2014 OMB Report Shows Substantial Public Protection Benefits Achieved at Low Cost

With little fanfare late last month, the Office of Management and Budget released its 2014 draft annual report to Congress on the costs and benefits of regulations. The report, required under the Regulatory Right-to-Know Act, summarizes the benefits and costs of major federal rules – those anticipated to have an annual economic impact of $100 million or more and subject to review by the Office of Information and Regulatory Affairs (OIRA) at OMB – for the 2013 fiscal year, as well as for the previous decade. The report finds that once again, the nation achieved significant health, safety, environmental, and other benefits at a relatively low cost.

Key Findings for 2013

Focusing on seven major rules that impact the economy, for which both cost and benefit data were available, the report found that the rules issued in fiscal year 2013 resulted in benefits totaling $31 to $81 billion (in 2010 dollars), dwarfing costs estimated at $2 to $3 billion, for a net benefit of $29 to $78 billion. The rules examined included three adopted by the U.S. Environmental Protection Agency (EPA), two from the Department of Energy, and one each from the Departments of Transportation and Health and Human Services. The vast majority of the benefits can be attributed to EPA’s rule to require large industrial facilities to limit emissions of toxic air pollutants.

In the chart above, the solid red and blue bars represent the midpoints of the ranges of costs and benefits of rules. The lines drawn through the middle of each bar show the full estimated cost and benefit ranges.

Key Findings for 2004 - 2013

The report also analyzed the cost and benefits of 116 major regulations adopted between fiscal years 2004 and 2013, finding that the total benefits from these rules ranged between $262 billion to just over $1 trillion (in 2010 dollars), while costs were estimated at $69 to $102 billion, for a net benefit of $193 to $940 billion. The EPA’s 24 air pollution rules accounted for between $162 and $840 billion in benefits, or 63-82 percent of the total benefits, while costing $38 to $45 billion, accounting for 46-56 percent of the total costs.

As shown in the figure below, the benefits of regulations exceeded costs for each year of the past decade, with benefits vastly exceeding costs during seven of the past ten years. But the actual benefits are likely much higher because many cannot be quantified or easily translated into dollars and cents.

In the chart above, the solid red and blue bars represent the midpoints of the ranges of costs and benefits of rules. The lines drawn through the middle of each bar show the full estimated cost and benefit ranges.

OMB excluded the substantial benefits (as well as costs) associated with EPA’s 2006 revision to the national air quality standards for particles (particulate matter) in its accounting to avoid double counting the benefits and costs from the revised standard with various regulations that reduce particle pollution and contribute to achieving the standard. The draft report indicates that future reports may likewise omit the benefits and costs associated with revisions to other national air quality standards for the same reason. Also excluded were several rules issued during the past decade that were later overturned by court decisions.

OMB Recommendations

In addition to reviewing the benefits and costs of past federal standards and safeguards, OMB’s draft report provides multiple recommendations for reforms that it believes will lead to more efficient and cost-effective rules.

As in previous reports, OMB recommends agencies continue to perform regulatory reviews, or "look-backs," of existing rules as detailed in Executive Order 13563. While retrospective review may provide valuable information to agencies about the actual benefits and costs of existing regulations, continually looking back at old rules requires agencies to divert precious staff time and resources that would be better spent looking forward and addressing outstanding and emerging risks, completing rules already in the pipeline, and performing critical enforcement activities.

In the current draft report, OMB highlights its role in the negotiations between the United States and the European Union to forge a Trans-Atlantic Free Trade Agreement (officially called the Transatlantic Trade and Investment Partnership) as an opportunity to address conflicting standards. Executive Order 13609 asks agencies to "address unnecessary differences in regulatory requirements between the United States and its major trading partners" as they conduct retrospective reviews of existing rules. However, the focus of harmonization to date has been on eliminating or severely weakening standards that impose costs on businesses. Making regulatory decisions based on trade-related factors will compromise public safeguards while providing little economic benefit.


It has become all too common to see references to the current administration’s “regulatory tsunami,” focusing on the number of pages of regulations in the Federal Register (as though this is somehow an appropriate measure of regulatory burdens) and an exclusive focus on the costs of regulations. The draft OMB report underscores that providing essential public health and welfare protections is not only good public policy, but also provides substantial economic benefits to society. Hopefully, OMB will highlight this key finding in the final version of the report and in future reports to Congress on regulations. 

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