On Balance: Reflecting on the Longevity of Executive Order 12866 and Looking to the Future

September 2018 marks the 25th anniversary of Executive Order (EO) 12866, which requires U.S. federal agencies, “in deciding whether and how to regulate, [to] assess all costs and benefits of available regulatory alternatives, including the alternative of not regulating.” It further states that, “in choosing among alternative regulatory approaches, agencies should 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.”

Since it was signed on September 30, 1993, four different presidents with markedly diverse regulatory philosophies have relied on EO12866 to guide both the procedures and analytical practices for developing new regulations.

To commemorate the 25th anniversary of EO 12866, the Society for Benefit-Cost Analysis  is co-sponsoring a forum with the George Washington University (GW) Regulatory Studies Center , the Section of Administrative Law and Regulatory Practice  of the American Bar Association, and the Trachtenberg School of Public Policy & Public Administration at GW. The forum, to be held on the GW campus on the afternoon of September 24, will feature panels addressing the past, present, and future of EO 12866.

On one panel, past administrators of the Office of Information and Regulatory Affairs  (OIRA) from the Clinton, Bush, and Obama administrations, along with senior career agency officials who have worked across administrations, will reflect on the Executive Order’s longevity. On another panel, congressional staff will discuss legislative initiatives aimed at regulatory benefit-cost analysis. A third panel will look to what the future for regulatory analysis and oversight might hold, with insights from the current OIRA administrator and officials from both federal executive departments and independent regulatory agencies.

EO 12866 was not the United States’ first requirement for regulatory benefit-cost analysis, but the order’s durability suggests that the principle—that regulatory actions should be based on evidence of likely benefits and costs—is here to stay. Presidents Gerald Ford and Jimmy Carter both issued executive orders directing agencies to assess the effects of regulations (see, for example, an article  by Thomas Hopkins and Laura Stanley in the Summer 2015 issue of the Journal of Benefit Cost Analysis). Although neither order used the words benefit-cost analysis, that’s what they implicitly called for.

Benefits and costs finally took center stage with EO 12291, issued in the early days of the Reagan Administration. For several reasons, many expected EO 12291 to be revoked when President Bill Clinton took office – and it was. What was unexpected was that it would be replaced by more thorough and sweeping requirements for benefit-cost analysis: EO 12866.

EO 12866 talks about benefit-cost analysis at three levels: as a principle, as a general practice, and as a set of necessary requirements. Among other “Principles of Regulation” enumerated in EO 12866, number 6 states, “Each agency shall assess both the costs and the benefits of the intended regulation…” In other words, good rulemaking should use benefit-cost analysis. After defining regulatory significance, EO 12866 states that, for each significant regulatory action, “the agency shall provide to OIRA “[a]n assessment of the potential costs and benefits of the regulatory action...”

For economically significant regulations (generally those with annual impacts of $100 million or more), a regulatory analysis is required, which additionally contains: “[a]n assessment, including the underlying analysis, of benefits anticipated from the regulatory action,” “[a]n assessment, including the underlying analysis, of costs anticipated from the regulatory action,” and “[a]n assessment, including the underlying analysis, of cost and benefits of potentially effective and reasonably feasible alternatives to the planned regulation.”

EO 12866, combining principles of good rule making with procedures to make those principles effective, has shown its mettle for 25 years. Since President Clinton signed EO 12866 in 1993, it has been applied to more than 14,500 significant regulations , cutting across all sectors of the government.

The anniversary marks a fitting time for commemoration, both to look at how regulation would have been different without the executive order and to think about what comes next for regulation and regulatory review.

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