Regulatory Budget Research Articles

Taxation and Durable Goods Monopoly*

This paper studies the role of taxation in durable good markets with dynamic monopolies. By conditioning the marginal tax rate on the volume of trade, the regulator can provide incentives for the monopolist to accelerate trade. When marginal cost pricing generates a loss for the monopolist, strategic delay cannot be avoided under regulatory budget constraint and the effects of tax policy depend on the monopolist's ability to commit. In the context of binary consumer types, we find a tax policy involving “back‐loaded subsidy” that achieves the second‐best outcome with commitment. In contrast, without commitment, a “front‐loaded subsidy” improves welfare.

A Regulatory Budget for the Public Company Accounting Oversight Board

A Regulatory Budget for the Public Company Accounting Oversight Board

Regulation and Economic Growth: Evidence from British Columbia’s Experiment in Regulatory Budgeting

We exploit a quasi-natural experiment to identify the effect of regulatory accumulation on economic growth. Following a decade of poor economic growth, the Canadian province of British Columbia implemented a regulatory budget in 2001. We use a difference-in-differences strategy to estimate the effect of this policy intervention, finding that British Columbia’s growth rate increased by about 25 percent relative to other provinces. We also present a set of regressions that, using data from the RegData project, directly account for changes to the stock of regulations as a possible determinant of economic growth. We find that regulatory budgeting, as implemented in British Columbia, is associated with much-improved economic performance. A 1 percent increase in the stock of regulations is associated with a 0.028 percent decrease in year-to-year economic growth. This finding implies that British Columbia’s regulatory budget experiment, through reducing the quantity of regulations by about 36 percent, positively affected year-to-year growth by approximately 1 percentage point.

Personnel changes and labor productivity in regulatory budget monitoring

The introduction of high-tech solutions leads to a change in the format and content of almost any work, as well as a rethinking of approaches to staff planning. There is a need for a special financial and economic analysis of the object and preparation of key financial indicators standards for business planning. This calculation is based on the results of an external financial analysis without taking into account planned changes in the personnel of the enterprise and options for increasing labor productivity. The goal of the research is to propose a methodology and apply in practice for external financial analysis and calculation of the regulatory budget, taking into account the forecast of personnel changes and growth in labor productivity. To develop a business plan for the withdrawal of the enterprise from the crisis, it is necessary to have a regulatory framework for planned financial and economic indicators of the company’s development. The article proposes a methodology for the development and monitoring of such indicators in the form of a “normative budget, taking into account the forecast of personnel changes and productivity growth”, tested by the authors in real situations. The authors recommend the development of a regulatory budget for this on the basis of the monitoring model “to cover the necessary net profit and dividend payments, taking into account the forecast of personnel changes and growth in labor productivity.”

El derecho a la salud en tiempos de pandemia en Colombia: entre la inequidad endémica y el estado de emergencia

Propósito/Contexto. La pandemia por COVID-19 y la emergencia sanitaria desencadenada permite analizar, desde la bioética y el bioderecho, los problemas relativos al principio de justicia distributiva, en el contexto estructural de la inequidad endémica en Colombia.Metodología/Enfoque. Este artículo realiza un análisis de los ajustes normativos en Colombia en relación con la garantía del derecho a la salud, en el contexto de la atención a la pandemia por SARS-CoV-2. Resultados/Hallazgos. A pesar de los ajustes normativos y la declaración del estado de emergencia sanitaria en Colombia, la persistencia de la inequidad social y económica en distintas regiones, la no intervención sobre determinantes sociales, las irregulares condiciones laborales de los trabajadores de la salud y las dificultades para materializar el principio de reciprocidad constituyen barreras para mitigar los efectos negativos de la pandemia sobre las poblaciones más vulnerables.Discusión/Conclusiones/Contribuciones. Ningún sistema de salud en el mundo estaba preparado para los retos que genera la pandemia y aun cuando se emitió normatividad de contingencia, siguen siendo críticas las profundas brechas de justicia distributiva e inequidad regional en Colombia, así como el incumplimiento de principios enunciados en la ley estatutaria de salud.

On Neglecting Regulatory Benefits

The administrative state faces a pervasive problem: “benefit neglect,” understood as insufficient attention to the benefits of regulation. In 2017, for example, President Donald Trump issued Executive Order 13771, calling for a regulatory budget of $0 and directing agencies to eliminate two regulations for every regulation that they issue. The order has two laudable ambitions: to reduce the stock of existing regulations and to stem the flow of new regulations. But because it entirely ignores the benefits of regulations and focuses only on costs, it is a singularly crude instrument for achieving those goals. In both theory and practice, it threatens to impose large net costs (including significant increases in mortality and morbidity). It would be much better to abandon the idea of a regulatory budget, focused solely on costs, and instead to engage in two sustained but independent efforts: (1) a continuing “look back” at existing regulations, with the goal of simplifying or eliminating those that are unwarranted, and (2) cost-benefit discipline for new regulations. A third goal, no less important than (1) and (2), should be a very high priority, which is to produce institutional mechanisms to promote issuance of regulations that would have high net benefits (including reductions in mortality and morbidity). Congress, courts, and the executive branch should take steps to combat benefit neglect.

Regulatory Oversight and Benefit-Cost Analysis: A Historical Perspective

The Office of Information and Regulatory Affairs (OIRA) in the Executive Office of the President coordinates the federal government’s regulatory agenda, reviews executive branch agencies’ draft regulations, and oversees government-wide information quality, peer review, privacy, and statistical policies. Remarkably, its regulatory oversight functions, and the benefit-cost framework underlying them, have not changed significantly through six very different presidential administrations. This article examines the evolution of executive regulatory oversight and analysis from the 1970s to today, exploring the reasons for its durability and whether the current imposition of a regulatory budget challenges the bipartisan nature of regulatory practice.

A Future for Federal Regulatory Budgeting?

For decades, a strong case has been made for comprehensive reform of the U.S. federal government’s regulatory processes (for early contributions, see Weidenbaum & DeFina, 1978; Lave, 1981; Breyer, 1982; Harrison & Portney, 1983; Litan & Nordhaus, 1983; Viscusi, 1992; Breyer, 1993; Sunstein, 1996; Graham, 1996, 1997). Establishment of centralized Office of Management and Budget (OMB) oversight through the Office of Information and Regulatory Affairs (OIRA) was an important achievement, but Congress has not yet passed comprehensive regulatory reform legislation.

Office of Information and Regulatory Affairs: Past, Present, and Future

AbstractThis article has three sections, each of which deals with an Executive Order. The first section, “Office of Information and Regulatory Affairs (OIRA) Past,” emphasizes the critical role that Executive Orders played in the formation of OIRA. More specifically, OIRA owes its initial existence to the establishment of a centralized regulatory review system, the Quality of Life Review, which initiated Office of Management and Budget (OMB) review of environmental regulations through the issuance of a directive from OMB. Every subsequent President expanded OMBs powers through the issuance of Executive Orders which culminated in the Iconic Executive Order 12291. The section concludes with the recommendation that a select class of Executive Orders, and OMB Directives, be designated as “Iconic” by the National Archivist in consultation with the OIRA, and then given substantial deference by incoming Administrations. The second section, “OIRA Present,” describes an Executive Order issued during the Kennedy Administration which remains in effect but was promulgated prior to the establishment of OIRA and therefore recommends that a new Executive Order be issued which gives OIRA specific authority to participate in the conduct of interagency reviews of Executive Orders. The third section, “OIRA Future,” describes an Executive Order which implements a regulatory budget (RB) and institutionalizes a mechanism for controlling the size of the administrative state. This final section of the article recommends that the aforementioned Executive Order be reviewed and modified based upon the outcome of a request for public comments, and rules with demonstrated positive net benefits should no longer be accorded an automatic entitlement for issuance as a final rule absent their inclusion in an RB.

Regulatory Review Commission + Regulatory Budget = a Diet for Better, More Effective Regulations

Excessive regulatory accumulation has long been a concern of policymakers, and over the past 40 years, many presidents and members of Congress have taken steps to address this issue. Every recent president beginning with Carter issued or reaffirmed executive orders that set requirements for regulatory agencies in an attempt to avoid poorly designed and excessive regulations. Similarly, Congress began taking steps to address overregulation with the Airline Deregulation Act of 1978, the Staggers Rail Act of 1980, and the Motor Carrier Act of 1980. Each of these attempts had a laudable goal, but none have had the effect of reducing and limiting the long-term accumulation of regulations. To reduce the burdens of regulations now and in the future, a proper regime must include both a drastic reduction of the regulatory bloat and a formal mechanism to limit the growth of the regulatory code. Together, these approaches would give Congress the information, incentives, and capacity to address existing costly regulations and regulatory accumulation more broadly, as well as improve future legislation and control the growth of new regulations. This policy brief describes the problems associated with regulatory accumulation, then briefly describes these two approaches and how Congress can use them together to take more control over the regulatory process and improve both legislation and regulation.

The Mighty Waves of Regulatory Reform: Regulatory Budgets and the Future of Cost-Benefit Analysis

In the past 70 or 80 years, there have been three “waves” of reforms to the process of creating and managing U.S. federal and state regulations. The first wave began in 1946 with the passage of the federal Administrative Procedure Act, after which states went on to pass and formalize their own administrative procedures. The second wave began decades later in the mid-1970s, ushering in the era of cost-benefit analysis reforms for regulations. This article focuses on the third wave of regulatory reforms that appears to be sweeping the nation and includes a prediction that the next wave may include a return to some unsettled issues from the past.

Takeaways from the Conference on the Future of White House Regulatory Oversight and Cost-Benefit Analysis

This is Professor Pierce’s summary of a conference on the future of White House regulatory oversight and cost-benefit analysis (cba), along with an explanation of his views on the controversial issues that were discussed. The participants agreed that OIRA should encourage ex post evaluations of rules, extend oversight to independent agencies, and continue its efforts to maximize the transparency of the review process. They also agreed that Congress should provide OIRA adequate funding and staffing. Professor Pierce explained why he shares the concern of some of the other participants that the major changes that the Trump Administration is making in the methods used to apply cba, and the resulting major changes in the estimates of the costs and benefits of rules, will undermine the bipartisan consensus in support of bca that has survived through five prior administrations. Professor Pierce also explained his views with respect to changes in the oversight process that were proposed by some participants and opposed by others. He explained why he opposes codifying cba and increasing Congress’s role in the process of applying cba. He also explained why he believes that any economically rational regulatory budget must have a regulatory cost ceiling that is many times the current cost of regulation.

Beyond Food Security: Challenges in Food Safety Policies and Governance along a Heterogeneous Agri-Food Chain and Its Effects on Health Measures and Sustainable Development in Mexico

This work describes the relevance of food policies and governance to reach food safety issues along a heterogeneous food chain, in the context of the Food and Agriculture Organization of the United Nations (FAO) food security definition. Using personal interviews with agents in the food chain, and secondary data from 2014–2018, this exploratory research demonstrated that: (a) Mexican food policies regarding food safety are oriented to the exports markets and/or high income producers-consumers; (b) this has split the agri-food chain in two: one serving international and/or high income consumers, and another serving domestic markets; (c) the agri-food chain that serves domestic markets experiences regulatory budget shortfalls, lacks coordination in food regulations across its agents, and brings about alternate informal markets that put peoples’ health and financial stability at risk, especially those lower-income consumers. Only 0.7% of producers, 12.5% of supermarkets and 42.8% of restaurants have some type of food safety certifications. This is worsened by the way public resources have been distributed, focused, prioritized, and planned. If the differences between big, medium and small producers continue to increase, it will increase regional and individual inequality, leading to two different countries: one developed and one developing, challenging its sustainable development.

Effective Regulatory Reform: What the United States Can Learn from British Columbia

In 2017, President Trump signed Executive Order 13771, which required that two regulations be identified for elimination each time a new federal rule is proposed. The order also created, for the first time, a system of annual regulatory budget allocations for federal agencies. On the surface, the policy seems promising, as it resembles a similar program established in the Canadian province of British Columbia in the first decade of the 21st century. That program has widely been viewed as a success and inspired reforms elsewhere in Canada as well as in the United States. This paper compares the regulatory reform efforts in the United States with those in British Columbia as a means to predict whether the US effort is likely to be successful and to identify ways in which the US program might be improved. The article finds that the way in which the US regulatory reform is being implemented is limiting its scope to a degree that will likely undermine its effectiveness. For example, the number of rules that qualify as EO 13771 regulatory actions is narrowed to the extent that vast amounts of new regulations and most policy documents are exempted from the offset requirement. Furthermore, the complicated nature of the two-for-one requirement, whereby different sets of rules are counted as “ins” versus “outs,” is making reporting difficult, if not misleading. The authors recommend improving reporting and transparency by creating a system for tracking government-wide regulatory requirements or restrictions over time, as well as changing the two-for-one requirement so that the same sets of rules count as regulatory and deregulatory actions. Although the current reforms are clearly having some immediate impact, expanding the scope of what the reforms cover, adopting a simpler measure, and improving reporting in order to create more transparency would make the reforms more consistent with the reforms in British Columbia, which have a track record of success. This would not be difficult to accomplish, and the article recommends some practical changes that build on the current reforms in the United States.

Legislative Impact Accounting: Incorporating Prospective and Retrospective Review into a Regulatory Budget

Congressional decision‐making suffers from scarce information about the scope and economic consequences of legislative actions. This paper proposes a better method to overcome congressional information scarcity. Our proposal relies on the premise that regulations have similar economic effects as taxes and spending, and therefore should be scored and tracked as part of the budget process. Our proposed system of legislative impact accounting (LIA) builds on the concept of a regulatory budget by developing a system for both prospective and retrospective review to create an effective feedback loop to better communicate information about economic effects of regulations to Congress.

Tax and Welfare in Dynamic Monopoly

This paper studies the role of taxation in durable good markets with dynamic monopolies. By conditioning the marginal tax rate on the volume of trade, the regulator can provide incentives for the monopolist to accelerate trade. When marginal cost pricing is incentive-feasible, tax policy with back-loaded subsidy can induce the first-best allocation with budget neutrality. When marginal cost pricing generates a loss for the monopolist, strategic delay cannot be avoided under regulatory budget constraint. Reducing delay then requires different forms of tax policy depending on the monopolist's commitment power. In particular, without commitment, front-loaded subsidy improves welfare.

What Is the 'Cost per Regulator' on GDP and Private Sector Job Creation? An Update on Prior Research

Each $1 million change in the regulatory budget is associated with a change of about four regulator jobs. With our new update, we now find that a 10% cut in the regulatory budget results in a loss of 21,756 regulatory jobs. Given the average jobs impact of 3 million jobs over the five-year horizon, our updated analysis finds that one regulator costs the U.S. economy the equivalent of 138 private sector jobs per year. Each regulator costs the U.S. economy $11 million annually.

One Step Forward, Two Steps Back? The New U.S. Regulatory Budgeting Rules in Light of the International Experience

Executive Order (EO) 13771 on “Reducing Regulation and Controlling Regulatory Costs” introduces a new regulatory budgeting system in the U.S. federal rulemaking process. International experience suggests that the new rule, aimed both at reducing the number of regulations and the volume of regulatory costs, will focus on a subset of regulatory impacts, most certainly the direct costs imposed by regulation on businesses, or even a subset thereof. The paper discusses possible ways to make sense of the new rule, without undermining the soundness of benefit-cost analysis mandated by EO12866. The paper concludes that the new system, while potentially promoting more retrospective regulatory reviews, will risk fundamentally affecting the quality of regulation in the United States, generating frictions and inefficiencies throughout the administration, to the detriment of social welfare.

Promise and Peril: Implementing a Regulatory Budget

Current regulatory reform approaches, such as requiring cost benefit analysis, will not tame the regulatory state so long as: (a) Agencies themselves get to calculate costs and benefits; (b) there are no legislative constraints on regulatory costs, and; (c) there are no Constitutional limits on the scope of regulation as such. At bottom, today's rulemaking process is plagued by the fact that agency bureaucrats are not accountable to voters. And Congress though responsible for the underlying statutes that usually propel those unanswerable agencies nevertheless can conveniently blame agencies for regulatory excesses. Indeed, Americans live under a regime of Regulation Without Representation. A regulatory budget could promote greater accountability by limiting the amount of regulatory costs agencies could impose on the private sector. Congress could either specify a limit on compliance costs for each newly enacted law or reauthorization of existing law, or Congress could enact a more ambitious full scale budget paralleling the fiscal budget, a riskier approach. A comprehensive budget would require Congress to divide a total budget among agencies roughly in proportion to potential lives saved (or some other measure of success). Agencies' responsibility would be to rank hazards serially, from most to least severe, and address them within their budget constraint. In either version of a regulatory budget, any agency desiring to exceed its budget would need to seek congressional approval. costs imposed on the private sector by federal agencies can never be precisely measured, and a budget cannot achieve and should not seek absolute precision. Nonetheless, a regulatory budget is a valuable tool. The real innovation of regulatory budgeting is simply its potential to impose the consequences for the quality of regulatory decisionmaking on agencies rather than on the regulated parties alone. Agencies that today rarely admit a rule provides negligible benefit would be forced to compete for the right to regulate. While agencies would be free to regulate as unwisely as they do now, the consequences could be transfer of the squandered budgetary allocation to a rival agency that saves more lives.Budgeting could fundamentally change incentives. Today's conflict between agency political rewards and admission that a rule has no benefits would change. Under a budget, adopting a costly, but marginally beneficial, regulation will suddenly be irrational. Congress would weigh an agencies' claimed benefits against alternative means of protecting public health and safety, giving agencies incentives to compete and expose one another's bogus benefits. Budgeting could encourage greater recognition of the fact that some risks are far more remote than those we undertake daily. In the long run, a regulatory budget would force agencies to compete with one another on the most important bottom line of all: that their least effective rules save more lives per dollar spent (or correct some alleged market imperfection better) than those of other agencies. The (unachieveable) perfect regulatory budget would be allocated such that further reshuffling of regulatory caps among agencies could save no more lives and would actually cause harm. There are clear benefits to regulatory budgeting, but there are also pitfalls. For instance, enforcement of a budget will never be easy. Under a budget, agencies have incentives to underestimate compliance costs while regulated parties have the opposite incentive. Self correcting techniques that may force opposing cost calculations to converge are only at the thought experiment stage. Limitations on the delegation of regulatory power and enhancing congressional accountability can help, however. Despite pitfalls, certain princples and antecedents can help ensure that a regulatory budgeting effort succeeds. For instance, explicitly recognizing that an agency's basic impulse is to overstate the benefits of its activities, a budget would relieve agencies of benefit calculation responsibilities altogether. Agencies would concentrate on properly assessing only the costs of their initiatives. Since an agency must try to maximize benefits within its congressionally specified budget constraint or risk losing its budget allocation, it would be rational for agencies to monitor benefits, but Congress need not require it.Other ways to promote the success of a budget are to: establish an incremental rather than total budget; collect and summarize annual report card data on the numbers of regulations in each agency; establish a regulatory cost freeze and implement a Regulatory Reduction Commission; employ separate budgets for economic versus environmental/social regulation; control indirect costs by limiting the regulatory methods that most often generate them. A regulatory budget is not a magic device alone capable of reducing the current $647 billion regulatory burden. Yet so long as Congress is fully accountable for the results of a budget, a cautious one deserves consideration. Having good information is an aid in grappling with the regulatory state just as compiling the federal fiscal budget deficit or not is indispensable to any effort to plan and control government spending. Under any size government, keeping track of spending and regulation will remain vital.

Testimony Before the Committee on the Budget of the United States Senate, Hearing on 'Moving Toward a Stronger Economy with a Regulatory Budget'

Chairman Enzi, Ranking Member Sanders, and Members of the Committee, thank you for inviting me here today to share with you my concerns about regulatory budgeting and to explain why I think this strategy could hurt everyday Americans while producing no benefit to the overall economy. As a former official at the U.S. Environmental Protection Agency (EPA), I’m very proud of the professionalism and resourcefulness of America’s regulatory agencies. And, as a law professor, I know that our regulatory system can be much improved. But rather than focusing on artificially imposed caps, I think we would do better by instead providing executive agencies with the tools and resources they need to write the smartest, most effective rules possible. Agency resources should, of course, enable policy makers to identify deficient rules already on the books and to fix or remove them. (And, in fact, periodic retrospective review, is already required of most agencies.) But a regulatory budget — whose fixation is quantity, not quality — will not lead to smarter regulations, a stronger economy, or a healthier and more secure citizenry. It will stand against those those things, making the concept, however well-intended, ultimately counter-productive.