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Comments to OMB on Draft Update of Circular A-4

This spring, the Office of Management and Budget (OMB) proposed a comprehensive update to the federal guidance document on best practices for conducting benefit-cost analysis, known as Circular A-4. Jointly with thirteen other nonprofit groups, we submitted comments commending particular aspects of the update and offering suggestions for further improvement.

Our letter focused primarily on the following issues.

  • In the Draft Update, OMB proposed to lower the discount rates used in benefit-cost analysis, meaning that long-term impacts would receive relatively greater analytical weight. Our letter explains that this update is consistent with the latest available science and evidence and has broad support among the field’s leading experts. We also suggested some further improvements including using a lower discount rate for environmental goods and services and adopting a declining discount rate schedule. 

  • The Draft Update also greatly improves upon the existing Circular by calling for more robust consideration of distributional impacts. Our letter explains how distributional analysis is consistent with existing guidance and practice. It also offers suggestions to further improve this aspect of the guidance, including by instructing agencies to assess regulatory effects on a granular scale and apply economic tools that identify underserved populations based on multiple datasets.

  • The Draft Update appropriately calls for agencies to consider a range of transboundary impacts that directly or indirectly affect the welfare of U.S. citizens and residents. As our letter explains, this approach is consistent with both existing agency practice across a wide range of regulatory contexts and consistent with judicial precedent endorsing the consideration of transboundary impacts in regulatory decisionmaking.

  • Our letter offers further suggestions to improve the Draft Update. These include expanding on the need to conduct analysis over a timeframe long enough to capture all important impacts, providing additional guidance around break-even analysis, and highlighting the importance of expert input when developing an analytical baseline. 

For more information, check out our recent blog post on the Circular A-4 update.