Highlighting the Benefits in Cost-Benefit Analysis

Over the past several years, the conversation about regulatory protections that safeguard the environment, worker safety, and the health and welfare of American families has focused almost exclusively on the monetary costs to affected businesses rather than on the benefits they provide to everyday citizens. Conservatives repeat false or exaggerated cost estimates and overblown anti-regulatory rhetoric. And too often, news articles fail to report on the benefits of the standards and safeguards they are criticizing, making for a very one-sided public discussion.

Yet the benefits of public protections are extensive. The air we breathe and the water we drink is significantly freer from toxins than 40 years ago. There are fewer foodborne illnesses, toxic toys, and unsafe drugs. Children have higher IQs because there is less lead in the environment. Asbestos is rarely used in construction, dramatically reducing the risk of lung disease to workers. Toxic polychlorinated biphenyls (PCBs), used in an array of industrial and consumer products before 1972, have been banned. Congress passed laws authorizing regulatory agencies to protect the public from all these environmental and public health hazards because businesses failed to act when public health risks were identified.

For most regulations, a particular set of producers bear the costs of implementing health and safety standards while a broad and diffuse group of citizens receives the benefits. Because of this, those businesses affected by regulations often complain loudly about the economic impact of safety standards and fund lobbyists to represent their interests in Washington while the public rarely participates in regulatory debates. Too often, when federal agencies consider new safeguards, the public is unaware of the deaths, injuries, and illnesses the proposed protections will help avoid.

In a new Watcher series, OMB Watch will carefully examine the benefits of standards and safeguards. Our goal is to redirect the conversation from “the costs to business interests” toward a focus on the benefits of regulations to everyday Americans. We feel the inside-the Beltway preoccupation with monetizing costs and benefits has obscured the human side of regulation. We will be highlighting the benefits side of the debate.

To illustrate how little attention is paid to understanding the benefits of public protections, OMB Watch staff reviewed cost-benefit analyses of 18 rules from a variety of agencies to see if an average person could find and understand the information on which agencies are required to base their decisions.

In this first phase of work, our most significant and surprising finding was how difficult it is for a lay person to find the estimated benefits of any government regulation. It is almost impossible for someone not schooled in the regulatory process to find benefits information.

Where Are the Benefits?

Tracking down cost-benefit studies on agency websites is like a complex game of "Where’s Waldo?" Since the mid-1970s, a variety of executive orders have required that agencies weigh the costs and benefits of their proposals before regulating. Although regulatory agencies have been completing these cost-benefit analyses for decades, they are nearly impossible to find.

Agency websites house the information on a maze of links and department pages. Every agency site looks different, so the ease or difficulty in accessing cost and benefit information varies, too. Beyond individual agency websites, there’s a short list of potential sites where one might think a person could find a cost-benefit study or information about benefits. Our research suggests that the practical utility of each is limited.

We started looking for benefit information at the Office of Information and Regulatory Affairs (OIRA) website. After all, this office has the authority to determine whether the costs of federal rules are justified by their benefits, so we thought OIRA would post benefit information on each rule it reviews. Reginfo.gov is OIRA’s main website for regulatory review information. Although the site is visually appealing, a visitor cannot find information on a rule without knowing its proper name (which can be incredibly long, convoluted, and non-intuitive) or its Regulatory Identification Number (RIN). Once you find the rule’s page, Reginfo.gov provides a description of the rule and a link to the Government Printing Office’s text file (not a PDF) of the rule’s Federal Register entry. The site, however, provides no information on the benefits of a rule.

Next, we tried to find benefit information on Regulations.gov, the government’s electronic docket office for rulemaking. The site provides an electronic portal for submitting comments on rules and links to comments and other data in the rulemaking record. Again, the interface is quite pleasing to the eye but is of limited use in tracking down benefits information.

Regulations.gov has a docket page for each rule that houses all the documents used to support the rule. We hoped the docket page would have information on the rule’s costs and benefits. But, to access a rule’s docket page, you need the rule’s docket number, which is different from the RIN number on Reginfo.gov. You obtain the docket number from either the agency or a Federal Register notice. With that information, you can access the rule’s docket page and try a keyword search to find a cost-benefit analysis.

However, there is no standard designation or label for a cost-benefit analysis, which makes conducting such a search difficult. Some agencies refer to cost-benefit analyses as Regulatory Impact Analyses, while others refer to them as Economic Analyses. Some agencies have two documents that evaluate costs and benefits separately. (This makes playing up the costs or playing down the benefits easier and makes it much more difficult for the average person to do his or her own independent comparisons of the available data.) If you don’t know what the agency called a particular analysis, you have to scroll through all the comments on a rule – sometimes thousands of them – and search each one to see if it includes the information you want.

Occasionally, an agency seemed to try to make it easier to find benefits information on Regulations.gov. Sometimes, an agency summarized its cost-benefit analysis in the Federal Register and included the docket number reference for the cost-benefit study on which it relied, making it easier to find the study on the docket page. However, this was unusual. Scrolling through the docket page could turn up dozens of documents, some prepared by industry and others prepared for the agency, all purporting to analyze the costs and benefits of a particular proposed rule. Sometimes, it was hard to identify which study was used as the basis for the agency’s action.

Consider the following example illustrating how difficult it is to find information on regulatory benefits. The Occupational Safety and Health Administration (OSHA) requires chemical manufacturers to provide workers with Material Safety Data Sheets that describe chemical hazards of the materials that they work with every day. The agency recently revised the way it requires businesses to inform workers about these hazards in order to “harmonize” the way U.S. businesses and those in other countries operate. Outgoing OIRA Administrator Cass Sunstein touted this regulatory action as yielding substantial “net benefits.”

Now, suppose an auto worker wanted to learn about how this rule change benefited the workers in her plant. If she were to go to OSHA’s website and search for Hazard Communication (the actual name of the standard), she would get a page that tells her about the recent revisions and includes a link to the Federal Register. The standard itself contains a table of contents, so she might scroll down to find a section on OSHA’s “final economic analysis.” OSHA even includes a reference to the four different economic analyses it relied on when adopting the rule and a link to Regulations.gov with the rule's docket number, making it easier to find.

However, the Hazard Communication standard docket includes 27 pages of comments, and each page has 25 entries. None of the entries are numbered, so the docket references included in the Federal Register are not entirely helpful in finding information on Regulations.gov. Searching within the docket for “benefit” reduces the search results to only six pages of comments, none of which are labeled “cost-benefit analysis.”

Ultimately, the auto worker would not be able to readily find a discussion of the benefits of the Hazard Communication standard, even though OSHA tried to point her in the right direction. Even if she were able to find the right analyses or studies related to the rule change, it is uncertain whether the materials would clearly tell her to what extent the Hazard Communication standard will help prevent her and her coworkers from suffering job-related illnesses and injuries.

American citizens cannot meaningfully participate in debates about the rules that could directly and critically affect their lives if they can’t access the information and analyses on which decisions on rules are based. Most people interested in rulemaking – at least those outside the Beltway – have limited time each day for civic engagement. If information on costs and benefits is the basis for government decision making (we do not believe that they should drive decision making), then that information should be publicly available to citizens.

Our work shows that the time and effort necessary to become informed about federal rulemaking would overwhelm most Americans. Business complaints about regulation already dominate the debate about over health, safety, environmental, and economic safeguards. If few citizens can find the information necessary to meaningfully participate, then self-interested businesses that want weaker regulations will have an even louder voice when public comments are gathered.

If policymakers continue to emphasize the monetary costs and benefits of a rule as a measure of its worth, then at a minimum, information on the estimated benefits of a rule and how the benefits were calculated (including the monetary value of the benefits of the rule) should be readily available to the public – presented in a form that interested citizens can understand. Toxicology or engineering studies should be summarized in clear language so that affected citizens know what is at stake.

Our experience demonstrates that it takes a tenacious investigator to find the estimated benefits of many rules. And, once the benefits information is found, it can require a Ph.D. to decipher the results. Since OIRA is the final arbiter of cost-benefit analyses, it should maintain a central website that provides links to agencies' assessments of the costs and benefits of proposed and final rules, summaries of what those costs and benefits represent, and plain-language explanations of the issues that anyone can understand.

The remainder of this series will explore some of the practices individual agencies and OIRA use to calculate benefits and propose ways to improve both the calculations and the way they are presented and made available to the public. Our goal is to highlight the human and social benefits of our regulatory system. After all, protecting the health and safety of the American people is the reason the system was put in place. This fact seems to have been lost in recent policy debates.

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