[Federal Register Volume 75, Number 243 (Monday, December 20, 2010)]
[Unknown Section]
[Pages 79455-79458]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X10-21220]


[[Page 79455]]



                
OPEN GOVERNMENT AND EVIDENCE-BASED REGULATION

                There is a close connection, even an inextricable 
                relationship, between open government and evidence-
                based regulation. If regulatory choices are based on 
                careful analysis of the evidence, and if opportunities 
                are provided for public review and comment, we will be 
                able to identify sensible and pragmatic approaches that 
                are designed to promote entrepreneurship, innovation, 
                job creation, and economic growth.

                Since his inauguration, President Obama has placed a 
                great deal of emphasis on open government. In requiring 
                openness, the President has emphasized three separate 
                points. First, he has stressed the importance of 
                accountability. In his words, openness ``will 
                strengthen our democracy and promote efficiency and 
                effectiveness in Government.'' Second, the President 
                has said that ``[k]nowledge is widely dispersed in 
                society, and public officials benefit from having 
                access to that dispersed knowledge'' and hence to 
                ``collective expertise and wisdom.'' Third, he has 
                emphasized the importance of providing people with 
                information that they ``can readily find and use.'' For 
                this reason, he has said that agencies ``should harness 
                new technologies'' and ``solicit public feedback to 
                identify information of greatest use to the public.''

                At the same time, the Administration has been placing a 
                great deal of emphasis on sound analysis and on 
                ensuring a careful accounting of the anticipated 
                consequences of regulation, including both benefits and 
                costs. While regulation can promote vital public goods, 
                such as protection of safety, health, and financial 
                stability, the President has said, ``Sometimes 
                regulation fails, and sometimes its benefits do not 
                justify its costs.''

                The word ``analysis,'' of course, includes a number of 
                distinct but overlapping approaches, such as the cost-
                benefit analysis required by Executive Order 12866 and 
                the regulatory flexibility analysis required by the 
                Regulatory Flexibility Act. Executive Order 12866 
                requires agencies, to the extent permitted by law, to 
                give careful consideration to both costs and benefits 
                and to ensure that the benefits of regulation justify 
                the costs. It is worth noting that, in part because of 
                this Administration's commitment to careful analysis, 
                the quantified benefits of final rules significantly 
                exceeded the quantified costs for calendar year 2009-
                and that the net benefits of final regulations for the 
                first year of the Obama Administration far exceeded 
                those of the first year for the Clinton and Bush 
                Administrations:


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                        Figure 1: Annual Estimated Net Benefits of 
                            Major Rules

                        First Calendar Year of an Administration (1/21 
                            to 12/31)


                <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
                
                It is important to emphasize that the monetized 
                benefits are high. We have issued rules and undertaken 
                initiatives that are saving lives on the highways and 
                in workplaces; reducing air and water pollution; 
                increasing fuel economy, thus saving money while 
                reducing pollution; making both trains and planes 
                safer; helping students to obtain school loans and so 
                to attend college; protecting consumers and investors 
                against manipulation, fraud, and conflicts of interest; 
                increasing energy efficiency, saving billions of 
                dollars while increasing energy security; combating 
                childhood obesity; and creating a ``race to the top'' 
                in education.

                A central goal for the upcoming period is to ensure 
                that regulations do not impose unjustified burdens and 
                that if the costs and burdens are significant, they are 
                producing even more significant gains. Analysis of 
                regulatory consequences is part of a broad effort to 
                subject regulatory decisions to public scrutiny, with 
                close reference to evidence, and thus improving them--
                not least by pointing the way toward reduced burdens 
                and innovative solutions.

                By promoting accountability, open government policies 
                can help to track government's own performance. In that 
                way, such policies make public officials accountable 
                for what they do, including in the regulatory arena. 
                Performance review matters; it is a hallmark of this 
                Administration. Regulatory analysis is best seen as a 
                form of performance review for Federal rules, typically 
                done in advance (and sometimes done retrospectively).

                Before acting, regulators should attempt to obtain a 
                clear and concrete understanding of the likely 
                consequences of what they propose to do. In its 2009 
                Report on the Benefits and Costs of Federal 
                Regulations, OMB specifically underlined the 
                relationship among careful analysis, evidence-based 
                regulation, and open government. As the Report says, 
                ``Indeed, careful regulatory analysis, if transparent 
                in its assumptions and subject to public scru

[[Page 79457]]

                tiny, should be seen as part and parcel of open 
                government. It helps to ensure that policies are not 
                based on speculation and guesswork, but instead on a 
                sense of the likely consequences of alternative courses 
                of action. It helps to reduce the risk of 
                insufficiently justified regulation, imposing serious 
                burdens and costs for inadequate reason. It also helps 
                to reduce the risk of insufficiently protective 
                regulation, failing to go as far as proper analysis 
                suggests. We believe that regulatory analysis should be 
                developed and designed in a way that fits with the 
                commitment to open government.''

                With these points in mind, the Office of Information 
                and Regulatory Affairs issued (in November 2010) an 
                ``Agency Checklist'' for Regulatory Impact Analysis, 
                designed to promote clarity and transparency with 
                respect to the anticipated effects of regulation (see 
                http://www.whitehouse.gov/sites/default/files/omb/
                inforeg/regpol/RIA_Checklist.pdf). The checklist 
                emphasizes that agencies must assess costs and benefits 
                (to the extent feasible), explore alternatives, and 
                demonstrate the need for regulatory action. In these 
                ways, we have been seeking to increase openness and 
                improve our regulatory practices.

                The second function of open government is very 
                different: Openness promotes not merely accountability, 
                but also access to widely dispersed information. The 
                central idea is that officials often lack information 
                that is held by numerous others, especially in the 
                private sphere. When it is working well, open 
                government can ensure that rules are properly informed 
                by such information, which will often help to increase 
                benefits, reduce costs, or identify new and creative 
                alternatives.

                Consider the rulemaking process itself. A large 
                advantage of notice-and-comment rulemaking is that it 
                allows agencies to offer proposals, and supporting 
                analyses, that are subject to public scrutiny, and that 
                can benefit from knowledge that is widely dispersed in 
                society. On numerous occasions in the last 21 months, 
                final rules have been significantly different from 
                proposed rules, and public comments are a key reason.

                In its 2010 Report on the Benefits and Costs of Federal 
                Regulations, OMB specifically noted that ``some 
                regulations have significant adverse effects on small 
                business'' and that ``it is appropriate to take steps 
                to create flexibility in the event that those adverse 
                effects cannot be justified by commensurate benefits.'' 
                To tap dispersed knowledge, OMB requested public 
                suggestions about regulatory changes that might serve 
                to promote economic growth, with particular reference 
                to increasing employment, innovation, and 
                competitiveness. More specifically, OMB sought 
                suggestions for regulatory reforms that have 
                significant net benefits, that might increase exports, 
                and that might promote growth, innovation, and 
                competitiveness for small business, perhaps through 
                increasing flexibility. We continue to seek such 
                suggestions in an effort to reduce the risk that 
                regulation will impose unjustified costs or contain 
                unjustified rigidity--and to square important 
                regulatory goals with the interest in economic 
                recovery.

                Finally, in emphasizing the value of providing access 
                to information that people ``can readily find and 
                use,'' the President signaled a distinctive idea--that 
                openness promotes learning by making data and evidence 
                accessible. Anecdotes, speculation, and guesswork can 
                be replaced with information and evidence. The point 
                bears directly on the role of regulatory impact 
                analysis. Such analysis is something that members of 
                the public can ``find and use,'' not least because 
                advance notice promotes predictability and avoids 
                unfair surprise.


[[Page 79458]]



                In its Memorandum of July 23, 2010, on the Regulatory 
                Plan and Unified Agenda, the Office of Information and 
                Regulatory Affairs noted:

                ``Executive Order 12866 identifies a number of 
                principles that you should keep in mind, to the extent 
                permitted by law, as you set priorities and prepare 
                your submissions.

                First, Executive Order 12866 directs agencies to 
                propose or adopt a regulation `only upon a reasoned 
                determination that the benefits of the intended 
                regulation justify the costs' (recognizing that some 
                benefits are difficult to quantify but are nonetheless 
                essential to consider, such as visibility in national 
                parks).

                Second, it requires each agency to `tailor its 
                regulations to impose the least burden on society . . . 
                taking into account, among other things, and to the 
                extent practicable, the costs of cumulative 
                regulations.'

                Third, it requires agencies to `identify and assess 
                available alternatives to direct regulation, including 
                providing economic incentives to encourage the desired 
                behavior, such as the public.'

                Fourth, it directs agencies to design regulations `in 
                the most cost-effective manner to achieve the 
                regulatory objective.'

                Fifth, it asks each agency to `avoid regulations that 
                are inconsistent, incompatible, or duplicative with its 
                other regulations or those of other Federal agencies.'

                Sixth, it directs agencies to `select those approaches 
                that maximize net benefits (including potential 
                economic, environmental, public health and safety, and 
                other advantages; distributive impacts; and equity), 
                unless a statute requires another regulatory 
                approach.'''

                OIRA asked agencies to ``comply with these requirements 
                as you develop your submissions.'' It also asked 
                agencies, among other things, to ``highlight 
                rulemakings that simplify or streamline regulations and 
                reduce or eliminate unjustified burdens'' and to 
                identify ``regulations that are of particular concern 
                to small businesses.'' Before they can be finalized, 
                the regulations on the plans that follow will, of 
                course, be subject to a rigorous process of assessment 
                and scrutiny, with careful attention to the foregoing 
                principles. The list of regulations is intended to 
                provide a public account of regulations that are under 
                consideration; agencies are under no obligation to 
                issue these regulations (unless some independent source 
                of law requires them to do so).

                In the current economic environment, it is especially 
                important to see that analysis and openness are 
                mutually reinforcing. If the two are taken together, 
                they can help to promote important social goals, to 
                eliminate unjustified costs, and to identify approaches 
                that will promote entrepreneurship, innovation, job 
                growth, and competitiveness.