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Executive Order 12866

Original Text

Effective Dates
9/30/1993 - Present

Reform Goals
Deploy cost-benefit analysis for economically “significant” rules to improve regulatory efficiency and decision making. “The objectives of this executive order are to enhance planning and coordination with respect to both new and existing regulations; to reaffirm the primacy of Federal agencies in the regulatory decision-making process; to restore the integrity and legitimacy of regulatory review and oversight; and to make the process more accessible and open to the public.”

Requirements (What of whom?)
EO 12866 revoked and replaced President Reagan’s EO 12291 with similar requirements for executive branch agencies [1]:  

  • Agencies submit all planned regulations to OIRA, marking any rules as “significant” if they have > $100 million in expected costs or conflict with existing rules
  • OIRA reviews the list of planned regulations and has the power to mark additional rules as “significant” 
  • Agency must submit a cost-benefit analysis to OIRA for all new “significant” regulations.
  • Agencies must submit a plan for reviewing existing rules, and the Vice President may surface existing rules for review. 

Like most executive orders, 12866 exempted independent regulatory agencies. [2] Independent agencies may still have to submit cost benefit analysis to OIRA for certain rules under the Regulatory Flexibility Act.

Oversight for rule compliance
The Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) oversees all proposed rules, reviews significant rules, and can mark any agency rule as significant.

Reform “Teeth”
OIRA can “send back” any rules for further agency consideration if 1) they find them inconsistent with the President’s priorities or 2) if the rule conflicts with existing rules. This delays implementation but does not block a rule’s eventual implementation. 

Outcomes
Out of 43,970 rules evaluated by the OMB and OIRA since 1980, only 432 (0.98%) have been “sent back” for agency review. [3]  This is not because 99% of agency analyses demonstrate overwhelmingly positive outcomes for society. Quite the contrary, over 70% of cost-benefit analyses spanning the Reagan, HW Bush, and Clinton administrations did not provide any quantitative information on net benefits. [4]

As one former OIRA Administrator commented, “A considerable number of federal regulations violate the letter or spirit of the Executive orders—failing to do thorough or even cursory analyses of benefits and costs and slurring over straightforward matters of risk and economic assessment in ways that leave one very skeptical about the merits.”[5,6] Another study concluded that the reported cost-effectiveness of a rule does not have a large impact on whether it is accepted or rejected [10].

Under the retrospective review clause, and as part of the larger effort under the “National Partnership for Reinventing Government”, Vice President Al Gore reported a 7,000 page reduction in the Code of Federal Regulations from 1995-1997. However, there was no reported associated decrease in the regulatory burden [7, 9].

Commentary
As scholar Scott Farrow noted:

"For all the sound and the fury about the role and impact of Executive Office review, the evidence is remarkably weak that OIRA has had a substantial quantitative impact." [10]

OIRA’s staffing constraints and organizational priorities limit their ability to review agency cost-benefit analyses. Their team of less than 50 people is small compared to the hundreds and sometimes thousands of complex rules they are expected to review annually. Moreover, Cass Sunstein, the OIRA Administrator from 2009-2012, stated that the review of cost-benefit analyses is  “not the dominant issue in the OIRA process” but rather “much of OIRA’s day-to-day work is devoted to helping agencies work through interagency concerns, promoting the receipt of public comments…, ensuring discussion and consideration of relevant alternatives, … and helping to ensure resolution of questions of law.” [8]

Executive Order 12866, widely considered to be one of the stronger regulatory system reforms, had no measurable impact on the cost-effectiveness of federal regulations. Improving transparency and intensifying reporting requirements does not automatically translate to improved decision making by regulatory agencies.

References

  1. Federal Register. Vol. 58, No. 190. Presidential Documents "Executive Order 12866 of September 30, 1993. Regulatory Planning and Review." Link , PDF
  2. Jim Tozzi. "Detailed Recommendations for Regulatory Review Executive Order." Center for Regulatory Effectiveness. Link , PDF ; There is much perceived sensitivity in DC regarding exertion of Presidential control over agencies ostensibly created by Congress to be independent of political influences. See Sally Katzen. "Can Greater Use of Economic Analysis Improve Regulatory Policy at Independent Regulatory Commissions?" April 7, 2011. Link , PDF
  3. See OIRA database at: Link
  4. A study of 74 agency cost-benefit analyses spanning the Reagan, George HW Bush and Clinton administrations:  Robert W. Hahn and Patrick M. Dudley. "How Well Does the Government Do Benefit-Cost Analysis?". 1 Rev. Envtl. Econ. & Pol'y 192 (2007). Link
  5. See page 102. Christopher DeMuth. "OIRA at Thirty." March 2015. Link
  6. One benefit of OIRA may have been to improve the quality overall of agency cost benefit analyses relative to baseline, as evidenced by the poorer quality of independent regulatory analysis, which is not submitted to OIRA. Still, this is of little use if OIRA is not primarily engaged as a gatekeeper for rule costs and benefits. See Richard J. Pierce, Jr. "The Regulatory Budget Debate." June 2016  Link , PDF
  7. John Kamensky, “A Brief History,” National Partnership for Reinventing Government, January 1999. Link 
  8. See page 1. Cass R. Sunstein. "The Office of Information and Regulatory Affairs: Myths and Realities." Harvard Law Review Volume 126. Link , PDF
  9. Randall Lutter. "Perspectives on Retrospective Review and Analysis. Testimony for the House Committee on the Judiciary, Subcommittee on Courts, Commercial and Administrative Law
    Clearing the Way for Jobs and Growth: Retrospective Review to Reduce Red Tape and Regulations."
    July 12, 2012 Link , PDF
  10. Scott Farrow. "Improving Regulatory Performance: Does Executive Office Oversight Matter?" Carnegie Mellon University. July 26, 2000 Link , PDF

Additional Reading

  • Institute for Policy Integrity. "Strengthening Regulatory Review, Recommendations for the Trump Administration from Former OIRA Leaders." New York University School of Law. 2016. Link