Regulation Policy

Guessing At Regulatory Costs And Benefits

The Clinton administration's 1999 budget contains a short chapter called "Regulation: Costs and Benefits." It was developed by the Office of Management and Budget and included at the insistence of Congress.

The OMB admits upfront that it needs better data from the regulatory agencies in order to come up with sounder estimates.

  • The administration explained that the raw data aren't always reliable and that it can't know the costs or the true benefits of the thousands of rules the federal government issues every year.

  • The section revealed that the government "is learning how to accurately estimate regulatory costs, such as how much the private sector spends to comply with regulations and benefits, such as safer cars and food."

  • One problem, it explained, is that no one can know with certainty what the baseline is to measure against, since one would have to know what would happen if the rule had never been issued.

  • Another problem is that since agencies like to see their programs funded, they sometimes understate the costs and overstate the benefits.

Despite the difficulties and lack of accurate data, the OMB says environmental and social regulations produce benefits that far outweigh the cost of compliance with the rules.

So for estimates of costs, those interested must turn to the private sector. For example, Clyde Wayne Crews Jr. of the Competitive Enterprise Institute says that regulatory costs hit $688 billion 1997 -- or 20 times the $34 billion federal budget deficit.

Source: Cindy Skrzycki, "The Long and the Short of Costs vs. Benefits on Compliance," Washington Post, February 6, 1998.

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