Burnishing His Legacy, President Obama Is Focused on Making Rule Review Permanent

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By Cheryl Bolen

Feb. 9 — President Barack Obama, with an eye toward his legacy, is personally engaged in a new initiative to move federal agencies into the next phase of reviewing their regulations—the results are expected in late summer—and potentially will make the changes permanent.

First announced in 2011, retrospective review had some early successes, but has slowed as cash-strapped agencies have struggled to both review existing rules and promulgate new ones, including the required public comment, cost estimates and impact analyses.

Under executive order, federal agencies are required to modify, streamline, expand or repeal any rule that has become outmoded, ineffective, insufficient or excessively burdensome. Agencies are required to submit plans for conducting reviews twice each year, on the second Monday of January and July.

Republicans are actually about 25 percent right when it comes to the amount of “regulatory burden,” Obama told members of the Business Roundtable last December. Nobody wants to be regulated, he said, and there are some regulations that are burdensome on businesses.

“What I’d like to do in these last two years is figure out how we can improve the system to find that 25 percent—and again, we may not always agree on what the 25 percent is—and can we institutionalize it so that it outlives my administration,” Obama said.

Preview of Plan

Those remarks by the president are a preview of the initiative that is scheduled to be revealed this year, aimed at reinvigorating the existing process of reviewing rules to achieve tangible results.

“So what we’ve tried to do is to set up a structure in which we can engage directly with various industries, explain here’s the goal we’re trying to accomplish, solicit as much feedback as possible, and then try to design systems that provide some flexibility, allow for creative adaptation, but still hit the mark,” Obama said.

The essential rule in his administration has been not to promulgate regulations unless the agency can show a significant benefit relative to costs, Obama said. “And we’ve been able to do that. We’ve been able to document it in the most rigorous way possible,” he said.

“But are there some other institutional things we can do to build the process so, for example, there’s more input on the front end rather than the rule gets promulgated, published, and then there’s this big, cumbersome, inefficient, unwieldy process of comments. Are there smarter ways of doing that?” Obama asked.

Obama said he had assigned his entire Cabinet to listen to stakeholders. If something is counterproductive and doesn’t work, he said, or there’s a smarter way of meeting the goal, his administration will embrace it.

Stakeholder Meetings Begin

Office of Management and Budget Director Shaun Donovan said Feb. 5 that there are a number of places where the administration can promulgate smarter, better regulation.

Broadly speaking, most regulation is designed to achieve goals everyone ought to be able to agree on, such as protecting the air and water and keeping Americans safe, Donovan said. Regulation during the Obama administration has produced dramatically more economic growth and benefits to Americans than costs, he said.

“So having said that, there is no question that there are regulations across the government that aren’t as effective as they could be, that are outdated,” Donovan said.

In 2011, the president began a retrospective review of regulations under Executive Order No. 13,563, asking every agency to identify rules that could be eliminated or updated, Donovan said. The initial round of retrospective review produced billions of dollars of savings, he said.

“But we’ve actually launched, we’ll start on this Friday [Feb. 6], an effort to bring in stakeholders from across the country to really say, what’s the next phase of this retrospective review that we can take on?” Donovan said. “We’re already working with agencies on this and have very specific proposals for them of regulations that could be modernized, updated,” he said.

Part of this is accounting for new technology, electronic signatures and a range of other things, but part of it is taking a more outcome-based approach to regulation, he said.

OIRA Explains

Retrospective review is “a very big part of the year ahead,” Howard Shelanski, administrator of OMB's Office of Information and Regulatory Affairs (OIRA), told Bloomberg BNA on Jan. 28.

A lot of what administration officials are accomplishing on the regulatory front, a lot of what OIRA is doing, will really bear fruit over the next year or so, Shelanski said.

“What we’ve been doing has been laying the groundwork of greatly strengthening retrospective review,” Shelanski said during the interview in his office in the Eisenhower Executive Office Building. “It’s something the president is very engaged in, as his remarks to the Business Roundtable made clear. He is very serious about retrospective review and has taken a direct interest in it.”

“I think what you can expect to see—and again this is the kind of thing that will unfold over the year—is a series of significant new retrospective review efforts of different kinds, from across the federal agencies,” Shelanski said.

OIRA has been engaging with all segments of society—businesses, state and local governments, the technology community, certainly with public interest groups, with labor unions, with environmental organizations—with all stakeholders in regulation, to get ideas about what can improve the regulatory process, what rules could be changed and what processes can be overhauled, Shelanski said.

“And these [discussions] are part of what is going to feed into the public engagement process surrounding retrospective review, that the agencies are carrying out,” he said.

Highest Priority is Review

Retrospective review is one of OIRA's highest priorities, Shelanski said. It stands right up there with getting a lot of the most important rules finalized.

Twice a year there is a data call on which agencies report their retrospective review initiatives and then post them on their websites, Shelanski said.

“We’re working with agencies on coming up with a very ambitious set of initiatives that would be announced in the winter and then later in the summer data calls,” Shelanski said. “So I think retrospective review is an area that will, while we’ve had some successes, we will have a lot more over the coming year,” he said.

“There are not a lot of billion-dollar bills lying around in the [Code of Federal Regulations] that one can pick up and return to the American public,” Shelanski said.

Although they would like to find those savings, there still are a lot of things OIRA can do to reduce paperwork burdens, to make rules simpler and easier to understand, to make compliance more straightforward and to reduce duplication in the system, he said.

However, there are probably a lot of $10 million and $100 million bills lying around—and agencies are looking for them, Shelanski said. Agencies have done a good job looking for the obvious candidates, and a number of them have done a good job digging deep and finding some creative retrospective efforts, he said.

“We’re going to see more of this and more comprehensively across the federal agencies, I think, over the remainder of the administration,” he said.

OIRA Priorities Span Agencies

“Well, we have a number of very high priorities going forward for this year—all of the agencies have significant policies they’re trying to achieve,” Shelanski said. Some are driven by statute, others are other kinds of policy priorities, he said.

Finalizing the power plant rules, is going to be a high priority. OIRA is working with the Environmental Protection Agency on those, Shelanski said. The Department of Energy has an ambitious and economically important set of appliance efficiency rules on which they are working, he said.

The Department of Transportation is doing important work in rail safety, and OIRA plans to continue work with the department on strengthening standards for the shipment of crude oil, Shelanski said.

The Department of Labor is moving forward on a significant number of important initiatives, Shelanski said. OIRA will be working with Labor Secretary Thomas Perez and his team to get those rules done, he said.

A real accomplishment last year was the creation of a new Forward Plan by the U.S.-Canada Regulatory Cooperation Council, Shelanski said. OIRA looks forward to continuing work with Canada this year, and in particular working with U.S. agencies to help them move forward with agency-to-agency plans with their Canadian counterparts, he said.

No Increase in Activity

Shelanski dismissed accusations often made by Republicans and the U.S. Chamber of Commerce that the Obama administration has unleashed a “tsunami” of regulations on the business community.

The U.S. Chamber of Commerce issued an analysis last May that said a move by the Environmental Protection Agency to restrict carbon pollution from power plants could cause billions of dollars in damage to the U.S. economy and lead to millions of job losses.

These accusers often point to largely discredited studies that contain absurd estimates, for example, of the per-household cost of regulation, Shelanski said.

“So there are a lot of these studies that would not pass muster in any even moderately peer-reviewed economics journal, that come out and make absurd estimates,” he said.

What OIRA is focused on is making sure that the regulations produced are necessary, serve a serious objective, do so in the most efficient way possible and generate net benefits for the American public, Shelanski said.

The level of regulatory activity in this administration has been relatively stable, Shelanski said. The latest cost-benefit report for fiscal year 2014 and the preliminary FY 2015 report will be out in the coming weeks and months, he said.

“And I think what we’ll see is possibly a decrease in regulatory activity from fiscal year 2012, and then pretty steady since then. So I don’t see any big increase in regulation—I see a good, steady responsible stream of valuable rules coming out of this administration,” he said.

Legislative Agenda

In terms of legislation, Shelanski said the relevant congressional committees have recently reconstituted themselves under the Republican majority, just appointed new members and restructured their subcommittees. So things are just getting started there, he said.

“And I look forward to engaging with the folks on the Hill and seeing what ideas they have, and we will respond to what they put forward,” Shelanski said.

Although Shelanski said he hoped to work with the Republican-controlled Congress “in the most constructive way possible,” he said no new legislation to change the regulatory process is needed right now.

“We feel like we have the tools to regulate effectively,” Shelanski said. “And there are lots of analytic requirements and procedural requirements in the regulatory process. We feel that it works well, that it’s rigorous, that agencies have to be careful and meet good standards,” he said.

Getting Out in Front

Amit Narang, regulatory policy advocate at Public Citizen, said it is important for the administration and for Shelanski to make clear to lawmakers and the public just how dangerous the pending anti-regulatory legislation is for public health and safety.

Obviously this type of legislation must be taken far more seriously now that the Senate will be voting on it and probably passing it; it will reach the president’s desk, Narang said.

“It’s important for the administration to be out in front making it clear that the deregulatory impacts of this legislation are not in the public’s interest and are frankly only in the interests of big business,” he said.

Narang said he expects all the legislation introduced in the last two Congresses to be reintroduced.

“We don’t think that any of it improves the regulatory process in the way it needs to be improved,” which means making the process far more efficient—making sure that agencies aren’t missing congressional and legal deadlines on a regular basis because they have so many analytical procedures and hoops to jump through, Narang said.

And most of the legislation that’s being proposed would make that process even more dysfunctional, inefficient and redundant, Narang said. So, we don’t see any of the legislation being an improvement on the process—that actually would help in terms of public health and safety, he said.

Addressing Inefficiency

Still, there are ways to address waste and government inefficiency that could directly improve rulemaking, Narang said.

Agencies are having to conduct all sorts of redundant and duplicative analyses when it comes to putting out new rules on health and safety, financial reform and consumer product safety, Narang said.

“And there’s a lot there in terms of removing waste and inefficiency,” he said. “I would encourage lawmakers to start there and find ways to make our process work much faster.”

To illustrate this point, it is useful to compare, for example, the Regulatory Accountability Act (H.R. 185), which was sponsored by Rep. Bob Goodlatte (R-Va.) and passed the House Jan. 13 with some of the Republican-sponsored legislation that speeds up energy project permit approvals, Narang said. H.R. 185 would require federal agencies to clear new procedural hurdles.

The Federal Permitting Improvement Act of 2015 (S. 280), which was introduced by Sens. Rob Portman (R-Ohio) and Claire McCaskill (D-Mo.) on Jan. 28, would speed up environmental permit approvals.

The changes to the permit approval process in the RAPID Act are the opposite of the regulatory process changes in the Regulatory Accountability Act, he said.

“For me, this [the RAPID Act] is just a very blatant attempt at rigging the process so deregulatory measures that hurt the public but help business are fast-tracked, and health and safety measures and other measures intended to help the public are slowed down as much as possible,” he said.

Regulatory Overreach

In contrast, several Republican senators spoke out as recently as Feb. 9 against what they called regulatory overreach by the administration. Specifically, the senators said they opposed a rule by the National Labor Relations Board to allow quick elections by employees to unionize.

Senate Majority Leader Mitch McConnell (R-Ky.) said the rule fit into the recent discussion in the Senate about partisan overreach. This administration seems to view democracy as what it can get away with, not what it can work cooperatively to achieve, he said.

The NLRB's far-reaching rule, the so-called “Mount Everest of regulations,” is not the administration seeking out best policy, but seeing what it can get away with, McConnell charged.

Sen. Mike Enzi (R-Wyo.) said he would support a resolution of disapproval to repeal the NLRB's “ambush” election rule. This effort would help prevent “yet more misguided federal regulation that will hurt American businesses and employees,” he said.

Enzi said he attempted a similar resolution of disapproval in 2012, but he didn't have the votes. “But we've had some elections and some changes in the Senate since then,” he said.

The rule that the NLRB has proposed would be a tremendous burden on employers, especially small businesses, Enzi said. “Our economy is already grappling with federal rules and regulations that hold back businesses,” he said.

“This rule from the National Labor Relations Board would be yet another brake slowing down our economy, at a time when we need to encourage employers and businesses to grow,” Enzi said.

Pen and Phone

Sally Katzen, former administrator of OIRA in the Clinton administration and now a senior adviser at the Podesta Group Inc., said the president has said he is prepared to use the pen and the phone to implement his agenda, and one way he can achieve that is through regulation.

“I think he will use the administrative process to promote his priorities, including reducing greenhouse gases and climate change generally,” she said.

Regulations implementing the Affordable Care Act are obviously important, as are rules implementing his immigration initiatives and the recent announcements to help the middle class, such as paid sick leave and increases in the minimum wage, Katzen said.

“To the extent there are regulatory vehicles to advance those initiatives, I think we can expect to see them over the next year,” Katzen said. “I do not expect to see a gi-normous tsunami of regulations swamping the landscape,” she said.

The president continues to talk about “smart regulations” and “sensible regulations,” and he will pick his battles, in part because he is also committed to seeing the economy continue its recovery, Katzen said. “And the economic recovery is not locked in,” she said.

Those who talk about a “tsunami” or indiscriminate regulations don't fully appreciate that the president understands that regulations, even when the benefits justify the costs, can have an effect on the economy, Katzen said. “So the regulations have to be well-crafted, tailored, thoughtful—and that’s why I believe we are not going to see him regulate everything in sight,” she said.

International Agenda

Another focus of OIRA in 2015 will be assisting with trade agreements and working on harmonizing regulations with Canada and Mexico.

Shelanski said OIRA has a good working relationship with their colleagues at the Office of the U.S. Trade Representative. And we’re always very happy to work with them on helping to build good regulatory practices into trade agreements, he said.

And so, while his office isn't directly involved with trade negotiations or negotiating trade agreements, it is involved with working with USTR to get good regulatory practices to be part of the common understanding of trade agreements, Shelanski said. And to be part of the foundation of those agreements, he said.

On the other hand, OIRA plays a significant role in Canada and Mexico, where the U.S. has formal regulatory cooperation councils (RCCs), Shelanski said.

With Canada, U.S. agencies are going to be executing the Forward Plan that was released last fall, Shelanski said. With Mexico, the U.S. is trying to wrap up the original work plan and to move forward, reinvigorating that relationship and coming up with some new agenda items for that RCC, he said.

“Cooperation on energy regulation, I think, is going to be a very important component of that going forward,” he said.

To contact the reporter on this story: Cheryl Bolen in Washington at cbolen@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com