NCPA - National Center for Policy Analysis

Report Outlines a "Smarter" Regulatory Policy

January 7, 2002

"The Bush Administration is committed to developing a smarter regulatory system based on sound science and economics," says a recent Office of Management and Budget report that outlines the Bush administration's regulatory approach.

"A smarter system adopts cost-effective rules when market and state and local efforts fail," says the report, "revises existing rules to make them less costly and/or more effective, and rescinds outmoded rules whose benefits do not justify their costs."

Two tools for achieving the smarter regulatory system are the "return letter" and the "prompt letter."

  • The Return Letter is the administration's "formal negative response for submitting rules to OMB that are not supported by quality analysis. ... A 'return'...is a decision by us not to give approval to a proposed or final rule submitted to us for review...."
  • The Prompt Letter "may suggest that a new rule be adopted or an existing rule be rescinded or revised....The 'prompt letter' provides a specific yet concise technical or policy rationale while leaving the more in-depth investigation in the hands of the administrative agency."
  • The report also urges agencies to adopt a policy of submitting "economically significant rules" to "formal, independent external peer review."
  • OMB will not require this but will "give an extra measure of deference to agency analyses that have been subjected to appropriate peer review processes."

The report concludes that the cost of federal regulation ranges from $575 billion to $655 billion while benefits are estimated to range between $250 billion to $1 trillion per year.

Source: White House Bulletin, January 4, 2002; based on "Making Sense of Regulation: 2001 Report to Congress on the Cost and Benefits of Regulations and Unfunded Mandates on State, Local and Tribal Entities," December 2001, Office of Information and Regulatory Affairs, Office of Management and Budget.

 

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