In the News

A new report out today from NYU’s Institute for Policy Integrity – it says that the benefits of regulations governing the fuel efficiency of heavy-duty trucks outweigh the costs. But the authors state that the scope and stringency of the regulations should be increased to achieve the maximum net benefits for society.

The Obama order, as has been noted, is one in a long line of executive orders requiring review of agency action using cost-benefit analysis. Initiated under Reagan, the process initially looked only at economic efficiency, remaining insensitive to how benefits and burdens were distributed. So if a regulation generated a large economic benefit for very wealthy people, but caused lower income earners to suffer disproportionately, it could be approved. At the same time, a rule that would help lift people out of poverty, but placed a larger burden on corporate profits, could be turned down.

Some progressive voices have weighed in on the executive order President Obama signed on Tuesday with harsh criticism. The president’s move, which lays out new ground rules for regulations issued by government agencies, was lambasted as a betrayal of progressive values and a gift to industry. But a closer look reveals that much of the focus has been on the rhetoric surrounding the order’s release, and not on the actual substance. There, you won’t find much for progressives to complain about. In practice, the new order makes several significant changes to the current regulatory process that will favor stronger protections for public health, safety, and the environment.

EPA is stuck between a rock and a hard place, said Michael Livermore, executive director of the Institute for Policy Integrity at New York University School of Law. Even if the agency has qualms about the proposed rules, it can’t make any changes that weren’t subjected to public comment last year. Whether the agency’s final rule is similar to the proposed rule or makes substantial changes, it’s bound to face lawsuits, Livermore said.

Tuesday’s news of a new executive order on regulatory review was not welcomed by some progressives. President Obama announced his move in a Wall Street Journal op-ed, and it was widely perceived as an olive branch to regulated businesses. But in its substance, the order mostly boosts the case for a strong government hand in protecting the public from the negative consequences of the free market.

The Clinton order lasted six years into George W. Bush’s presidency. But a lot depends on how the White House uses its power. In the Bush years, says Michael Livermore of New York University Law School’s Institute for Policy Integrity, “the actual practice changed significantly” and “informal reviews” essentially derailed rules secretly. In 2007, Mr. Bush replaced the Clinton order with his own, among other things, strengthening the role of political appointees.

Michael Livermore, the Institute for Policy Integrity’s executive director, claims that the cost-benefit analysis enshrined in Obama’s executive order rewards regulations that benefit society, dismissing conservative arguments that most regulations are burdensome to businesses. “For rules they’ve adopted in which you get more benefit at less cost, the net benefit to society is worth billions and billions.”

Richard Revesz, the law school’s dean and the center’s faculty director, said that the president made several noteworthy changes to the federal regulatory review process which progressive groups should embrace.

Public-interest groups have nothing to fear from Obama’s executive order, which provides more opportunities for the public to make a case for additional regulatory protections, said Michael Livermore, executive director of the Institute for Policy Integrity at New York University’s School of Law. “This move demonstrates the administration’s belief that when cost-benefit analysis is done right, the facts often support stronger protections,” Livermore said. “In the long term, this order is likely to displease those industry groups that want less regulation without regard to public benefits.”

That type of calculus was praised by cost-benefit analysis supporters such as Richard Revesz, dean of New York University’s law school. “The environment and the economy are not at odds,” Revesz said today. “On the contrary, the success of each one is linked to the well-being of the other. By making this case, the president pointed to a better way of safeguarding both.”