Levin, Thompson Renew Legislative Push for Risk Assessment, Cost-benefit Analysis

Published July 1, 1999

Picking up where they left off last year, Senators Carl Levin (D-Michigan) and Fred Thompson (R-Tennessee) have reintroduced a bill requiring federal agencies to make major regulatory decisions only after they have conducted a risk assessment and cost-benefit analysis.

Their bill, “The Regulatory Improvement Act of 1999” (S. 746), is identical to the measure the two senators developed during the last session of Congress. After a more ambitious Levin- Thompson bill had been scaled back in accordance with administration wishes, President Clinton agreed to sign the revised measure. But a legislative logjam in the closing weeks of the last Congress, which saw numerous spending bills being rushed through shortly before adjournment, prevented Congressional action on regulatory improvement.

Levin is the ranking minority member on the Senate Governmental Affairs Committee, and Thompson is the committee chairman. The two have substantial bipartisan support for their bill, including Republicans George Voinovich (Ohio), Spencer Abraham (Michigan), William Roth (Delaware), Ted Stevens (Alaska), Thad Cochran (Mississippi), Bill Frist (Tennessee), Bob Enzi (Wyoming), Rod Grams (Minnesota), Charles Grassley (Nebraska), Mitch McConnell (Kentucky), Mike Crapo (Idaho), and Paul Coverdell (Georgia) and Democrats Daniel Patrick Moynihan (New York), John Breaux (Louisiana), Blanche Lambert Lincoln (Arkansas), Chuck Robb (Virginia), Jay Rockefeller (West Virginia), and Tom Daschle (South Dakota).

Key Provisions

The Levin-Thompson bill requires federal agencies to perform a cost-benefit analysis for all rules costing $100 million or more, or with other significant impacts. Specifically exempted from the requirement are rules pertaining to taxes, antitrust, monetary policy, banking, securities and futures markets, elections, or products controlled by the federal Food, Drug, and Cosmetic Act.

The regulatory agency must determine whether the benefits of the rule justify the costs; whether the rule is more cost-effective, or provides greater net benefits, than other regulatory options considered by the agency; and whether the rule adopts a sufficiently flexible regulatory stance. If the agency determines that the proposed rule does not meet those requirements, the agency must explain why it nevertheless promulgated the rule, including any statutory provision that required the agency to do so.

If the rule involves a risk to health, safety, or the environment, the bill further requires the agency to do a risk assessment to analyze the benefits of the rule.

Cost-benefit analyses for rules costing $500 million or more, and all risk assessments covered by the legislation, would undergo independent peer review.

In performing the cost-benefit analysis and risk assessment, the regulatory agency is required by Levin-Thompson to consider substitution risks–that is, risks that could be expected to result from the implementation of the regulatory option selected by the agency. The agency must also compare the risks being regulated with other risks with which the public may be more familiar.

The regulatory agency is required to put forward the results of its cost-benefit analyses and risk assessments in a clear and understandable form. The agency’s analyses and assessments must include an executive summary outlining the expected benefits and costs of the rule and the agency’s cost-benefit determinations; the risk addressed by the rule and the results of any risk assessment; the benefits and costs of other regulatory options considered by the agency; and the key assumptions and scientific and economic information upon which the agency relied.

The Levin-Thompson act also requires that cost-benefit analyses, cost-benefit determinations, and risk assessments be included in the rulemaking record. If challenged in court, this record can be considered, to the extent relevant, only in determining if the final rule is arbitrary and capricious. In addition, if the agency fails to perform a required cost-benefit analysis, risk assessment, or peer review, the court may remand or invalidate the rule or order the agency to perform the required analyses.

Additionally, the bill codifies the review procedure now conducted by the Office of Management & Budget’s (OMB) Office of Information and Regulatory Affairs and requires public disclosure of OIRA’s review process.

Finally, the bill requires the director of OMB to contract for two studies: one an overview of known risks to human health, safety, and the environment; the other aimed at developing a common language for communicating about risk and guidelines for how risk assessments should be incorporated into cost-benefit analyses.

Widespread Support

The Levin-Thompson bill has the backing of the National Governors’ Association, National League of Cities, U.S. Conference of Mayors, Council of State Governments, National Conference of State Legislatures, and the National Association of Counties, as well as dozens of business organizations, school boards, and state environmental directors.

With the White House on record as saying the President will sign the bill as written, S. 746 would appear to have smooth sailing to enactment. Anti-reform environmental groups, however, are not likely to stand idly by. Cost-benefit analysis and risk assessment are anathema to such groups as OMB Watch and Public Citizen, that regularly oppose all efforts, however modest in scope, aimed at bringing about regulatory reform.

Congress is considering three other legislative initiatives aimed at providing regulatory relief in a variety of areas.

In February, the House overwhelmingly approved two bills designed to rein in the federal regulatory bureaucracy. By a vote of 274 to 149, the House passed the “Mandates Information Act of 1999” (H.R. 350), sponsored by Representatives Gary Condit (D-California) and Rob Portmam (R-Ohio). The bill targets “hidden taxes”: the costs imposed on consumers and businesses as a result of federal mandates. It requires that any legislation imposing costs of $100 million or more on the private sector be subject to a “point of order” in Congress. After a 20-minute debate, a simple majority vote of members would be sufficient to strike the mandate.

Also, by a vote of 174 to 151, the House approved the “Small Business Paperwork Reduction Act of 1999” (H.R. 391), sponsored by Representative David McIntosh (R-Indiana). Among other things, the McIntosh bill waives civil fines for minor, first-time paperwork violations if corrected within six months.

Another bill recently introduced in the House requires the federal government to report each year on the costs its regulations impose on business and government bodies. Sponsored by Representatives Thomas Bliley (R-Virginia) and McIntosh, the bill (H.R. 1074) is designed to promote accountability at regulatory agencies. In the Senate, Thompson has joined forces with John Breaux (D-Louisiana) in sponsoring the “Regulatory Right-to-Know Act” (S. 59). It requires OMB to issue an annual regulatory accounting report, showing the costs and benefits of federal regulatory action.

All of these bills must clear several hurdles before they become law. But by their mere introduction and ability to attract bipartisan support, Congress has shown its growing discontent with the regulatory status quo.

Bonner Cohen is a senior fellow with the Lexington Institute.