Regulatory Policy and the Balance of Powers

February 24, 2012
By Ashali Singham MPP 2013

How can the Federal government improve the design and implementation of regulatory policy? That is the fundamental question asked at the program, “Reviving Regulatory Reform,” hosted by the Mossavar-Rahmani Center for Business and Government (M-RCBG).

Christopher DeMuth described to a group on Feb. 23, how Congress often provides regulatory agencies with broad, general mandates, and how regulatory agencies employ significant discretion in designing important policies often without much public attention. DeMuth is currently a distinguished fellow at the Hudson Institute, and previously the Administrator of the Office of Information and Regulatory Affairs at OMB and President of the American Enterprise Institute.

DeMuth also noted that, despite common perceptions, growth in regulations has been a bipartisan trend.

Regulatory growth, according to DeMuth, is rooted in the unchecked power of the executive branch. At the seminar, DeMuth offered two proposals to reform the regulatory process, both of which constrain opportunities for the executive branch to act unilaterally.

The first proposal would elevate the role of the judiciary by requiring a formal cost-benefit analysis of all regulatory actions subject to judicial review. Many regulatory agencies are currently required to analyze the costs and benefits of the regulations under their organic statutes and executive orders and show that the benefits of the identified regulatory option maximizes net social benefits among the available choices.

The quality of these analyses varies and, in fact, some regulations go forward even with costs exceeding benefits. DeMuth argued that judicial review would improve the quality of cost-benefit analysis, make regulatory policy more transparent and analytical, and reduce the influence of interest group politics.

The second proposal would increase the role of Congress in regulatory policy. Under REINS Act (the Regulations from the Executive in Need of Scrutiny Act, H.R. 10 in this Congress), major regulations (with an impact of at least $100 million annually) would need to be approved by both houses of Congress through an expedited vote before they take effect. While some people believe that this proposal could result in Congressional micromanagement of regulatory policy, DeMuth said this is an inflated worry.

He countered that this proposal could bring the legislature back into a position of regulatory responsibility, bridge some of the political divisions on regulatory issues, and improve regulatory policy over time.

The seminar is part of a series of six seminars sponsored this spring by the Regulatory Policy Program (RPP) at the Mossavar-Rahmani Center for Business and Government. The series will explore two themes: the role of cost benefit analysis in regulatory policy and new directions in financial regulation. RPP serves as a catalyst and clearinghouse for the study of regulation across Harvard University. The program's objectives are to cross-pollinate research, spark new lines of inquiry, and increase the connection between theory and practice.

picture of Christopher DeMuth at a podium

Christopher DeMuth, distinguished fellow at the Hudson Institute, and former administrator of the Office of Information

Photo Credit: Victoria Groves

Regulatory growth, according to DeMuth, is rooted in the unchecked power of the executive branch.

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