Trading
Commission

11

8

Agency

98

Ibid.
See http://www.whitehouse.gov/sites/default/files/omb/inforeg/2012_cb/2012_cost_benefit_report.pdf for a copy of
this report.
100
See http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf for a copy of this
report.
99

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Major Rules Issued

Major Rules with Some Benefit
or Cost Information

Commodity Futures Trading
Commission / Securities and
Exchange Commission

3

2

Consumer Product Safety
Commission

3

1

Federal Communications
Commission

13

1

Federal Deposit Insurance
Commission / Federal Reserve
System / Office of the
Comptroller of the Currency

1

0

Federal Energy Regulatory
Commission

1

1

Federal Reserve System

16

3

Federal Trade Commission

2

1

Nuclear Regulatory Commission

12

4

Securities and Exchange
Commission

54

53

Total

118

76

Agency

Source: OMB’s 2013 report on costs and benefits, Appendix C.

The CRS and OMB reports suggest several broad conclusions about the current state of
regulatory analysis. First, many of the rules for which agencies are required to prepare costbenefit analyses are “major” for reasons unrelated to regulatory compliance costs. Therefore,
although economic analyses of these rules may be appropriate for transparency or other reasons,
it may be unlikely that the analyses will result in significantly reduced compliance costs or
increased regulatory benefits. Second, Cabinet departments and independent agencies like EPA
are more likely to prepare cost-benefit analyses that produce monetized estimates of costs and
benefits than independent regulatory agencies. However, not all rules issued by Cabinet
departments and independent agencies contained such estimates. When monetary estimates of
costs and benefits are available, estimated benefits are generally higher than estimated costs.
Finally, some independent regulatory agencies (e.g., the SEC and the NRC) appear to be more
likely to estimate at least the costs of their regulations than other independent regulatory agencies
(e.g., the FCC and the Federal Reserve System).

December 2013 GAO Report
In December 2013, GAO published a report on regulatory analyses conducted for rules issued
under the Dodd-Frank Wall Street Reform and Consumer Protection Act.101 In that report, GAO
concluded that the agencies issuing rules under Dodd-Frank generally completed the analyses that
were required in those rules. Most of the agencies issuing rules under Dodd-Frank are
101
U.S. Government Accountability Office, Agencies Conducted Regulatory Analyses and Coordinated by Could
Benefit from Additional Guidance on Major Rules, GAO-14-67, December 2013, http://www.gao.gov/assets/660/
659586.pdf.

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independent regulatory agencies, and, as such, were sometimes required to conduct analyses
under the PRA and the RFA. GAO examined a total of 59 “substantive” rules, 10 of which were
“major.” For the major rules, according to GAO, agencies generally relied on the key elements of
OMB Circular A-4 in conducting their analyses.

Regulatory Reform Legislation in the 113th Congress
A number of bills have been introduced in the 113th Congress that would codify, expand, or
otherwise modify existing requirements for cost-benefit or other types of regulatory impact
analysis. Some of the bills would expand the principles and requirements in Executive Order
12866 to all agencies or rules, some would require cost-benefit analysis by certain agencies, and
other bills would modify the analytical requirements in the RFA or UMRA. A few examples of
these bills are listed below.102
•

H.R. 899, the Unfunded Mandates Information and Transparency Act of 2014,
would amend the current analysis requirements in UMRA by making those
requirements more broad (i.e., by requiring them to be completed for a greater
number of rules) and by requiring a more detailed level of analysis.

•

H.R. 2122, the Regulatory Accountability Act of 2013, would make several
changes to the rulemaking process by amending the Administrative Procedure
Act (APA). Among those changes would be a requirement for agencies to
conduct cost-benefit analysis when issuing rules, which is not currently required
under the APA.

•

H.R. 2542, the Regulatory Flexibility Improvements Act of 2013, would amend
and expand current analysis requirements under the RFA.

•

H.R. 3863 and S. 2099, the Sound Regulation Act of 2014, would amend the APA
to require that agencies conduct cost-benefit analysis when issuing rules.

•

H.R. 5184 and S. 2153, the National Regulatory Budget Act of 2014, would
establish an Office of Regulatory Analysis as an independent establishment in the
executive branch that would be required to conduct its own cost-benefit analysis.

•

S. 1173, the Independent Agency Regulatory Analysis Act of 2014, would
authorize the President to subject independent regulatory agencies to cost-benefit
analysis requirements that exist in executive order (discussed above) and do not
currently apply to independent regulatory agencies.

Concluding Observations
As the preceding discussion indicates, many federal agencies are already required to conduct
cost-benefit and other types of analysis before they issue certain proposed or final rules. These
requirements have been added incrementally by various statutes and executive orders during the
102
Not included in this list are bills whose primary purpose is something other than changing regulatory impact
analysis requirements, or bills that would change regulatory analysis requirements for one agency or a small group of
agencies (e.g., financial regulators).

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past 40 to 50 years, and sometimes require agencies to perform the same general types of
analyses. For example, virtually all of the elements of the written statements that agencies are
required to prepare pursuant to UMRA were already required by Executive Order 12866 (e.g.,
quantitative and qualitative estimates of costs and benefits, effects on the national economy,
consideration of a range of alternatives, selection of the alternative that is least costly, most costeffective, or least burdensome, or an explanation of why that alternative was not selected). The
drafters of UMRA appear to have recognized the overlap, stating in Section 202(c) of the statute
(2 U.S.C. §1534) that an agency may prepare the written statement “in conjunction with or as part
of any other statement or analysis.” Section 605(a) of the RFA (5 U.S.C. §605(a)) contains the
same type of statement.
Also, many of the current requirements have substantial exclusions and exceptions, or give
federal agencies substantial discretion to decide whether an analysis is required. For example, the
RFA’s analytical requirements do not apply to rules that are issued without a prior notice of
proposed rulemaking, and agencies can avoid regulatory flexibility analyses if they certify that
their rules do not have a “significant” economic impact on a “substantial” number of small
entities. UMRA does not apply to independent regulatory agencies, and contains more than a
dozen other ways that “economically significant” rules would not be covered by its requirements.
Executive orders on children, federalism, and energy permit agencies to escape coverage of their
analytical requirements if they conclude the effects of their rules will not have “disproportionate”
effects on children, will not have “significant federalism implications,” or do not involve
“significant energy actions.” Executive Order 12866 and OMB Circular A-4 contain some of the
most inclusive and far-reaching analytical requirements, but they do not apply to independent
regulatory agencies, or to rules that are not “economically significant.”

Congressional Options
Congress could decide to keep the existing analytical framework in place. Alternatively, Congress
could decide to enact one or more of the bills listed above, perhaps resulting in more analyses
being performed, more detailed analyses, or both. Some of these bills would result in substantial
changes to the current requirements discussed above, while other bills would not substantially
change the nature or number of regulatory analyses that certain agencies would perform. Finally,
enacting one or more of the bills would add to the existing, incrementally developed combination
of statutes, executive orders, and OMB circulars that covers some agencies and rules but not
others, and could potentially be confusing to agencies and the public.
Another, more comprehensive approach could be to consolidate all of the analytical requirements
in one place, and perhaps expand those requirements to include more agencies or more rules, or to
require different types of analysis for the rules that are covered. Since Executive Order 12866 and
OMB Circular A-4 currently contain the most detailed and inclusive analytical requirements,
perhaps the easiest way to accomplish that goal would be to add elements to the executive order
and circular and ensure that certain agencies and types of economic effects are included (e.g.,
effects on small entities, or state, local, or tribal governments). The President could arguably
make most of these changes by amending the executive order and the circular without
congressional action.103 In 2011, OMB said obtaining better information on the costs and benefits
103

Commenters at an April 2011 Resources for the Future conference stated that both President Reagan and President
Clinton obtained legal opinions from the Office of Legal Counsel at the Department of Justice stating that Executive
Orders 12291 and 12866 could cover independent regulatory agencies. However, according to Sally Katzen, President
(continued...)

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of independent regulatory agencies’ rules was “desirable,” and described the absence of such
information as an “obstacle to transparency” that may be having “adverse effects on public
policy.”104 For more than 20 years, the Administrative Conference of the United States and the
American Bar Association have recommended that independent regulatory agencies’ rules be
reviewed by OIRA.105
However, expanding the executive order’s cost-benefit analysis requirements to independent
regulatory agencies, and requiring those agencies to submit their covered rules and analyses to
OIRA for review, may trigger resistance by those in Congress and elsewhere who believe these
agencies should remain more independent of presidential influence than Cabinet departments or
agencies like EPA. Sally Katzen, OIRA Administrator for five years during the Clinton
Administration, favors expansion of the executive order’s requirements to independent regulatory
agencies, and has suggested that a “sense of the Congress” resolution indicating that such a
course would be desirable “would go a long way to ameliorate any concerns in that regard.”106
Another option would be to amend the executive order to require independent regulatory agencies
to prepare cost-benefit analyses, but not require them to submit their rules to OIRA for review.107
If Congress was to establish a “congressional office of regulatory analysis” as is contemplated in
H.R. 214 from the 112th Congress (introduced by Representative Don Young on January 7,
2011), then perhaps the rules and analyses could be submitted there.108 Or, to maintain a measure
of independence, the independent regulatory agencies could be required to submit their rules and
analyses to OIRA, but the agencies could be given the same type of authority they have with
regard to PRA submissions—to override any objections from OIRA by a majority vote of the
agency’s leadership.109

(...continued)
Clinton’s OIRA Administrator, the decision not to cover them was reportedly a political, not a legal, determination. See
http://www.rff.org/Documents/Events/Workshops%20and%20Conferences/110407_Regulation_KatzenRemarks.pdf,
pp. 2-3.
104
Office of Management and Budget, 2011 Report to Congress on the Benefits and Costs of Federal Regulations and
Unfunded Mandates on State, Local, and Tribal Entities, June 2011, p. 31, available at http://www.whitehouse.gov/
sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf.
105
Administrative Conference of the United States, ACUS Recommendation 88-1, “Presidential Review of Agency
Rulemaking,” 1988, available at http://www.law.fsu.edu/library/admin/acus/305889.html. Comments from the
American Bar Association on presidential supervision on rulemaking, March 16, 2009 (citing House of Delegates,
Recommendation: Presidential Review of Rulemaking (Annual Meeting 1990)), available at http://www.reginfo.gov/
public/jsp/EO/fedRegReview/ABANET_comments.pdf. See also the American Bar Association’s statement in support
of S. 1173, the Independent Agency Regulatory Analysis Act of 2013, at http://www.americanbar.org/content/dam/aba/
uncategorized/GAO/2013sept16_indregagencies_l.authcheckdam.pdf.
106
Testimony of Sally Katzen before the Senate Committee on Homeland Security and Governmental Affairs, “Federal
Regulation: A Review of Legislative Proposals, Part II,” July 20, 2011, available at http://hsgac.senate.gov/public/
index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=6b0123b5-c6b2-42f2-9bfa-1b588af931d4. See also Sally
Katzen, “Expand Centralized Regulatory Review to Independent Agencies,” August 9, 2011, available at
http://www.law.upenn.edu/blogs/regblog/2011/08/expand-centralized-regulatory-review-to-independent-agencies.html.
107
Sally Katzen has suggested that the rules could be submitted to GAO or the Congressional Budget Office. See Sally
Katzen, “Expand Centralized Regulatory Review to Independent Agencies,” August 9, 2011, available at
http://www.law.upenn.edu/blogs/regblog/2011/08/expand-centralized-regulatory-review-to-independent-agencies.html.
108
Other options include GAO or the Congressional Budget Office, although those agencies would likely require
additional resources to take on this responsibility.
109
See 44 U.S.C. §3507(f).

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Codification of Executive Order’s Requirements
Alternatively, Congress could decide to enact legislation codifying and expanding the executive
order’s requirements to cover independent regulatory agencies, and requiring different types of
analyses. Supporters of this approach include Susan Dudley, OIRA Administrator for two years
during the George W. Bush Administration, who has said codification could (1) signal
congressional support for cost-benefit analysis principles, (2) apply the requirements to
independent regulatory agencies, and (3) make compliance with the requirements judicially
reviewable.110 She also said that legislation could emphasize certain types of analyses that have
been found lacking (e.g., effects on employment or indirect effects). Support has also come from
Professor Peter L. Strauss of Columbia Law School, who testified in February 2011 that codifying
in one statute the analytic requirements in Executive Order 12866 and elsewhere, and “framing
them to permit needed regulation to proceed efficiently, would in my judgment be a highly
desirable step.”111
Other observers, however, have opposed codification of the cost-benefit analysis requirements in
Executive Order 12866. For example, Sally Katzen has said that (1) the executive order’s
requirements have been successfully implemented for more than 30 years (as evidenced by the
fact that OMB’s reports regularly show that the costs of rules exceed the benefits); (2) even if the
executive orders were not working well, there is no evidence that putting the requirements in
statutes would make them work better; (3) the executive orders permit Presidents to emphasize
different things during their administrations, which would be lost if the requirements were put in
statute; and (4) codification of cost-benefit analysis requirements “would be amending a host of
previously enacted statutes that either are silent on the role of costs in the formulation of
regulations or do not permit the consideration of such factors.”112
Another option to cover all or some of the independent regulatory agencies by the requirements
of Executive Order 12866 would be for Congress to amend the statutory definition of an
“independent regulatory agency” that is referenced in the executive order. Executive Order 12866
defines an “agency” as (unless otherwise indicated) “any authority of the United States that is an
‘agency’ under 44 U.S.C. §3502(1), other than those considered to be independent regulatory
agencies, as defined in 44 U.S.C. §3502(10).” That definition (which is actually in 44 U.S.C.
§3502(5)) lists the agencies considered to be independent regulatory agencies (e.g., CFTC, SEC,
FCC, and the NRC), and also says it includes “any other similar agency designated by statute as a
Federal independent regulatory agency or commission.” Congress could amend this provision,
stating that, for purposes of Executive Order 12866, all or certain of these agencies would be
covered by the analytical and/or rule submission requirements in the executive order.113 This
110

Testimony of Susan E. Dudley before the Senate Committee on Homeland Security and Governmental Affairs,
“Federal Regulation: A Review of Legislative Proposals, Part II,” July 20, 2011, available at
http://www.hsgac.senate.gov/hearings/federal-regulation-a-review-of-legislative-proposals-part-ii, pp. 16-17.
111
Testimony of Peter L. Strauss before the Subcommittee on Courts, Commercial and Administrative Law, House
Committee on the Judiciary, “The APA at 65 – Is Reform Needed to Create Jobs, Promote Economic Growth, and
Reduce Costs?,” February 28, 2011, available at pdf http://judiciary.house.gov/index.cfm/2011/2/hearing-on-the-apaat-65-is-reform-needed-to-create-jobs-promote-economic-growth-and-reduce-costs-0.
112
Sally Katzen, “Why Congress Should Not Codify Cost-Benefit Analysis Requirements,” July 7, 2011, available at
http://www.law.upenn.edu/blogs/regblog/2011/06/why-congress-should-not-codify-requirements-for-economicanalysis-of-new-regulations.html.
113
The scope of any such amendment would likely need to be confined to confined to Executive Order 12866 to avoid
affecting other statutes and executive orders that reference the statutory definition of an independent regulatory agency.

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approach would not, however, prohibit the President or any future President from amending or
revoking the executive order.

Contextual Considerations
Whether done by presidential or congressional action, any effort to consolidate or reform the
analytical requirements in rulemaking should be cognizant of the state of existing law in this area.
Congress has required cost-benefit analysis in some statutes, prohibited it in other statutes,114 and
not precluded it in still other statutes.115 Both Executive Orders 12866 and 13563 contain the
phrase “to the extent permitted by law” when referencing the principles of rulemaking and the
analytical requirements, confirming that agencies must adhere to the requirements contained in
their authorizing statutes, and may only apply the principles and procedures of the executive
orders if the statutes permit them to do so. Should Congress decide to enact legislation
superseding existing law, it should do so in full recognition of the likely consequences.
Presidential and congressional requirements for cost-benefit analysis should also recognize that
data availability may be an implementation issue, and that additional resources may be necessary
for the agencies conducting these analyses. In some cases, the data that agencies need to estimate
the costs and benefits of their rules may not exist, or may only be available from regulated
entities.116 Although there is no “typical” cost-benefit analysis (just as there is no “typical” rule),
the cost of conducting many individual regulatory analyses has been in the hundreds of thousands
of dollars.117 If more agencies were required to prepare more detailed analyses for more rules, it is
likely that the agencies would make the argument that they would be unable to do so without
additional resources.118

114

Whitman v. American Trucking Associations, 531 U.S. 457 (2001).
Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208 (2009).
116
See, for example, Arthur Levitt, Jr., “Don’t Gut the S.E.C.,” New York Times, August 7, 2011, p. A19, who noted
that when he was chairman of the SEC, the data needed to do a cost-benefit analysis was only available from large
auditing firms, who would not provide the data. See also U.S. Government Accounting Office, Federal Water
Requirements: Challenges to Estimating the Cost Impact on Local Communities, GAO-06-151R (December 1, 2005),
which reported that local communities often lack the institutional knowledge or historical records on treatment
technologies and, as a result, may not be able to provide cost information.
117
A 1997 study by the Congressional Budget Office concluded that the median cost of 85 analyses conducted between
1990 and 1996 was $270,000, but some of the analyses cost more than $1 million. See Congressional Budget Office,
Regulatory Impact Analysis: Costs at Selected Agencies and Implications for the Legislative Process, March 1997,
available at http://www.cbo.gov/ftpdocs/40xx/doc4015/1997doc04-Entire.pdf. See also U.S. General Accounting
Office, EPA’s Costs of Preparing Regulatory Impact Analyses, GAO/RCED-97-15R (December 6, 1996), which
reported that 27 EPA analyses cost about $13 million, or an average of about $480,000 each. The cost of the individual
studies ranged from $46,000 to $3.8 million.
118
After the July 22, 2011, decision regarding the SEC’s proxy access rule, the Committee on Capital Markets
Regulation (described on its website as an independent and nonpartisan 501(c)(3) research organization dedicated to
improving the regulation of U.S. capital markets) released a statement saying, in part, that the SEC and other
commissions “will not be able to do the necessary cost-benefit analysis without adequate funding,” and went on to say
that “we support such funding.” See http://www.capmktsreg.org/pdfs/
2011.07.27%20Proxy%20Access%20statement.pdf.
115

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Author Contact Information
(name redacted), Coordinator
Analyst in Government Organization and
Management
[redacted]@crs.loc.gov, 7-....

Acknowledgments
The original version of this report was written by (nameredacted), who is no longer at CRS. (name reda
cted), Research Assistant, provided valuable support in completing an update of this report.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR41974. Public record. Not legal advice.