OMB’S COST BENEFIT REPORT

NOT WORTH THE PAPER ITS PRINTED ON- 9/3/13

The office of OMB releases the president’s proposal budget for the upcoming fiscal year. Everyone agrees that most of what’s in the budget has little change of becoming emanated. Congress goes through the motions of passing a budget of its own, with scant regard to what the White House has proposed. At the same time it release the budget, OMB produces another document one that’s a manifestation of the management half of its portfolio: the report to congress on he benefits and costs of federal regulations. Because it perennially misrepresents the activities of the regulatory agencies as being about reproach. All presidents have had an executive order in place mandating that “economically significant” regulations issued by executive order agencies (those in excess of $100 million) be subject to a formal cost-benefit analysis showing that the benefits outweigh the costs.
Is in essence a league table that compiles the costs and benefits of a variety of regulations formally issued during the previous year? Every edition has reported that all is well with our regulatory world, with the benefits accruing to society form our government’s regulatory activities far outweighing the cost imposed. The report is of little use in discerning whether this is, in fact, the truth. The report includes only a few regulations. While 3,700 regulations were issued in fiscal year 2012, with 80 of them being categorized as “major”, only 14 regulations were included in OMB’s analysis.
Some entities that issue regulations don’t bother and are not required to do cost-benefit analysis and most regulations considered to be “non-major” never have their cost and benefits measure. Still OMB is cherry picking less than 1% of regulations issued in 2012 to present in its report.
Various executive branch agencies aren’t all that good at measuring cost and benefits. When EPA tasks it economists to do a cost benefit analysis on a regulation it expects them to deliver an analysis that supports the regulation. The idea that an agency economists would get in the way of its regulator’s is laughable: any economist worth his salt can torture data until they justify whatever the agency wants to do. Value of life saved if a new regulation were to save 10 lives a year, economists have come up with several difference ways to assess the value that people implicitly place on their lives.
Economist Mrozek and Taylor complied a comprehensive list of studies that tried to measure the value of a statistical life (VSL). The representative number they arrived at was @2.5 million, which happened to be much lower than what EPA used in its cost-benefit calculations. SURPRISE.
Rather than adjust its figure the agency responded by announcing that it would perform its own meta-analysis. While research was not yet complete, EPA said it expected its VSL estimate would be three times higher than the Mrozek and Taylor figure—and almost precisely the figure EPA was already using. The pronouncement was met with mocking laugher from the audiences but the EPA never budget. It didn’t have to. IT JUST ONE SURPRISE AFTER ANOTHER WITH THESE GUYS!
If by some bureaucratic accident, OMB did not get this result, no one would insist that the government eliminate the new regulations. All agencies should be subject to cost benefit analysis for their major regulations. Agencies like the SEC, FCC, or the new consumer financial protection bureau should be above such accountability. It is absurd and should be fixed at once. The agencies themselves should not be the ones determining whether a rule exceeds the $100 million threshold to merit a cost benefit test. OMB should use some of the agency budgets devoted to economic analysis to create an entity outside of their purview solely dedicated to doing sot benefit analysis. The entity would do for regulations what CBO does when measuring the revenue impact of legislative proposals.
For an administration that likes to advertise itself as the most transparent in history, it’s a logical step to take.

Source—weekly standard, ike Brannon, sam batkins,

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