Federal Regulatory Reform: An Overview

Congressional research reportJan 29, 2003

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Order Code RL31207

Report for Congress

Received through the CRS Web

Federal Regulatory Reform: An Overview

Updated January 29, 2003

Gary L. Galemore

Analyst in American National Government

Government and Finance Division

Congressional Research Service ˜ The Library of Congress

Federal Regulatory Reform: An Overview

Summary

Federal regulation can be defined broadly as federal requirements, directives,

standards, or procedures, backed by the use of penalties or other sanctions, intended

specifically to modify the behavior of state and local governments, private

institutions, businesses, and individuals. Congress and the President have made

numerous attempts to reform government regulation over the last 3 decades.

Regulatory reform efforts have centered on several policy issue areas that include

requiring agencies to prepare cost-benefit and cost-effectiveness analyses for major

regulations, centralizing mandatory review and clearance of new regulations, setting

expiration dates on regulations (forcing a new review of a regulation before it is

continued), and expanding the role of judicial review.

The heart of the debate over regulatory reform is the tension between the costs

imposed by federal regulations, in terms of both dollars and government

intrusiveness, and protecting public health, safety, and the environment. Several

factors have made it troublesome to resolve regulatory issues and to pass

comprehensive regulatory reform. The difficulty is compounded by the fact that costbenefit analysis, cost-effectiveness analysis, and risk-assessment analysis, primary

tools used by regulators, rely on subjective assumptions, incomplete data collection,

and other uncertainties.

In its efforts to address regulatory issues, Congress has enacted laws to lessen

the regulatory burden and intrusiveness of federal regulation. These laws include the

Paperwork Reduction Act, the Regulatory Flexibility Act, the Unfunded Mandates

Reform Act, the Small Business Regulatory Enforcement Fairness Act, and the

Congressional Review Act, among others.

The purpose of this report is to provide Congress with an overview of regulatory

reform efforts and a summary of regulatory issues. The report also briefly describes

what issues have been most contentious and prevalent over the last decade or more,

and what Presidents have attempted, on their own authority, to evaluate better both

the necessity and the costs of regulations. Also discussed are laws passed by

Congress that have a direct or indirect impact on the regulatory process, those that

affect the analysis of the costs and benefits of regulations, and other laws that allow

for congressional, executive, and judicial review of regulations.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Current Administrative Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Cost-Benefit and Cost-Effectiveness Analyses . . . . . . . . . . . . . . . . . . . . . . . 5

Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Regulatory Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Congressional Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Judicial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Moratoriums on Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Paperwork Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Private Property “Takings” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Sunset of Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Unfunded Mandates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Negotiated Rulemaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Federal Efforts to Reform the Regulatory Process . . . . . . . . . . . . . . . . . . . . . . . . 10

Presidential Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Congressional Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Regulatory Flexibility Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Negotiated Rulemaking Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Paperwork Reduction Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Unfunded Mandates Reform Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Small Business Regulatory Enforcement Fairness Act . . . . . . . . . . . . 14

Regulatory Compliance Simplification . . . . . . . . . . . . . . . . . . . . . . . . 14

Regulatory Enforcement Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Equal Access to Justice Act Amendments . . . . . . . . . . . . . . . . . . . . . . 14

Regulatory Flexibility Act Amendments . . . . . . . . . . . . . . . . . . . . . . . 15

Congressional Review Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Omnibus Consolidated Appropriations Act . . . . . . . . . . . . . . . . . . . . . 15

Truth in Regulating Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

CRS Issue Brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

CRS Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Other Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Selected World Wide Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Federal Regulatory Reform: An Overview

Introduction

Since the 1970s, Congress and the President have struggled to lessen the

perceived intrusiveness and cost of federal regulations issued by over 100 federal

agencies.1 Federal regulation can be defined broadly as federal requirements,

directives, standards, or procedures, backed by the use of penalties or other sanctions,

intended specifically to modify the behavior of state and local governments, private

institutions, businesses, and individuals. A significant increase during the last 3

decades in the number,2 scope, and reach of federal regulations and regulatory

programs has drawn criticism and stimulated much of the reform effort. On the other

hand, those who perceive benefit from federal regulations are effective supporters.

Regulations and agencies promulgating regulations relating to public health, safety,

and the environment, the so-called “social” regulations and regulatory programs,

while providing substantial protections, have also imposed a significant costs on the

economy.

Regulatory reform efforts have required agencies to prepare cost-benefit and

cost-effectiveness analyses for major regulations, centralized mandatory review and

clearance of new regulations in the Office of Management and Budget (OMB),

established termination dates for certain regulations and regulatory agencies, and

expanded judicial review of regulations.

Although Congress has not reached agreement on a single, comprehensive,

regulatory reform bill, it has enacted several relevant measures, including the

Paperwork Reduction Act,3 the Regulatory Flexibility Act,4 the Unfunded Mandates

Reform Act,5 the Small Business Regulatory Enforcement Fairness Act,6 and the

Congressional Review Act.7 Congress has also passed legislation deregulating

specific sectors of the economy previously regulated by government. For example,

Jeffrey S. Lubbers, A Guide to Federal Agency Rulemaking (Chicago: ABA Publishing,

1998).

New and revised regulations have numbered, on average, around 1,600 per year for the last

20 years. Only 4% to 8% are new regulations, depending on the year specified. For

additional information on this subject, see CRS Report RL30183, Federal Regulations and

the Federal Register: Statistical Measurements, 1976-1999, by Rogelio Garcia.

94 Stat. 2812; Dec. 11, 1980; recodified at 109 Stat. 163; 44 U.S.C. 3501 et seq.

94 Stat. 1164; Sept. 19, 1980; 5 U.S.C. 601 note.

109 Stat. 48; Mar. 22, 1995; 2 U.S.C. 1501 et seq.

110 Stat. 857; Mar. 29, 1996; 5 U.S.C. 601 note.

110 Stat. 868; Mar. 29, 1996; 5 U.S.C. 801 et seq.

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deregulation has occurred relating to telecommunications, transportation, and other

industries.

Regulatory activity, whether within Congress, where bills are introduced each

year calling for more or less regulation, or within the executive branch, where dozens

of agencies propose, change, discontinue, or finalize regulations, may remain

vigorous in the coming decades. In the absence of a consensus on a comprehensive

regulatory reform bill, smaller scale reform efforts are likely to continue. Contending

factions remain split, however, over the degree of risk a society should reasonably

bear regarding health, safety, and environmental matters, as well as how best to

determine and evaluate such risk.

This report provides a brief overview of regulatory reform efforts. It describes

what issues have been most controversal and prevalent and what Presidents have

attempted, on their own authority, to evaluate better the necessity and costs of

regulations. Laws passed by Congress that have either a direct or an indirect impact

on the regulatory process or allow for more formal analysis of costs and benefits of

regulations, and those that require congressional, executive, and judicial review of

regulations are also discussed.

Current Administrative Process

Federal agencies are authorized to issue regulations under their establishing

statutes, as well as through statutes amending and extending the duties and

responsibilities of those agencies. Many regulations are issued under the notice-andcomment requirements established by the Administrative Procedure Act (APA).8

Passage of the APA in 1946 provided the framework within which agencies would

perform administrative actions, including rulemaking.9 The APA does not just apply

to new rules, but applies to any changes or attempts to repeal or revise existing

regulations. In a few instances, federal agencies are required to include elements of

adjudicatory proceedings such as cross-examination and rebuttal witnesses to the

notice-and-comment requirements when promulgating regulations. These agencies

include the Federal Trade Commission, the Consumer Product Safety Commission,

and the Occupational Safety and Health Administration. On occasion, agencies are

required to conduct rulemaking exercises under formal adjudicatory proceedings.10

Many of the general rulemaking requirements of the APA have been further defined

by federal court rulings that have sought to make the rulemaking process more

accessible to the public and more fair and meaningful to affected parties.

The notice-and-comment procedure of Section 553 of the APA (often called

“informal rulemaking”) requires an agency to publish a notice of proposed

rulemaking in the Federal Register. Publication in the Federal Register affords all

Lubbers, A Guide to Federal Agency Rulemaking, pp. 1-92.

60 Stat. 237; June 11, 1946; 5 U.S.C. 551-559,701-706,1305, 3105, 3344, 5372, 7521.

CRS Report RL30795, General Management Laws: A Selective Compendium—107th

Congress, by Ron C. Moe.

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interested persons an opportunity to participate in the proceedings either by written

comment or, at the agency’s discretion, oral presentation. When consideration of the

relevant matter is completed by the regulatory agency, these comments are

incorporated into the final rule record. Also, final rules published in the Federal

basis and purpose. A final rule normally must be published in the Federal Register

at least 30 days before its effective date. Interested persons have the right to petition

for the issuance, amendment, or repeal of a rule (see 5 U.S.C. 553). Under President

Clinton’s Executive Order 12866, a period for comment was established as not less

than 60 days.11 The APA itself does not specify the length of the public comment

period. Executive Order 12866 also adds several other requirements to rulemaking

not stipulated in the APA. The current Bush Administration has followed this

executive order, and will for at least the immediate future.

Under Executive Order 12866, agencies can issue regulations only upon

reasoned determinations of benefits and costs. All regulations must be submitted to

the Office of Management and Budget’s Office of Information and Regulatory

Affairs (OIRA), and any major regulation (impact exceeding $100 million a year)

submitted for review and clearance must be accompanied by a cost-benefit analysis.

Agency regulatory plans must include risk assessment and analysis; agencies must

submit to OMB plans to review existing regulations; and the Vice President and

Regulatory Working Group will act as a forum to assist agencies in identifying and

analyzing regulatory issues. During the promulgation process, regulatory agencies

may extend or reopen the period for public comment at any time. Agencies are also

free to grant additional procedural rights to interested persons.

The current administrator of the Office of Information and Regulatory Affairs,

John D. Graham, has stated publicly that he is implementing a review policy that

places greater emphasis on science-based procedures, including cost-benefit analyses,

in evaluating proposed agency regulations.12 OIRA will review all significant

regulations for strict compliance with all procedures and guidelines to include risk

assessment, peer review, and evaluation of rules for their impact on state, local, and

Indian governments. Strict review will also be applied to regulations affecting energy

supplies and small businesses. This action is a shift away from a prior emphasis on

agency expertise in rulemaking decisions, and may portend a more active role for and

dominance over regulations by OIRA.

Stricter review procedures at OIRA may affect agency rulemaking, making

agencies more attentive to procedures and guidelines. Currently, agency rulemaking

procedures may differ slightly, depending on the significance of a particular

regulatory decision. Procedures may vary according to whether a rule is considered

major or minor; whether it is a new rule, a revision, or a repeal of an existing

regulation; or for many other reasons. Regardless, agencies are required to follow the

Executive Order 12866, “Regulatory Planning and Review,” 58 Federal Register 51735,

Sept. 30, 1993.

U.S. Office of Management and Budget, Office of Information and Regulatory Affairs,

Presidential Review of Agency Rulemaking by OIRA, Memorandum for the President’s

Management Council (Washington: Sept. 20, 2001).

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requirements stipulated in the APA. Failure to do so could result in a challenge by

OIRA or a reversal of the agencies’ rulemaking by the court.

Regulatory Reform Concepts

Background

Regulatory reform has been a significant issue for both Presidents and Congress,

due to the growing reach, scope, and numbers of regulations and regulatory programs

issued over the last 3 decades.13 Statutes have been enacted as reform measures, and

several of them are discussed later in this report.

Most regulations have both economic and social effects. The purpose of

economic regulation is to ensure the continuation of a competitive marketplace and

to correct market failures when competition does not exist or does not allocate

resources efficiently. Federal agencies such as the Federal Trade Commission or the

Securities and Exchange Commission are examples of federal agencies that conduct

economic regulation.

Regulations dealing with health, safety, and the environment, the so-called

“social regulations,” have been especially controversial. These social regulations,

while providing substantial protections, have also imposed significant economic

costs on business. Proponents of comprehensive regulatory reform contend that

many federal regulations are too costly and intrusive. They argue that the public and

private resources needed to address problems in health, safety, and environmental

areas are limited, and that these resources must be allocated more efficiently to

address the greatest needs of society in the most cost-effective manner, so that the

costs of regulations do not exceed the benefits. Finally, they contend that the existing

system tends to be overly risk conscious, and they question a perceived lack of

stringent analytical guidelines in the methodology used to assess risk hazards as well

as costs and benefits when developing regulations. These perceived shortcomings,

they argue, result in unnecessary, costly, and intrusive rules that impede economic

growth and development.

Supporters of health, safety, and environmental regulation believe that some of

the reform efforts focus too much on costs and not enough on benefits. They argue

that efforts to make the process more stringent hinder the ability of regulatory

agencies to safeguard the public’s health and safety and to protect the environment.

Suggesting that a more complicated regulatory process might produce unintended

negative consequences, they argue for retaining the current, relatively effective

regulatory process to avoid these unforeseen consequences. They assert that the

methodology and administrative process that agencies currently apply to rulemaking

are adequate in evaluating the need for rulemaking and its costs and benefits. They

argue that additional reforms might ultimately prevent or unnecessarily delay needed

regulations as well as impose additional costs on agencies and risks to the public.

Marc Allen Eisner, Regulatory Politics in Transition (Baltimore: The Johns Hopkins

University Press, 2000).

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Several factors make it difficult to resolve differences regarding the need for

regulatory reform. First, contending parties often disagree on the need for a

particular regulation; some prefer a market solution. Second, the available

information necessary for effective use of risk assessment, cost-benefit, or costeffectiveness analysis (tools required for sound rulemaking) often is ambiguous and

incomplete. Finally, these tools depend largely on assumptions and other subjective

factors, thereby making them subject to bias and manipulation.

In recent years, efforts to reform the regulatory process have, for the most part,

focused on the following 10 areas: (1) use of cost-benefit analysis and costeffectiveness analysis when developing regulations, especially regulations likely to

impose annual costs of $100 million or more; (2) use of risk-assessment analysis to

determine the probability of certain hazards occurring and their adverse effects; (3)

use of a regulatory budget to provide an overview of regulatory costs and set a cap

on these costs; (4) subjecting new regulations to review and possible disapproval by

Congress; (5) widening the scope of judicial review of regulatory actions; (6)

imposing a moratorium on new regulations while agencies review their existing

regulations to determine if they should be revised or abolished; (7) reducing and

streamlining the paperwork required by regulations; (8) establishing a fair procedure

for compensation of property owners when all or some of their property is “taken”

or devalued by a regulatory action; (9) establishing a sunset mechanism whereby

regulations or regulatory programs are terminated unless Congress or the agency

determines otherwise; and (10) restricting mandates imposed on state and local

governments unless federal funds are provided to offset the cost of these mandates.

Each of these areas is briefly discussed below.

Cost-Benefit and Cost-Effectiveness Analyses

Cost-benefit analysis involves a systematic identification of all costs and

benefits associated with a project, regulation, or policy decision, including a full

analysis of how these costs and benefits are distributed across different groups in

society. A full analysis recognizes that quantitative assessments of benefits and costs

are necessarily uncertain and heavily dependent on numerous assumptions, thus

requiring qualitative analysis. Particularly difficult to quantify are long-term or

uncertain effects where suspected but subtle interactive aspects are not well

understood or directly measurable. A regulatory requirement is judged to pass the

test if the sum of future benefits outweighs the sum of present and future costs in

present value terms. The analysis is extremely controversial when it seeks to

rationalize inherent value trade-offs. Most observers believe that used carefully and

with adequate data, cost-benefit analysis can be an effective tool for assessing

regulatory costs.

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 is not with weighing

the merits of the goal, but with identifying and analyzing the costs of alternatives to

reach that goal. Cost-effectiveness analysis is commonly seen as a better tool than

cost-benefit analysis for uncovering cases in which large incremental costs result in

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minor gains. A disadvantage, however, is that misjudgments in determining the goal

or the budget may go undetected.14

Risk Assessment

Risk assessment analysis is the systematic evaluation of the probability of

certain hazards occurring and their adverse effects. There are many different

methods of analyzing risks, some quantitative and some qualitative. The quality of

the analysis depends on the adequacy of the underlying data and the validity of the

methods. As with cost-effectiveness and cost-benefit analyses, risk analysis,

carefully used and supported by adequate data, is a valuable management tool in

developing and directing regulatory programs. Advocates state that risk analysis may

be used as an objective, scientific basis for planning, identifying management

strategies to provide “a bigger bang for the buck,” or promoting risk reduction.

Controversy focuses on how risk analysis should be used and how much influence

it should have on health, safety, and environmental decisions. Critics argue that risk

analysis is often not scientific and not entirely objective, in part, because of

inadequate data regarding most chemicals, health effects, and ecological effects. The

concern is that risk analysis may oversimplify problems and its conclusions can be

easily manipulated. Risk analyses often focus on relatively small risks to the

population as a whole, rather than larger risks to smaller groups. Cost-benefit

analyses for environmental and health regulations may use quantitative estimates of

risk to assess benefits (i.e., risks avoided), but quantitative analyses, critics claim,

may undervalue such benefits, especially when projected over time. Critics further

contend that comparative risk analysis is unscientific, and that priorities should not

be based on risk alone.15

Regulatory Budget

There has been some discussion of a regulatory budget. Such a budget would

be designed to improve regulatory accountability and control. Its purpose would be

to force agencies to determine their regulatory priorities in two ways. First, the

budget could impose an analytical framework to attempt an overview of the total

costs and benefits of regulations. Second, the budget might limit the total volume of

regulatory programs, expenditures, and compliance costs, by setting a cap on the

compliance costs each agency could impose on regulated sectors of the economy,

both private and public. While evoking some congressional interest, there are

differing approaches to its appropriate range, contents, and objectives. Implementing

a regulatory budget would present many conceptual and empirical problems. These

include the scope of regulations to be covered (almost all federal programs involve

some degree of regulation, the amount depending to some extent upon one’s

definition of “regulation”); cost estimates (direct and indirect, including the impact

on firms, industries, and consumers, beyond compliance costs); benefit estimates

CRS Report RL30031, Environmental Risk and Cost-Benefit Analysis: A Review of

Proposed Legislative Mandates, 1993-1998, by Linda-Jo Schierow.

CRS Issue Brief IB94036, The Role of Risk Analysis and Risk Management in

Environmental Protection, by Linda-Jo Schierow.

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(generally regarded as more difficult to determine than estimating costs); and

redundancy or overlap with state and local regulations.16

Congressional Review

Proponents of congressional review of regulations believe it better insures that

Congress has an opportunity to reject unnecessary, overly intrusive, or excessively

costly regulations. Congressional review, as enacted, requires agencies to send each

of their final regulations to Congress and the General Accounting Office (GAO) for

review before it takes effect. Implementation of the regulation may occur during the

congressional review. Congress then has 60 legislative days to address the

regulation. A regulation, whether or not it has become effective, can be rejected

within the review period if Congress passes a joint resolution of disapproval and the

President signs it, or if he vetoes the resolution and Congress overrides the veto.

Congress can reject the regulation at any time during the 60-day period. If a

Congress adjourns before the 60 days has ended, the 60 days to review is renewed for

the next, incoming Congress. Congress has overturned one regulation since the

passage of this Act in 1996.

Critics argue that congressional review encroaches on agency independence, can

politicize rulemaking, delays the timely issuance of regulations, and requires an

expertise in subject areas that Congress does not have readily available to it (one of

the reasons Congress delegates regulatory authority to agencies in the first place).

Proponents respond, however, that congressional review enables Congress (with

whom the power to regulate constitutionally rests) to make the final decision on the

need for specific regulations, and makes regulatory agencies more sensitive to

congressional intent and Congress more accountable for regulators’ actions.17 (See

“Congressional Review Act,” below.)

Judicial Review

Judicial review subjects agency actions to court scrutiny except where a statute

precludes such review or “where agency action is committed to agency discretion by

law.” Any person adversely affected or aggrieved by an agency action “within the

meaning of the relevant statute” may challenge that action. Statutes containing

judicial review provisions applicable to rulemaking generally call for direct, preenforcement review in the courts of appeals and usually specify requirements as to

venue, timing, and scope of review. Arguments over judicial review result from two

primary concerns: first, the lack of such review may make agencies less accountable;

and second, expanding judicial review may encourage frivolous court challenges and

perhaps undermine the rulemaking process because of inadvertent errors, an inability

to obtain hard data, or subjective evaluations of data by judges. Judicial review also

helps insure that agencies follow proper regulatory procedures.

Samuel Hughes, “Regulatory Budgeting,” Center for the Study of American Business,

Washington University, Working Paper 160, June 1996.

CRS Report RL30116, Congressional Review of Agency Rulemaking: A Brief Overview

and Assessment After Five Years, by Morton Rosenberg, and CRS Report RL30795,

General Management Laws: A Selective Compendium—107th Congress, by Ron C. Moe.

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Moratoriums on Regulations

Since 1981, there have been three moratoriums on regulations. Two of the

moratoriums were issued by incoming Presidents Ronald Reagan and George W.

Bush (1981 and 2001), both of whom wanted to review and possibly block

regulations issued at the end of outgoing administrations. George H. W. Bush also

issued a moratorium, but later in his presidency. All three moratoriums exempted

regulations issued by independent regulatory boards and commissions, as well as

regulations issued in response to emergency situations or statutory or judicial

deadlines. Independent regulatory boards and commissions were exempted from the

moratoriums, but were requested to participate in the review on a voluntary basis.

Critics claim that moratoriums disrupt the regulatory process and delay the

implementation of important regulations. Supporters, on the other hand, argue just

the opposite, and assert that moratoriums help to block undesirable regulations and

enable the new administration and federal agencies to revise or eliminate less

desirable regulations. President George W. Bush’s moratorium took effect on

January 20, 2001, and ran for 60 days. Now expired, this moratorium was announced

by issuance of a memorandum from the White House Office by Andrew H. Card, Jr.,

Assistant to the President and Chief of Staff.18

Under President George W. Bush’s regulatory review plan (moratorium), federal

regulatory agencies were ordered to stop sending proposed or final rules to the Office

of the Federal Register for printing unless the rules had been reviewed and approved

by a Bush appointee. Regulations already sent to the Office of the Federal Register,

but as yet not printed, were returned to the issuing agencies. A regulation already

printed and final had its effective date postponed for 60 days. These temporary

actions postponed many regulations issued at the end of the Clinton Administration.

Although the moratorium has expired, the future status of some regulations proposed

or withdrawn is unclear. Many have been allowed to go forward; some have been

dropped; and still others are under revision.

Paperwork Reduction

The growth in regulations has imposed significant paperwork burdens on

individuals, businesses, and organizations—both large and small—and state and local

governments. All generally agree on the need to reduce the amount of paperwork

required to comply with regulations. Paperwork can consume numerous man-hours

and imposes costs on those affected. Proponents of paperwork reduction argue that

forms and reports required to be completed should be streamlined, simplified, and

consolidated to avoid unnecessary and burdensome duplication. Other observers,

however, argue that without adequate information from regulated entities or program

beneficiaries, agencies may not be able to carry out their congressional mandates to

monitor compliance effectively. The Office of Information and Regulatory Affairs

U.S. White House Office, “Regulatory Review Plan,” Federal Register, vol. 66, no. 16,

Jan. 24, 2001, p. 7702.

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in OMB is the focus of the paperwork reduction effort because it controls the

information collection activities of executive agencies.19

Private Property “Takings”

Much of the property rights debate is primarily centered on two statutes: the

Endangered Species Act and the wetlands protection program under the Clean Water

Act. Property rights activists have advocated two approaches. One calls for federal

agencies to establish a procedure for assessing values if their proposed actions are

likely to result in the “taking” of property under the Fifth Amendment of the

Constitution. President Reagan adopted this approach in 1988 when he issued

Executive Order 12630.20 The other approach calls for a statutory dollar threshold

to stipulate when a federal agency must compensate a property owner as a result of

agency action resulting in a loss in property value. Typically, the statutory approach

is far more generous to the property owner than the Fifth Amendment threshold,

which in most cases requires a major diminution in property value before

compensation is owed.21

Sunset of Regulations

Sunset is a mechanism designed to mandate a systematic reexamination of

existing regulations to determine if they are still useful. One variant of sunset

provides for agency review to determine if a regulation should be terminated.

Another requires automatic termination unless the agency successfully argues

otherwise. Sunset proponents believe that without an automatic review mechanism,

regulations will continue long after they are viable. Critics agree that selected

regulations should be reviewed periodically, but contend that automatic termination

of thousands of regulations creates an enormous workload burden on understaffed

and underfunded federal agencies, possibly interfering with an agency’s ability to

address new issues and regulatory requirements mandated by Congress.22

Unfunded Mandates

“Unfunded mandates” is a term used to describe responsibilities or duties

imposed by the federal government on state and local governments without

providing funding appropriate to the level of costs incurred. The issue touches upon

the proper role of federalism—the responsibility of the federal government to

establish priorities and national standards—and the responsibility of state and local

CRS Report RL30590, Paperwork Reduction Act Reauthorization and Government

Information Management Issues, by Harold Relyea, and CRS Report RL30795, General

Management Laws: A Selective Compendium—107th Congress, by Ron C. Moe.

Executive Order 12630, “Governmental Actions and Interference with Constitutionally

Protected Property Rights,” 43 Federal Register 8859, Mar. 18, 1988.

CRS Report RS20493, Property Rights: House Judiciary Committee Reports H.R. 2372,

by Robert Meltz.

CRS Report RL30795, General Management Laws: A Selective Compendium—107th

Congress, by Ron C. Moe.

CRS-10

governments to determine their own priorities and standards. Advocates contend that

mandates often are designed to address state and local problems found nationwide.

State and local government officials, on the other hand, have expressed concern

about the increasing cost of complying with federal mandates.23 (See “Unfunded

Mandates Reform Act,” below.)

Negotiated Rulemaking

Negotiated rulemaking is a concept that emerged in the 1980s as a method to

reduce the adversarial nature of rulemaking. In essence, agency rule makers

negotiate the text and contents of a proposed regulation with interested and affected

parties prior to drafting the regulation. If a consensus can be reached, it might make

implementation of the regulation easier and it could lesson the likelihood of

subsequent litigation. At worst, authorities state, the agency has a better

understanding of the concerns of affected parties. Critics point out, however, that

negotiated rulemaking works best on proposed regulations that are non-controversial

in the first place. When a consensus is unlikely, requiring agencies to devote limited

manpower and funds to this effort may distract from the agency’s ability to perform

its regulatory mission.24 (See “Negotiated Rulemaking Act” below.)

Federal Efforts to Reform the Regulatory Process

During the last 30 years, both Presidents and Congress have struggled to lessen

the number, intrusiveness, and cost of federal regulatory activity. Most of the effort

has resulted in changes in the rulemaking process and other procedural changes, to

better assure that agencies issue regulations only when necessary, and that regulations

produce a net benefit at the lowest cost to society. These procedural changes have

often been contentious and remain so today.

Presidential Efforts

Presidential efforts to reform regulatory procedures have generally been carried

out through executive orders. Independent regulatory agencies are exempt (defined

as such under (44 U.S.C. 3502 (10)). However, independent regulatory agencies can

voluntarily comply. Presidents Richard M. Nixon, Gerard R. Ford, and Jimmy Carter

all instructed federal agencies to include calculations of compliance costs and to

consider alternatives to regulation in their regulatory activities when legally

permitted.

CRS Report RS20058, Unfunded Mandates Reform Act Summarized, by Keith Bea and

Richard S. Beth.

CRS Report RL30795, General Management Laws: A Selective Compendium—107th

Congress, by Ron C. Moe.

CRS-11

President Ronald Reagan, however, initiated a more dramatic change in

regulatory procedure with the issuance of Executive Order 12291.25 E.O. 12291

directed agencies to employ cost-benefit analyses when developing regulations and

established centralized review of agency rulemaking, two features that are now basic

elements in the regulatory process. President Reagan’s order also directed agencies,

again to the extent legally permitted, to issue only regulations whose calculated

benefits outweigh the costs. Agency compliance was insured by requirements for

submitting both proposed and final regulations to OMB’s Office of Information and

Regulatory Affairs (OIRA) for review and clearance. The order further required that

agencies continue to publish their semiannual agendas of proposed regulations (first

required by President Carter). Regulations responding to emergency situations and

regulations with statutory or judicial deadlines were exempted from review and

clearance procedures, but still had to be submitted to OMB.

In 1989, concern about the continued costs of regulations led President George

H. W. Bush to establish the President’s Council on Competitiveness to review

regulations issued by agencies.26 Chaired by Vice President Dan Quayle, the council

focused on reducing the financial burdens of new and existing regulations. In

January 1992, the President imposed a 90-day moratorium on regulations and

instructed agencies to identify existing regulations and programs imposing

unnecessary regulatory burdens and to develop programs to reduce or eliminate those

burdens. Regulations that were issued in response to emergency situations, had

statutory or judicial deadlines, dealt with military or foreign affairs, or were related

to agency administrative matters were exempted from the moratorium. The

moratorium was extended, and remained in force until the end of the Bush

Administration.

When President Bill Clinton assumed office in 1993, he also initiated several

steps to reform the regulatory process. In September 1993, the President issued

Executive Order 12866,27 which revoked E.O. 12291 and E.O. 12498, but retained,

with some modifications, the major provisions of these two orders, in particular, costbenefit analysis and centralized review and clearance of regulations by OIRA.

Independent regulatory boards and commissions again were exempted from the order

(voluntary compliance with the order was possible). In addition to the executive

order, President Clinton established the National Performance Review (NPR) in

1993, a task force headed by the Vice President. The NPR generated reports

addressing and recommending improvements in the regulatory process.28 Also in

September 1993, the President ordered executive branch agencies to submit to OIRA

within 90 days a list of regulations for which they planned to use negotiated

Executive Order 12291, “Federal Regulation,” 43 Federal Register 13193, Feb. 17, 1981.

Executive Order 12498, “Regulatory Planning Process,” 50 Federal Register 1036, Jan.

4, 1985.

Executive Order 12866, “Regulatory Planning and Review,” 58 Federal Register 51735,

Sept. 30, 1993.

Office of the Vice President, From Red Tape to Results, Creating a Government That

Works Better and Costs Less, Improving Regulatory Systems, accompanying report of the

National Performance Review (Washington: GPO), Sept. 1993, p. 81.

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rulemaking.29 In April 1995, he directed agency heads to use their enforcement

discretion to waive all or a portion of a penalty for regulatory violation to reduce

compliance costs to small businesses.30

As mentioned earlier, upon taking office on January 20, 2001, President George

W. Bush directed that no new or proposed regulations be published until reviewed

and cleared by one of his appointees; that regulations sent to the Office of the Federal

to the issuing agencies for review and approval; and that the effective date of

regulations that had been published in final, but had not yet taken effect, be

postponed for 60 days. Regulations issued by independent regulatory boards and

commissions were exempted from the moratorium, as were regulations issued in

response to health or safety emergencies and regulations under legislative or judicial

mandates.31

Congressional Efforts

In the late 1970s and early 1980s, Congress relied, in part, on the legislative veto

to overturn final regulations. Statutes applicable to several agencies and some

programs were written to make final regulations subject to either a one-house or twohouse veto before they could take effect. During this period, numerous bills were

introduced to enact a generic legislative veto provision applicable to all regulations.

This process was made invalid after the Supreme Court ruled the legislative veto

unconstitutional, finding that it violated bicameralism and the “presentation” clause

of the Constitution.32

A more direct approach taken by Congress was to deregulate previously

regulated industries. Since the 1970s, Congress has passed several laws deregulating

certain sectors of the economy. Areas of commerce that have been deregulated

include banking and other financial services; telecommunications, to include cable

and telephones; and areas relating to transportation, such as trucking and airlines.

Deregulation also resulted in the elimination of the Civil Aeronautics Board and the

Interstate Commerce Commission, although some of their programs were transferred

to other agencies.

U.S. President (Clinton), “Negotiated Rulemaking,” Memorandum of Sept. 30, 1993,

Code of Federal Regulations, vol. 3 (1994), p. 776.

U.S. President (Clinton), “Regulatory Reform-Waiver of Penalties and Reduction of

Reports,” Memorandum of Apr. 21, 1995, Code of Federal Regulations, vol. 3 (1996), pp.

474-475.

U.S. Executive Office of the President, “Memorandum for the Heads and Acting Heads

of Executive Departments and Agencies,” Federal Register, vol. 66, no. 16 (Jan. 24, 2001),

p. 7702.

INS v. Chadha, 103 S. Ct. 2764, Consumer Union, Inc. v. FTC and Consumer Energy

Council of America v. FERC, 103 St. 3556, and CRS Report RL30808, Government at the

Dawn of the 21st Century: A Status Report, by Harold C. Relyea, p. 36.

CRS-13

In 1995, the House of Representatives, with the passage of H.Res. 168 (104th

Congress), changed its rules to enable the House to repeal regulations. This

resolution allows bills that would overturn regulations and that have been reported

favorably from a committee to be placed on the “Corrections Calendar” on the

second and fourth Tuesday of each month. A three-fifths vote of the House is

required to pass corrections legislation.33 The Senate does not have such a procedure.

Congress has also considered numerous other proposals that would directly

affect the administrative processes of all government agencies, including regulatory

agencies. Several laws have been enacted that have had a significant impact on

government–wide regulatory policy. The most far-reaching of these laws are noted

below.

Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980 (5

U.S.C. 601-612), since amended, directs agencies to prepare analyses indicating how

agency regulations affect smaller entities, including businesses, organizations, and

state and local governments. The Act encourages an agency to tailor regulations so

that they are less burdensome to smaller entities. Copies of the agency analyses are

to be sent for review and comment to the Office of Advocacy in the Small Business

Administration. The Act also requires agencies to publish semi-annual regulatory

agendas describing regulatory actions they are developing. Amendments that were

part of the Small Business Act in 1996, discussed below, have strengthened the

Regulatory Flexibility Act.34

Negotiated Rulemaking Act. The Negotiated Rulemaking Act of 1990 (5

U.S.C. 561-570a), as amended and permanently authorized in 1996 (110 Stat. 3870),

seeks to overcome the perceived adversarial relationship between agencies and

affected interest groups that sometimes accompanies agency rulemaking. The Act

encourages agencies to consider convening a negotiated rulemaking committee that

includes private parties with an interest in the rule before developing or issuing a

proposed regulation under the Administrative Procedure Act (APA). The agency

would then issue the agreed upon proposal as a proposed or final rule if an acceptable

consensus can be reached .35

Paperwork Reduction Act. The Paperwork Reduction Act of 1980 (44

U.S.C. 3501-3520), since amended, seeks to minimize the cost and burden imposed

by federal paperwork requirements and to maximize the usefulness of the information

collected. It established the Office of Information and Regulatory Affairs (OIRA)

within the Office of Management and Budget, making OIRA responsible for

reviewing and clearing agency information collection requirements. Through E.O.

12291, OIRA also became the central clearinghouse for agency rulemaking actions.

U.S. Congress, House Committee on Rules, Establishing a “Corrections Calendar” in the

House of Representatives, report to accompany H.Res. 168, 104th Cong., 1st sess., H.Rept.

104-144 (Washington: GPO, 1995), and see also CRS Report 97-301, The House’s

Corrections Calendar, by Walter J. Oleszek.

CRS Report RL30795, General Management Laws: A Selective Compendium—

107thCongress, by Ron. C. Moe.

Ibid., p. 76.

CRS-14

Agencies are required to create an office responsible for ensuring compliance with

information policies and information resources management.36

Unfunded Mandates Reform Act. The Unfunded Mandates Reform Act

of 1995 (2 U.S.C. 602) was one of several major regulatory reform measures passed

by the 104th Congress, although the law applies to nonregulatory agencies as well.

The Act requires agencies to prepare a cost-benefit analysis and other assessment

measures before issuing (1) any general notice of proposed rulemaking likely to have

a federal requirement resulting in state and local expenditures of $100 million or

more in any single year, and (2) any final rule for which a general notice of proposed

rulemaking was published. The Act does not apply to independent regulatory boards

and commissions. The required assessments must include the extent to which costs

to state, local, and tribal governments may be paid with federal funds. When

developing regulations under the Act, agencies must consider reasonable alternatives

and select the least costly, most cost-effective, or least burdensome of the

alternatives, or explain in their written assessment records why such alternatives were

not chosen. The assessments would be published in the Federal Register, along with

proposed rules. The Act also allows for judicial review, but only to redress agency

failures to prepare written statements and analyses accompanying regulations.37

Small Business Regulatory Enforcement Fairness Act. Title II of the

Contract with America Advancement Act of 1996 is the Small Business Regulatory

Enforcement Fairness Act,38 which incorporates several regulatory reform proposals

under various subtitles.

Regulatory Compliance Simplification. (Subtitle A)39 Requires agencies

issuing regulations and the Small Business Administration to give small businesses

active assistance in understanding and complying with these regulations.

Regulatory Enforcement Reforms. (Subtitle B)40 Creates a Small

Business and Agriculture Regulatory Enforcement Ombudsman and Regional Small

Business Regulatory Fairness Boards to assist small businesses. In certain

circumstances, it allows for reducing or waiving civil penalties for violations of

statutory or regulatory requirements.

Equal Access to Justice Act Amendments. (Subtitle C)41 Awards

attorney fees and court costs to private parties, including large entities, if a court finds

an agency’s adversary adjudication claims in a hearing substantially in excess of the

Ibid., p. 68.

CRS Report RS20058, Unfunded Mandates Reform Act Summarized, by Keith Bea and

Richard S. Beth.

P.L. 104-121; Mar. 29, 1996; 110 stat. 847, at 857-874.

110 Stat. 858; 5 U.S.C. 601, note.

110 Stat. 860; 5 U.S.C. 601, note and 15 U.S.C. 657.

110 Stat. 862; 5 U.S.C. 504 and 28 U.S.C. 2412 (d).

CRS-15

decision of the adjudicative officer, as well as unreasonable when compared with

other such decisions.

Regulatory Flexibility Act Amendments. (Subtitle D)42 Amends the

Regulatory Flexibility Act of 1980 by removing the prohibition on judicial review of

an agency’s decision to provide or not provide a regulatory flexibility analysis.

Federal courts may now order corrective action regarding such an analysis, and defer

enforcement of a rule if they find the analysis defective. Agencies also are required

to send a proposed rule and copy of an initial regulatory flexibility analysis, or a

determination that such an analysis is not required, to the Small Business

Administration (SBA) for comment. In addition, a review panel consisting of

officials from the issuing agency, the Office of Information and Regulatory Affairs

(OIRA), the SBA’s Chief Counsel for Advocacy (small businessman’s advocate),

and another representative of SBA are to consider the impact on small business of

regulations issued by the Environmental Protection Agency (EPA) and the

Occupational Safety and Health Administration (OSHA).

Congressional Review Act. (Subtitle E)43 Requires agencies to submit new

regulations to Congress and the General Accounting Office (GAO) before the

regulations can take effect. GAO is required to prepare a report on each major rule

(over $100 million impact), which it sends on to Congress, to assure that the agency

has complied with procedural requirements regarding cost-benefit analysis,

regulatory flexibility analysis, and specified sections of the Unfunded Mandates

Reform Act. Congress has 60 session days in which to block the regulation by

passing a joint resolution of disapproval, which must be signed by the President. The

regulation goes into effect if the President vetoes the joint resolution and Congress

overturns the veto.

Omnibus Consolidated Appropriations Act. The Omnibus Consolidated

Appropriations Act of 1997 (110 Stat. 3009) Title II, Section 645, requires the Office

of Management and Budget to submit to Congress a report estimating the costs and

benefits of all federal regulations and regulatory programs. The OMB report to

Congress must analyze the direct and indirect impact of regulations on the private

sector and state, local, and federal governments, and must recommend regulations

that should be revised or eliminated. Riders to appropriations acts have been used

by Congress, over the last several years, to require OMB to submit annual reports on

the costs and benefits of federal regulations, and to instruct OMB to issue guidelines

to agencies that would have the effect of standardizing the procedures to measure the

costs and benefits of regulations and the forms for accounting statements.

Truth in Regulating Act. The Truth in Regulating Act of 2000 (114 Stat.

1248-1250) requires GAO to evaluate independently the cost-benefit analysis

prepared by agencies when they develop a regulation. When an agency publishes an

economically significant rule, whether proposed or final (including interim rules), a

chairman or ranking member of a congressional committee of jurisdiction of either

House may request GAO to review and report on the rule within 180 days. An

110 Stat. 862; 5 U.S.C. 603, 605, 609 and 611.

Title II, Subtitle E of P.L. 104-121; Mar. 29, 1996; 110 Stat. 868; 5 U.S.C. 801-808.

CRS-16

economically significant rule is defined as any rule having an annual effect on the

economy of $100 million or more per year, or adversely affecting in a material way

the economy, a sector of the economy, or other specified sectors. GAO’s review

program has not taken effect, because funding has not yet been appropriated.

The GAO report is to include an independent evaluation of the agency’s analysis

of potential benefits and costs, or other analysis required, and any alternative

approaches considered in the rulemaking, as well as a summary of the results and

their implications. GAO is to evaluate the agency’s data, methodology, and

assumptions used in developing the rule; to explain how any strengths or weaknesses

in the data, methodology, or assumptions support or detract from conclusions reached

by the agency; and to discuss the implications of any weaknesses. The program is

authorized for three years, beginning in 2001and ending in 2003, and the Comptroller

General is to recommend to Congress whether it should be made permanent. As

mentioned above, the GAO review program authorized by this legislation has not

taken effect, because funding has not been appropriated by Congress.

Conclusion

Regulatory activity, responding to changing conditions in American society,

remains vigorous. Congress and the President continue their efforts to mitigate the

perceived intrusiveness and cost of this activity, while providing protections to the

public. In the absence of a consensus on a comprehensive regulatory reform bill,

smaller scale efforts are likely to continue. Contending factions remain split,

however, over the degree of risk a society should reasonably tolerate regarding

health, safety, and environmental matters, as well as how best to determine and

evaluate such risk.

For Additional Reading

CRS Issue Brief

CRS Issue Brief IB94036, The Role of Risk Analysis and Risk Management in

Environmental Protection, by Linda-Jo Schierow.

CRS Reports

CRS Report RL30116. Congressional Review of Agency Rulemaking: A Brief

Overview and Assessment After Five Years, by Morton Rosenberg.

CRS Report RL30031. Environmental Risk and Cost-Benefit Analysis: A Review of

Proposed Legislative Mandates, 1993-1998, by Linda-Jo Schierow.

CRS Report RL30183. Federal Regulations and the Federal Register: Statistical

Measurements, 1976-1999, by Rogelio Garcia.

CRS-17

CRS Report RL30795. General Management Laws: A Selective Compendium—107th

Congress, by Ron C. Moe.

CRS Report RL30590. Paperwork Reduction Act Reauthorization and Government

Information Management Issues, by Harold Relyea.

CRS Report RS20058. Unfunded Mandates Reform Act Summarized, by Keith Bea

and Richard S. Beth.