[Federal Register Volume 74, Number 233 (Monday, December 7, 2009)]
[Unknown Section]
[Pages 64137-64139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X09-31207]


[[Page 64137]]



                
INTRODUCTION TO THE FALL 2009 REGULATORY PLAN

                It is . . . the policy of the United States that . . . 
                agencies shall prioritize actions based on a full 
                accounting of both economic and social benefits and 
                costs and shall drive continuous improvement by 
                annually evaluating performance, extending or expanding 
                projects that have net benefits, and reassessing or 
                discontinuing under-performing projects.

                         Executive Order 13514 on Environmental,

                         Energy, and Economic Performance

                         (Oct. 5, 2009)

                Some of the nation's most important policies are 
                implemented through regulation. In domains as diverse 
                as energy efficiency, environmental protection, health 
                care, occupational safety, civil rights, 
                communications, homeland security, and many more, the 
                government attempts to protect its citizens through 
                regulations.

                In a memorandum signed on January 30, 2009, President 
                Obama emphasized that as a result of many years of 
                experience, ``Far more is now known about regulation - 
                not only about when it is justified, but also about 
                what works and what does not.'' He explicitly directed 
                the Director of the Office of Management and Budget, 
                Peter Orszag, to evaluate the regulatory review process 
                and, among other things, to ``clarify the role of the 
                behavioral sciences in formulating regulatory policy'' 
                and ``identify the best tools for achieving public 
                goals through the regulatory process.''

                Director Orszag has written that behavioral economics 
                is ``one of the most important intellectual 
                developments of the past several years. . . . By taking 
                the insights of psychology and observed human behavior 
                into account, we now have a fuller picture of how 
                people actually behave - instead of just reducing them 
                to the hyper-rational utility-maximizers of Econ 101.''

                A behavioral approach to regulation is straightforward. 
                It draws on evidence of people's actual behavior. It 
                favors approaches that are clear, simple, and easy to 
                understand. It attempts to ensure that regulations will 
                have good consequences.

                These goals have many implications for regulatory 
                policy. In the domain of savings for retirement, 
                consider these words from the President's Fiscal Year 
                2010 Budget:

                ``Research has shown that the key to saving is to make 
                it automatic and simple. Under this proposal, employees 
                will be automatically enrolled in workplace pension 
                plans--and will be allowed to opt out if they choose. . 
                . . Experts estimate that this program will 
                dramatically increase the savings participation rate 
                for low and middle-income workers to around 80 
                percent.''

                In September 2009, the President expanded on this theme 
                by offering a series of initiatives for increasing 
                automatic enrollment. He said, ``We know that automatic 
                enrollment has made a big difference in participation 
                rates

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                by making it simpler for workers to save - and that's 
                why we're going to expand it to more people.''

                In many other domains, it is possible to promote 
                regulatory goals by selecting the appropriate default 
                rules. And where it is not possible or best to change 
                the default, we can have a similar effect merely by 
                easing and simplifying people's choices. Several of the 
                rules discussed in this Plan reflect this aspiration. 
                One such rule, involving hazard communication to 
                workers and proposed by the Occupational Safety and 
                Health Administration in 2009, is expected to increase 
                simplicity, to reduce costs, and at the same time to 
                save dozens of lives each year.

                In the same vein, the Administration is taking a series 
                of steps toward simplifying the Free Application for 
                Federal Student Aid (FAFSA), reducing the number of 
                questions and allowing electronic retrieval of 
                information. Use of a simpler and shorter form is 
                accompanied by measures designed to permit online users 
                to transfer data previously supplied electronically on 
                their tax forms directly onto their FAFSA application.

                To achieve regulatory goals, it is important to 
                understand that people are often affected by the 
                behavior of their peers: If people learn that they are 
                using more energy than similarly situated others, their 
                energy use declines - saving money while also reducing 
                pollution. In the domain of seatbelt usage, real change 
                occurred as regulation worked hand-in-hand with 
                emerging social norms. The Administration is well aware 
                that if safety is to increase significantly on the 
                highways, it must be in part because of social norms 
                that discourage distracted driving (and other risky 
                behavior). In October 2009, the President issued an 
                Executive Order banning texting while driving by 
                Federal employees; the Department of Transportation is 
                embarking on a range of initiatives to reduce 
                distracted driving.

                Scientific integrity is critically important, in the 
                sense that regulators cannot decide how to proceed 
                without having a sense of what is known and what 
                remains uncertain. Of course some risks are large and 
                others are small. Some regulations are burdensome and 
                some are not. Some regulations have unintended bad 
                consequences; others have unintended good consequences.

                In his January 30, 2009, memorandum, President Obama 
                pointed to the importance of ``a dispassionate and 
                analytical `second opinion' on agency actions.'' He 
                also asked the Director of OMB to address the role of 
                three factors that are not always fully included in 
                cost-benefit analysis: the interests of future 
                generations; distributional considerations; and 
                fairness. If regulation is to be data-driven and 
                evidence-based, it must include, rather than neglect, 
                the concerns of future generations.

                Many of the regulations in this Plan reflect these 
                concerns. In particular, environmental regulations, 
                designed to combat the risks associated with climate 
                change, are attentive to the interests of future 
                generations and those who are least well-off. The 
                Administration has recently developed interim figures 
                for the social cost of carbon-figures that have been 
                used for several different regulations in this Plan, 
                involving energy efficiency in vending machines and 
                greenhouse gas emissions from motor vehicles. The 
                figures are based in part on a recognition of the well-
                established view that a high discount rate for long-
                term damage could lead to action that might harm future 
                generations.

                In addition, President Obama has placed a great deal of 
                emphasis on open government. In his first weeks in 
                office, he quoted the words of Supreme

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                Court Justice Louis Brandeis: ``Sunlight is said to be 
                the best of disinfectants.'' President Obama explained 
                that ``accountability is in the interest of the 
                Government and the citizenry alike.'' He emphasized 
                that ``[k]nowledge is widely dispersed in society, and 
                public officials benefit from having access to that 
                dispersed knowledge.'' President Obama has stressed 
                that transparency can ensure that data is available to 
                all - and with available data, we can greatly improve 
                our practices.

                The Environmental Protection Agency has built on these 
                ideas with its Greenhouse Gas Reporting rule, requiring 
                disclosure by the most significant emitters. The data 
                will allow businesses to track their own emissions and 
                compare them to similar facilities; it will also 
                provide assistance in identifying cost-effective ways 
                to reduce emissions in the future.

                All this is merely a start. For example, the Executive 
                Order on environmental, economic, and energy 
                performance will attempt to track progress in meeting 
                crucial goals - including greenhouse gas emissions 
                reductions - and disclose both costs and benefits to 
                the public.

                Regulatory decisions often require complex tradeoffs, 
                especially in the current economic environment. We are 
                committed to ensuring that those tradeoffs reflect the 
                best available information, respect scientific 
                integrity, and benefit from public participation - and 
                are rooted in a clear and transparent understanding of 
                the human consequences.

                        Cass R. Sunstein

                        Administrator

                        Office of Information and Regulatory Affairs