Each presidential-oversight effort had been more ambitious than the last. For his part, President Carter had required agencies to create a publicly available “regulatory impact analysis” for each new regulatory proposal, which was to “contain a succinct statement of the problem; a description of the major alternative ways of dealing with the problem that were considered by the agency; an analysis of the economic consequences of each of these alternatives and a detailed explanation of the reasons for choosing one alternative over the others.”
Members of the Reagan transition, however, identified what they took to be two shortcomings of the Carter system. First, even though copies of the agencies’ analyses were to be shared with OMB, there was no centralized quality control. The rigor of any agency’s analysis was pretty much left up to the agency. Moreover, although agencies were required to analyze their proposals for rule making, they were not bound in their choice of regulatory strategy by the results of their analysis. Specifically, agencies were not required to use their analyses to maximize the ratio of regulatory benefits to regulatory costs.
The lawyers and economists on the Reagan team, working with James J. Tozzi, a veteran federal economist who had helped implement the Carter-administration reforms, came up with a draft order to remedy these two supposed defects. Henceforth, agencies would be told that to the extent permitted by law, they would have to hold off on the publication of any significant new rule until OMB was satisfied with the quality of the cost-benefit analysis, providing that centralized quality control the process had lacked. Moreover, to the extent an agency’s statutes permitted, each agency would be bound to pursue its regulatory objectives in the most cost-effective way.
The Reagan administration had one obvious legal problem with its potential new strategy: Congress had never authorized any centralized federal office to oversee the mass of federal regulation. Congress hands rule-making assignments to individual agencies, not to OMB. Hence, it would be the job of career lawyers like myself, along with our supervisors, to meld the new system as much as possible with laws that Congress had already passed.
One part of doing so turned out to be straightforward. Congress in 1980 had created within OMB a new division called the Office of Information and Regulatory Affairs, or OIRA. OIRA’s statutory assignment was to police the requirements that individual agencies might impose on the public for reporting information to the government. Making OIRA the headquarters for reviewing regulatory cost-benefit analyses would therefore take advantage of an office Congress had already approved.
A second part required more care. There are a variety of technical ways in which the Reagan order was polished to avoid any conflicts between the order and existing law, but one was of foundational importance: The career lawyers agreed that presidents had constitutional authority to demand regulatory analyses from agencies, because Article II of the Constitution explicitly authorizes presidents to obtain information from government departments. But, at the same time, we also argued that presidents had no constitutional authority to draft agency regulations for them. That is, we deemed it legally crucial that each agency’s final decision-making authority would remain formally intact. The Justice Department’s memorandum approving the new requirement of cost-effectiveness was conditioned on precisely this understanding:
The requirement would not exceed the President’s powers of “supervision.” It leaves a considerable amount of decisionmaking discretion to the agency. Under the proposed order, the agency head, and not the President, would be required to calculate potential costs and benefits and to determine whether the benefits justify the costs. The agency would thus retain considerable latitude in determining whether regulatory action is justified and what form such action should take. The limited requirements of the proposed order should not be regarded as inconsistent with a legislative decision to place the basic authority to implement a statute in a particular agency.
The new supervisory role carved out for OIRA attracted a variety of criticisms in the ensuing decades. Under pressure from Congress, the Clinton administration updated the original Reagan charter to make it rhetorically more balanced in its philosophy of regulation and more transparent in its operation. The OIRA-enabling order now explicitly acknowledges: “Nothing in this order shall be construed as displacing the agencies’ authority or responsibilities, as authorized by law.” But criticized or not, it turns out that both Republican and Democratic presidents from Ronald Reagan through Barack Obama have administered the OIRA program within the same general framework that Reagan’s people established. All presidents, regardless of party, value oversight of the regulations issued by the executive branch on their watch. OIRA cost-benefit review truly is the most important innovation in federal administration in the past half century, however little the public may notice it.