OMB Annual Report Shows Regulations' Benefits Exceed Costs

by Katie Greenhaw, 6/28/2011

On June 24, the Office of Management and Budget (OMB) released its annual report on the costs and benefits of major federal regulations (those with an annual effect of $100 million or more on the economy) reviewed by OMB over the last ten years. OMB issued the 2011 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities in compliance with the Regulatory-Right-to-Know Act, which requires OMB to submit to Congress an annual report on the costs and benefits of federal regulations for the previous year.

The report concludes, consistent with previous annual reports, that the benefits of regulations greatly exceed the costs. In the aggregate, the annual benefits of major federal regulations reviewed from October 1, 2000, to September 30, 2010, are between $132 billion and $655 billion, while the estimated annual costs are between $44 billion and $62 billion.

OMB acknowledged the difficulties in attempting to quantify or monetize the costs and benefits of regulations, emphasizing that the figures have “significant limitations.” In addition, “there is substantial variation across agencies in the total net benefits produced by rules,” the report said.

The highest costs and benefits come from the U.S. Environmental Protection Agency’s (EPA) air pollution rules. Specifically, the Clean Air Fine Particle Implementation Rule has the highest costs and benefits of any rule, with estimated annual costs of $7.3 billion and benefits ranging from $19 billion to $167 billion. The benefits, which far exceed the costs, include prevention of premature deaths, heart attacks, and respiratory illness among Americans.

Echoing President Obama’s Executive Order 13563, "Improving Regulation and Regulatory Review," OMB emphasized the importance of "ensuring that regulation is undertaken in a way that promotes the goals of economic growth, innovation, competitiveness and job creation." The report also placed importance on "ensuring that regulation is evidence-based and data-driven."

The report is currently being reviewed by the House Committee on Oversight and Government Reform, according to BNA news service (subscription required).  Although many House Republicans claim that regulations are too costly and negatively impact jobs, this report presents findings consistent with recent independent research from the Economic Policy Institute (EPI) concluding that the benefits of regulation greatly exceed the costs. The EPI research also indicates that "regulations do not tend to significantly impede job creation."

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