Very quietly, the Trump administration recently issued a draft of its annual report on the costs and benefits of federal regulations. It’s a responsible and highly professional document — and a corrective to the noisiest claims, from both the White House and its critics, on the whole topic of regulation.
The report is required by the Regulatory Right-to-Know Act, enacted in 2000. Since that time, Republican and Democratic administrations have cataloged the costs and benefits of federal regulations.
This year’s report is especially interesting, because the Trump administration’s Office of Information and Regulatory Affairs is cataloging the work of its predecessors — above all, that of the Barack Obama administration. The report’s numbers suggest that the benefits of previous regulations far exceeded their costs.
In fiscal year 2016, for example, the anticipated costs of regulations range from $3.3 billion to $4.6 billion — but the anticipated benefits range from $13.6 billion to $27.3 billion. (The range accounts for uncertainty about the precise numbers.) That means that the net benefits are, at a minimum, a whopping $9 billion — $24 billion at a maximum.
The report also offers a 10-year accounting, with eight of those years coming under Obama. The estimated aggregate costs are between $59 billion to $88 billion. The aggregate benefits are much higher than that: between $219 billion to $695 billion.
Not only are the net benefits high, but the numbers also show a degree of discipline on the cost side. A range of $5.9 billion to $8.8 billion per year is far from modest, and it would be great to reduce it — but in comparative terms, it’s not unmanageable. For comparison, the annual budget of the Department of Transportation has recently been in the vicinity of 10 times that amount.
At the same time, the report offers some important caveats. First, it emphasizes that for some rules, agencies failed to offer a complete accounting of costs and benefits — and that independent agencies, such as the Federal Reserve and the Securities and Exchange Commission, often fail to monetize benefits and costs at all.
That’s not good.
Second, the report observes that the current figures — for quantifying both benefits and costs — depend on assumptions that might turn out not to be true. It strikes just the right note when it states that the report was issued after a change in administration, and that its figures do “not imply an endorsement by the current Administration of all of the assumptions made and analyses conducted at the time these regulations were finalized.”
Third, the report draws attention to uncertainties. One example: It’s not easy to turn the protection of homeland security, or of personal privacy, into monetary equivalents.
In accordance with tradition, the new cost-benefit report offers recommendations for reform. Importantly, the Trump administration embraces the commitment to cost-benefit analysis as “the primary analytical tool to inform specific regulatory choices.” Since that commitment was initially imposed by President Ronald Reagan, it’s not exactly a big surprise that a Republican successor would reaffirm it. Nonetheless, it’s excellent news.
There’s a lot of chest-thumping on regulation, both by those who act as if it’s the most serious problem facing the United States today, and by those who have never seen a health or safety regulation they don’t like. This week’s sober, fair-minded report is a reminder that everything turns on the numbers — and that political dogmas mask all of the serious questions.
Sunstein was administrator of the Office of Information and Regulatory Affairs from 2009 to 2012.