Do federal regulations -- the rules enforcing the laws passed by Congress -- cost taxpayers more than they are worth? Answers to that question can be found  in a first-ever draft report on the costs and benefits of federal regulations just released by the Office of Management and Budget (OMB).

The report includes benefit-cost information by agency program as well as by agency. A copy of the report can be viewed at: http://www.whitehouse.gov/omb/fedreg/2003draft_cost-benefit_rpt.pdf.

"More detailed information helps consumers make intelligent choices on the products they purchase. By that same token, knowing more about the benefits and costs of federal regulations helps policymakers promote smarter regulations," said Dr. John D. Graham, OIRA Administrator. 

Benefits far exceed costs 
The draft report estimates that major federal regulations provide benefits of from $135 billion to $218 billion annually, while costing taxpayers between $38 billion and $44 billion. 

Federal regulations enforcing the EPA's clean air and water laws accounted for the majority of the regulatory benefits to the public estimated over the last decade. Clean water regulations accounted for benefits of up to $8 billion at a cost of $2.4 to $2.9 billion. Clean air regulations provided up to $163 billion in benefits, while costing taxpayers only about $21 billion. 

Costs and benefits of some other major federal regulatory programs included:

• Energy: Energy Efficiency and Renewable Energy
  Benefits: $4.7 billion
  Costs: $2.4 billion
  
  
• Health & Human Services: Food and Drug Administration
  Benefits: $2 to $4.5 billion
  Costs: $482 to $651 million
  
  
• Labor: Occupational Safety and Health Administration (OSHA)
  Benefits: $1.8 to $4.2 billion
  Costs: $1 billion
  
  
• National Highway Traffic Safety Administration (NTSHA)
  Benefits: $4.3 to $7.6 billion
  Costs: $2.7 to $5.2 billion
  
  
• EPA: Clean Air Regulations
  Benefits: $106 to $163 billion
  Costs: $18.3 to $20.9 billion
  
  
• EPA Clean Water Regulations
  Benefits: $891 million to $8.1 billion
  Costs: $2.4 to $2.9 billion

The 37-page full draft report contains detailed cost and benefit figures on dozens of major federal regulatory programs, as well as the criteria used in making the estimates.

OMB recommends agencies consider costs of regulations
Also in the report, OMB encourages all federal regulatory agencies to improve their cost-benefit estimation techniques and to carefully consider costs and benefits to taxpayers when creating new rules and regulations. Specifically, OMB calls on regulatory agencies to expand use of cost-effectiveness methods as well as benefit-cost methods in regulatory analysis; to report estimates using several discount rates in regulatory analysis; and to employ formal probability analysis of benefits and costs for rules based on uncertain science that will have more than a $1 billion-dollar impact on the economy.

Agencies must prove need for new regulations
The report also reminds regulatory agencies they must prove that a need exists for the regulations they create. When creating a new regulation, OMB advises, "Each agency shall identify the problem that it intends to address (including, where applicable, the failures of private markets or public institutions that warrant new agency action) as well as assess the significance of that problem." 

OMB seeks public comment
The draft report also calls for public comment on how federal regulatory agencies are currently assessing and managing emerging risks to human health, safety, and the environment, particularly those risks that are subject to substantial scientific uncertainty. For future homeland security regulations, the report seeks public comment on how agencies and OMB can do a better job of identifying, quantifying, and weighing the consequences of the rules. The draft report is required by the Regulatory Right to Know Act and it will now be subjected to a 60-day public comment period, peer review by academic experts, and a formal process of interagency review.

Comments can be emailed to OIRA _ECON _GUIDE@omb.eop.gov or faxed, with the title ‘‘Comments on Draft Guidelines" identified in the transmittal page, to (202)395 –7245.

Comments can also be sent via regular mail to:

Lorraine Hunt
Office of Information and Regulatory Affairs,
Office of Management and Budget
NEOB, Room 10202,725 17th Street, NW.
Washington, DC 20503