OMB’s Reported Benefits of Regulation: Too Good to Be True?
In this article in Regulation Magazine (Vol. 36, No 2), the authors writes that the Office of Management and Budget has reported to Congress each year on the benefits and costs of federal regulation. These reports, which generally conclude that the benefits of regulation are an order of magnitude greater than the costs, are used to refute concerns that regulations may be hindering economic growth and to suggest that smart regulation can provide large net economic gains. For example, the Democratic National Committee’s 2012 platform defended President Obama’s regulatory record against Republican criticism by repeating the president’s claim that regulations issued over his first three years produced “more than 25 times the net benefits of the previous administration’s regulations.” The OMB’s draft 2013 report estimates that regulations issued over the last decade have aggregate benefits of between $193 billion and $800 billion, compared to costs ranging from $57 billion to $84 billion.
How accurate are these estimates? A closer examination reveals that the benefit figures are highly dependent on a few assumptions and that the ranges presented are unlikely to reflect true uncertainty surrounding them.
Susan E. Dudley is director of the George Washington University Regulatory Studies Center and Research Professor in the university’s Trachtenberg School of Public Policy and Public Administration. She was administrator of the Office of Information and Regulatory Affairs during the George W. Bush administration.