Archive

Improving Regulatory Systems

Recommendations and Actions

EXECUTIVE SUMMARY

--Chocolate makers had trouble determining how to comply with the Occupational Safety and Health Administration's noise standards without running afoul of the Food and Drug Administration's hygiene standards.

--The 1982 Surface Transportation Assistance Act required the Department of Transportation to force trucks to carry "splash and spray suppression devices"--that is, fancy mud flaps--to curtail the road spray on cars traveling nearby, although tests showed that the flaps did not improve car drivers' visibility and, thus, road safety.

--Only the intervention of senior Transportation Department officials prevented the National Highway Traffic Safety Administration (NHTSA) and the Federal Aviation Administration, both located within the department, from imposing regulations that would have forced parents traveling by airplane to carry along two child seats--one for the plane ride, a second for car rides taken during the trip.

Federal regulations, of course, are not supposed to create problems like that for individuals, businesses, and state, local, and tribal governments. But such problems are not surprising, considering the number of regulations on the books. Nonetheless, although Americans dislike regulations in general, they support specific ones to promote health, safety, environmental, and other goals.

THE EFFECTS OF REGULATION.

Regulations affect virtually every American citizen, household, business, institution, community, and level of government. They reduce the amounts of lead in the air we breathe; ensure that cars have seat belts, air bags, safety glass, and brakes that work; require content and nutrition labeling of foods; establish eligibility for agricultural, educational, and small business loans and grants; and define distinctions between legitimate and deceptive advertising, fair and unfair business practices.

And, in fact, regulatory programs have produced real results. The NHTSA's crash-worthiness and brake standards have saved at least 112,000 lives in the last 25 years, while the Consumer Product Safety Commission helped to cut in half the annual number of electrocutions involving consumer products. Nevertheless, the federal regulatory system is not working as well as it should. Many federal regulations impose too many constraints on individuals and businesses (such as by unnecessarily using command-and-control structures that tell regulated parties precisely what to do) while still failing to accomplish the goals for which they were imposed.

The task at hand is straightforward, but challenging. We need to give the public the protection and services it expects at a reasonable cost, while eliminating ineffective and avoiding unnecessarily burdensome regulations. And we must do so at a time when most agencies will face the dual, and seemingly contradictory, pressures of providing more services with fewer resources.

Generally speaking, regulators and Congress should employ regulations more selectively and sometimes use other approaches to accomplish their goals, such as providing more information to consumers. When opting for regulations, regulators should use market-based, performance-oriented or other innovative approaches, thus giving affected parties more freedom to meet the goals behind the rules. The government should better educate its regulators about possible tools at their disposal. And regulators should communicate more with the public and other interested parties and rely more heavily on scientific data.

THE REGULATORY PROCESS.

Regulations are directives, standards, or procedures, supported by penalties or other sanctions, that are designed to shape the behavior of individuals, businesses, and state, local, and tribal governments..[Endnote 1] The federal government employs regulations for much of what it does--distributing grants, benefits, contracts, and other subsidies; protecting bank depositors and imposing other financial service requirements; and enforcing health, safety, and environmental laws.

The development of regulations involves four key players: (1) Congress passes legislation to authorize or require an agency to issue regulations; (2) the executive branch decides the form and extent of regulations; (3) interested parties may comment on proposed regulations or challenge final ones in court; and (4) federal courts, which review regulations that are challenged in lawsuits, sometimes order agencies to revise the challenged regulations.

The number of regulations that agencies issue varies dramatically. Agencies may issue just a few regulations a year or thousands. While the time that agencies devote to developing regulations also may vary widely, they will typically take 12-18 months to develop a proposed regulation after a statute is enacted, and another 12-18 months to issue a final regulation.

The process by which agencies issue regulations is governed by numerous statutes, executive orders, and internal agency policies and requirements. While the Administrative Procedure Act establishes a simple, straightforward process, also important are such laws as the Paperwork Reduction Act, Regulatory Flexibility Act, Federal Advisory Committee Act, Negotiated Rulemaking Act, and National Environmental Policy Act. In addition, such laws as the Clean Air Act and the General Education Provisions Act impose procedural requirements for certain specific regulations.

Agencies have developed their own lengthy review procedures, designed to ensure coordination among agency and department offices. The full review process--within the agency, department, and administration--normally is repeated twice, first when the regulation is proposed and then again when it is finalized.

Executive orders also play a major role in shaping regulations. Executive orders require agencies to conduct specific analysis (such as a cost-benefit analysis), establish centralized review by OMB of proposed and final regulations, and establish mechanisms to coordinate and plan executive branch rulemaking activities.

IMPROVING THE REGULATORY PROCESS.

The President, agencies, and Congress need to take a series of steps to improve the process to accomplish regulatory goals in a cost-effective manner.

First, to help agencies share information and coordinate their approaches to regulatory issues, the President should create an interagency regulatory coordinating group (RCG). This group should include political appointees or their designees from key domestic regulatory agencies and certain key White House advisors. This group should, within a year, oversee the development of a manual of regulatory approaches.

Second, the President should direct agency heads to use market-oriented and other innovative approaches to regulation whenever they are appropriate. For example, rather than order coal-fired power plants to install scrubbers (a type of pollution control equipment) the government might order such plants not to emit more than a given number of pounds of sulfur dioxide per million BTU (British thermal unit) and let them decide how to meet that requirement.

Third, in the hopes of encouraging consensus-based rulemaking, the President should encourage agencies to use negotiations to develop regulations--i.e., the "reg neg" process. This process allows representatives of an agency to work with affected interests in a cooperative effort to develop regulations.

Fourth, the President and agencies should take steps to enhance public awareness and participation both in developing and implementing regulatory programs. The President should encourage agencies to convene focus groups, hold more useful public hearings, and use other tools by which to involve those who are affected by their regulations. Agencies also should consider using information technology more aggressively.

Fifth, agencies will streamline their internal rulemaking processes, including recommending whether legislative changes are needed. Agencies will begin to experiment with "direct final" rulemaking, which will sharply reduce the time needed to implement non- controversial regulations.

Sixth, in enforcing regulations, the President should strongly encourage agencies to use alternative means of dispute resolution--which refers to a collection of techniques that are designed to help disputing parties resolve conflicts in mutually agreeable ways. Such "ADR" techniques could help nourish more cooperative relations between regulators and regulated parties.

And finally, among its other recommendations, this report suggests that agencies concentrate their regulatory resources on the most serious environmental, health, and safety risks and engage in long-term regulatory planning; that the President order relevant agencies to create science advisory boards as tools to use scientific data more widely in agenda-setting and decision making; that agencies establish technical drafting services for congressional committees and subcommittees; and that the administration take steps to provide more training for agency heads and staff.

ENDNOTE

1. For this report, "regulation" is defined to exclude those regulations affecting how the government runs itself (e.g., personnel, budget, and procurement), which are addressed in other National Performance Review Accompanying Reports.

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