On June 23, several senators outlined proposals for revamping the regulatory system, a system they blame for the nation's economic problems despite evidence to the contrary. Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs (OIRA), told the senators that the proposals were largely unnecessary and could have harmful unintended consequences.

The exchange between Sunstein and the senators took place at a hearing of the Senate Committee on Homeland Security and Governmental Affairs entitled "Federal Regulation: A Review of Legislative Proposals."

Sen. Joseph Lieberman (I-CT), chair of the committee, called the hearing to allow fellow senators to discuss their proposals for how to change the regulatory system. One of the few acknowledgements that regulations have benefits to society came from Lieberman in his opening comments when he said, "A nation without regulations would be a nation at risk." Smart regulations, he noted, help businesses by providing predictability and accountability.

The hearing's first panel featured Ranking Member Susan Collins (R-ME) and Sens. Olympia Snowe (R-ME), Rob Portman (R-OH), Pat Roberts (R-KS), David Vitter (R-LA), Rand Paul (R-KY), and Mark Warner (D-VA). They presented various ideas that would create more obstacles in the regulatory process and make it harder for agencies to fulfill their mission to protect the American people. Most of these proposals are part of the anti-regulatory agenda of Big Business associations like the U.S. Chamber of Commerce.

The proposals would erect more procedural hurdles in a rulemaking process that is already staggeringly complex. The bills would, among other things, duplicate analyses federal agencies are already legally required to perform and expand the list of analyses to potential impacts from indirect costs and to guidance documents. Other proposals call for allowing judicial review of individual parts of the regulatory process, imposing regulatory "budgets" on agencies, and expanding the reviews of rules OIRA undertakes to include rules promulgated by independent agencies like the Securities and Exchange Commission, the Federal Trade Commission, and the Federal Communications Commission – agencies designed by Congress to function independently from presidential control.

Sunstein was the lone witness on the second panel. He argued that rules have both costs and benefits and that under both Republican and Democratic administrations, the benefits of rules (economic, health, and safety) have outweighed the costs.

He stated that the Obama administration has taken steps to make the regulatory process more cognizant of harsh economic times and emphasized the need for better, evidence-based analyses of potential and existing rules through Obama's Jan. 18 regulatory executive order. That order, combined with laws already in existence, gives the administration the tools it needs to effectively control the flow of regulations and have a sound process, he said.

Executive Order 13563 directed federal agencies to develop and submit preliminary plans to OIRA by May 18. The plans meet the requirement in section 6(b) of the order for each agency to identify how it "will periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency's regulatory program more effective or less burdensome in achieving the regulatory objectives."

Under questioning from Lieberman and Portman, Sunstein said he expected the final retrospective review plans to identify changes in rules that will lead to significant cost savings and reductions in paperwork burdens. A June 14 memorandum from Sunstein directs agencies to quantify these changes and to propose specific timelines for implementing the changes. Final plans are due to OIRA by Aug. 6.

Although he did not directly criticize the legislative proposals in detail, Sunstein noted that one idea that several senators proposed, judicial review of cost-benefit analysis, would likely have unintended consequences and that the courts do not have the "skill set" to deal with the technical complexities of economic tools. Dealing with these issues in the courts would tie up regulatory and deregulatory actions in litigation and delay action.

Sunstein also called "deeply flawed" a report that many have been using to criticize the costs of the regulatory system. The report in question was commissioned by the Small Business Administration's Office of Advocacy and was written by economists Nicole and Mark Crain. It pegs the annual cost of regulations at $1.75 trillion, a figure which many on Capitol Hill and many senators in the hearing have repeated as they argue that federal agencies should halt or delay rules that protect our health, workplaces, communities, and environment. Sunstein noted the figure had become an "urban legend."

The study has been widely discredited by the Congressional Research Service, the Economic Policy Institute, and the Center for Progressive Reform. Even the Crains themselves have said that the number was "not meant to be a decision-making tool for lawmakers or federal regulatory agencies." Austan Goolsbee, the Chairman of the Council of Economic Advisers, wrote in a White House blog post on June 23 that the report's figure was "utterly erroneous."

Noticeably absent from the hearing were perspectives from the small business and non-governmental public interest communities; representatives from those communities were not invited to testify. To help fill the void, the Coalition for Sensible Safeguards, of which OMB Watch is a co-chair, held a press call the day before the hearing that featured powerful stories from a small business leader, a victim of foodborne illness, and a nurse.

All of the call's participants made clear that regulations are necessary and valuable; that protecting the American people and preventing harm are key parts of an agency's mission; and that rulemaking delays and the absence of strong standards and effective enforcement take a great toll on everyday people, often resulting in serious injuries, illnesses, and death.

Lieberman's committee is expected to work to combine some of the ideas outlined in the hearing into new legislative proposals. Several senators indicated a desire to add their own ideas to the mix, although they have not yet formulated drafts of bills.