The Evolving Regulatory Role of the U.S. Office of Management and Budget

Abstract

Since the early Reagan years, critics have argued that benefit-cost analysis is used by the U.S. Office of Management and Budget (OMB) as a one-sided tool of deregulation to advance the interests of business. This article discloses a little-known fact: The OMB also plays a powerful pro-regulation role when agency proposals address market failures and are supported by benefit-cost analysis. Drawing on four case studies from the George W. Bush administration, the author examines how and why the OMB encouraged regulatory initiatives and protected some rule making from opposition by forces both inside and outside of the executive branch. The case studies address the labeling of foods for trans fat content, control of diesel engine exhaust, improvement of light-truck fuel economy, and control of air pollution from coal-fired power plants. The OMB's role in the 2001–2006 period was unusual by historic standards because rather than await agency drafts, the OMB played a proactive role in both the initiation of rule making and the creation of regulatory alternatives for consideration. However, the benefit-cost framework could be much more powerful if greater investments were made in applied research to expand knowledge on key regulatory issues.