Tuesday, January 18, 2011

Seeking Balance In A 21st-Century Regulatory System

Jan 18: In a surprising Wall Street Journal Op-Ed, President Obama announced a new Executive Order -- "Improving Regulation and Regulatory Review" -- calling for a government-wide review of regulations, regulatory improvement, elimination of unnecessary paperwork and a special focus on eliminating burdens for small business. The President said:
    "For two centuries, America's free market has not only been the source of dazzling ideas and path-breaking products, it has also been the greatest force for prosperity the world has ever known. That vibrant entrepreneurialism is the key to our continued global leadership and the success of our people. But throughout our history, one of the reasons the free market has worked is that we have sought the proper balance. We have preserved freedom of commerce while applying those rules and regulations necessary to protect the public against threats to our health and safety and to safeguard people and businesses from abuse.
    "From child labor laws to the Clean Air Act to our most recent strictures against hidden fees and penalties by credit card companies, we have, from time to time, embraced common sense rules of the road that strengthen our country without unduly interfering with the pursuit of progress and the growth of our economy.
    "Sometimes, those rules have gotten out of balance, placing unreasonable burdens on business -- burdens that have stifled innovation and have had a chilling effect on growth and jobs. At other times, we have failed to meet our basic responsibility to protect the public interest, leading to disastrous consequences. Such was the case in the run-up to the financial crisis from which we are still recovering. There, a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.
    "Over the past two years, the goal of my administration has been to strike the right balance. And today, I am signing an executive order that makes clear that this is the operating principle of our government. This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive. It's a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades.
    "Where necessary, we won't shy away from addressing obvious gaps: new safety rules for infant formula; procedures to stop preventable infections in hospitals; efforts to target chronic violators of workplace safety laws. But we are also making it our mission to root out regulations that conflict, that are not worth the cost, or that are just plain dumb. For instance, the FDA has long considered saccharin, the artificial sweetener, safe for people to consume. Yet for years, the EPA made companies treat saccharin like other dangerous chemicals. Well, if it goes in your coffee, it is not hazardous waste. The EPA wisely eliminated this rule last month.
    "But creating a 21st-century regulatory system is about more than which rules to add and which rules to subtract. As the executive order I am signing makes clear, we are seeking more affordable, less intrusive means to achieve the same ends -- giving careful consideration to benefits and costs. This means writing rules with more input from experts, businesses and ordinary citizens. It means using disclosure as a tool to inform consumers of their choices, rather than restricting those choices. And it means making sure the government does more of its work online, just like companies are doing.
    "We're also getting rid of absurd and unnecessary paperwork requirements that waste time and money. We're looking at the system as a whole to make sure we avoid excessive, inconsistent and redundant regulation. And finally, today I am directing federal agencies to do more to account for -- and reduce -- the burdens regulations may place on small businesses. Small firms drive growth and create most new jobs in this country. We need to make sure nothing stands in their way.
    "One important example of this overall approach is the fuel-economy standards for cars and trucks. When I took office, the country faced years of litigation and confusion because of conflicting rules set by Congress, federal regulators and states [See WIMS 5/19/09].
    "The EPA and the Department of Transportation worked with auto makers, labor unions, states like California, and environmental advocates this past spring to turn a tangle of rules into one aggressive new standard [See WIMS 4/1/10]. It was a victory for car companies that wanted regulatory certainty; for consumers who will pay less at the pump; for our security, as we save 1.8 billion barrels of oil; and for the environment as we reduce pollution. Another example: Tomorrow the FDA will lay out a new effort to improve the process for approving medical devices, to keep patients safer while getting innovative and life-saving products to market faster.
    "Despite a lot of heated rhetoric, our efforts over the past two years to modernize our regulations have led to smarter -- and in some cases tougher -- rules to protect our health, safety and environment. Yet according to current estimates of their economic impact, the benefits of these regulations exceed their costs by billions of dollars. This is the lesson of our history: Our economy is not a zero-sum game. Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary. But what is clear is that we can strike the right balance. We can make our economy stronger and more competitive, while meeting our fundamental responsibilities to one another."
     In addition to the Executive Order, the President also issued two Presidential Memorandums -- one on Regulatory Compliance and Enforcement (Memo #1); and another on Regulatory Flexibility, Small Business, and Job Creation (Memo #2). The Regulatory Compliance and Enforcement Memo requires Federal enforcement agencies to make publicly-available compliance information easily accessible, downloadable, and searchable online. This will provide citizens with information they need to determine when entities fail to comply with the law. 
    The Regulatory Flexibility, Small Business, and Job Creation Memo requires Federal agencies to consider ways to reduce regulatory burdens on small business and requiring that Agencies provide justifications when such flexibilities are not included in proposed regulation. Agencies will not only be required to consider these alternatives for small businesses, but also to provide written justification when such alternatives are not utilized.
    Jack Lew Director of the Office of Management and Budget (OMB) commented on the President's actions in a White House blog post. Lew said, "OMB plays a central role in implementing a President's regulatory agenda. Through our Office of Information and Regulatory Affairs (OIRA), OMB acts as a clearinghouse for the most significant regulations and rules, making sure that policies are consistent across the federal government and with the agenda of the President. OMB also ensures that analysis of rules is done properly, according to one set of standards."

    Lew indicated as the President wrote, our aim is to "strike the right balance" between what is needed to protect the safety and health of all Americans, and what we need to foster economic growth, job creation, and competitiveness. He said, "The Administration has followed this balanced approach since taking office, and this executive order formally details our basic operating principles. With this EO, there should be no confusion about what guides this Administration when crafting regulations. The basic tenets are: to consider costs and how best to reduce burdens for American businesses and consumers; to expand opportunities for public participation and stakeholder involvement; to seek the most flexible, least burdensome approaches; to ensure that regulations are scientifically-driven; and to review old regulations so that rules which are no longer needed can be modified or withdrawn. This smarter approach builds on the best practices of the past, while adapting to serious economic challenges the country faces today. . ."

    The National Association of Manufacturers (NAM) Senior Vice President for Government Relations and Policy, Aric Newhouse issued a statement commenting on the President's executive order saying, "Manufacturers appreciate President Obama's call for a government-wide review of regulations and rules. Manufacturers have been saying for some time that overregulation is harming job creation and stifling economic growth. This is an opportunity for the President to demonstrate results by eliminating unnecessary regulations already in the pipeline or delaying poorly thought-out proposals that are costing jobs. For example, the Environmental Protection Agency's (EPA) proposals -- from regulating greenhouse gases to the Boiler MACT rule -- are a real threat to America's job creators. We stand ready to assist in the President's efforts to address an escalating problem and meaningfully reduce unnecessary burdens on manufacturers in America so they can get back to creating jobs."  
    U.S. Chamber of Commerce President and CEO Thomas Donohue issued a statement saying, "We welcome President Obama's intention to issue an executive order today restoring balance to government regulations. While a positive first step, a robust and globally competitive economy requires fundamental reform of our broken regulatory system. Congress should reclaim some of the authority it has delegated to the agencies and implement effective checks and balances on agency power. It also means repealing or replacing outdated or ineffective regulations, ensuring realistic cost-benefit analyses using quality data. No major rule or regulation should be exempted from the review, including the recently enacted health care and financial reform laws. The Chamber shares the president's view that we should 'root out regulations that conflict, that are not worth the cost, or that are just plain dumb.' And the Chamber will work with the White House, Congress, and the federal agencies to advance common sense regulatory reform measures." 
    The regulatory watchdog group, OMB Watch Executive Director Gary Bass issued a release saying,"Unfortunately, President Obama's regulatory executive order does little to change the mechanics of a broken regulatory process. The order reflects, however, the values the administration has stressed in its two years in office: greater public participation, decisions based on the best available science and technology, and greater agency flexibility. The RFA's [Regulatory Flexibility Act] requirements already burden agencies with procedural hurdles that can delay critical public protections. This memo may very well be taken as an insult by the federal agencies, which write reasoned, evidence-based rules now; those rules would never be approved if they were based on 'guesswork'"
    Access the WSJ Op-Ed (click here). Access the Executive Order (click here). Access Memo #1 (click here). Access Memo #2 (click here). Access a fact sheet on the executive order and memorandum (click here). Access the OMB blog posting which also summarizes the actions (click here). Access the statement from NAM (click here). Access the U.S. Chamber statement (click here). Access the release from OMB Watch (click here). Access the OMB OIRA website for more information (click here).
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