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Dateline: August 4, 2004

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).

"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 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."

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