This post is part of a symposium on Beth Popp Berman’s Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy. Read the rests of the posts here.
A central observation of Elizabeth Popp Berman’s illuminating book, Thinking Like an Economist, is that Democrats have hewed more closely to what she calls “the economic style of reasoning” than Republicans. Republicans, she finds, only adhere to economic reasoning when it suits their larger political agenda, while Democrats cling to it even when it shrinks the policy space available to them.
Nowhere has this dynamic been more evident, or more painful to watch unfold, than in the approach that presidents over the last 50 years have taken with respect to regulatory policy. Presidents from both parties have embraced a White House-driven approval process for the regulations that they identify as important, and have required the use of cost-benefit analysis (or similar economic frameworks) to secure White House approval. Republican and Democratic presidents have differed, however, in their willingness to sacrifice economic purity even when it disrupts their larger policy agendas.
The cost-benefit criterion has generally aligned with Republican political priorities, disallowing rules they didn’t like anyway. When it hasn’t, Republican administrations have tended to ignore this criterion, quietly deep-sixing rules even when they pass a cost-benefit test. I can think of only two cases in the past 20 years when Republicans approved rules primarily on the basis of a cost-benefit test: the labeling of trans fats on food and the reduction of air pollution from nonroad engines. The Republicans’ tendency to dismiss the economic style of reasoning when it does not suit their policy agenda reached an absurd apex during the Trump administration, when President Trump instructed agencies to repeal two existing rules for every one issued and imposed limits on regulatory activity that were based on costs alone. In these directives, the “benefits” part of cost-benefit analysis simply dropped away.
Democratic presidents have been more foolishly consistent. They have often held on tight to economic analysis even when it disrupts their larger policy platforms. In the Obama administration, for example, the Office of Information and Regulatory Affairs (the White House office that oversees the regulatory process) delayed, weakened, or rejected dozens of rules – rules concerning energy efficiency, ozone pollution, chemicals regulation, food safety, and more – that seemed to align comfortably with the administration’s own expressed policy agenda.
Perhaps recognizing the potential tension between economic thinking and their policy agendas, the last three Democratic presidents have, early in their administrations, signaled a desire to significantly reform the process of regulatory review. President Clinton issued an executive order – still in effect today – that kept the cost-benefit criterion of a Reagan-era order but promised stricter deadlines, clearer lines of authority, and more attention to regulatory benefits that are difficult to quantify and monetize. Yet the deadlines are frequently ignored, the clear lines of authority have vanished entirely, and many regulatory benefits still count for little or nothing because they cannot be pressed into the tight container of quantitative cost-benefit analysis. President Obama, too, issued an executive order that gestured toward reform of the process, but his administration actually deepened the hold of economic thinking on the regulatory process. One of President Biden’s first acts in office was to instruct the Office of Management and Budget to develop recommendations for improving regulatory review, explicitly acknowledging the potential tension between meaningful action on his priorities of climate change and racial injustice and the economic style of thinking reflected in prior executive orders. At least publicly, however, no changes have emerged yet from this process.
It is possible, of course, for the Biden administration to pursue an ambitious regulatory agenda on climate change, racial injustice, and other pressing problems without formally amending the existing executive orders on regulatory review. Executive orders on regulatory review do not create legal obligations. In addition, no federal statute requires an administrative agency to submit a regulation to the White House for approval, and few statutes require quantitative cost-benefit analysis for agency rules. When it suits his policy aspirations, President Biden could borrow a page from the Republicans’ script and allow agencies to sidestep both the process for regulatory review and, where a statute does not require it, the cost-benefit criterion.
I hope President Biden will think bigger than this. The unbroken practice of White House regulatory review, across Democratic and Republican administrations, has persisted for so long that it has begun to change the law itself. For example, several years ago, the Supreme Court rejected the EPA’s decision to regulate toxic air pollutants from power plants under the Clean Air Act because the agency had not considered economic costs in deciding whether to regulate. In taking a narrow view of EPA’s authority under the statute, the Court relied in part on presidents’ longstanding practice of requiring cost-benefit analysis for agency rules. Lower courts have, in turn, relied on the Supreme Court’s decision in requiring consideration of economic costs in other regulatory contexts as well. An explicit withdrawal of presidential approval of this practice might begin to rebalance the scales and discourage further judicial distortions to statutes based on the presumed unimpeachability of economic thinking.
An express presidential reworking of regulatory review would, moreover, provide a model for future presidents to follow. Just as the broad outlines of President Reagan’s executive order systematizing the process of regulatory review are still visible in this process today, so too could a Biden executive order rethinking this process provide a template for future administrations. For fifty years, no U.S. President, of either party, has offered a vision of regulatory policy that does not accept the economic style of reasoning as a North Star. For Democratic presidents, this has been a missed opportunity to show what a regulatory agenda can look like if it puts rights, equality, power, democratic process, and ecological interdependence, rather than efficiency, cost-effectiveness, and markets, at the center.
Even if President Biden is not prepared to renounce the economic style of reasoning when it comes to regulation, he should direct OMB to revamp its guidance on cost-benefit analysis, known as Circular A-4, which spells out the agencies’ obligations in developing and evaluating regulatory actions. As it stands today, Circular A-4 reads like a training manual on neoliberal governance, treating federal regulation as a last resort after alternative options like economic incentives have been exhausted. The guidance has not been revised in two decades. Overseeing a major renovation of OMB’s guidance on cost-benefit analysis would mark a refreshing new moment in Democratic leadership on regulatory policy at the presidential level.
To help the President do this work, OIRA needs a leader, too. It will be difficult for OIRA to change its ways without a change in leadership. OIRA is currently being run by a long-time civil servant deeply immersed in the economic style of reasoning. While President Biden recently nominated NYU law professor Richard Revesz to serve in this role, no president has waited as long as President Biden did to nominate someone for this position, and the timing of a confirmation hearing and vote is uncertain.
I believe President Biden is the kind of president who is capable of breaking free of the economic style of reasoning and speaking, even in regulatory contexts, about rights, equality, power, democratic process, and ecological values. I have seen him do it. When President Clinton nominated Stephen Breyer for a seat on the Supreme Court, Biden, then a Senator and Chair of the Judiciary Committee, hired me to assist him in preparing for the confirmation hearings. Not long before, Breyer had written a book, Breaking the Vicious Circle: Toward Effective Risk Regulation, which endorsed the economic style of reasoning as a superior framework for regulating risks to health, safety, and the environment. The book severely criticized existing laws as irrationally requiring more protection than economic analysis would condone and proposed that we radically shift our priorities in regulating risks to humans and the environment. I briefed Senator Biden on the arguments of the book and their negative consequences for robust public protections. I wasn’t sure any of my points were landing with the Senator – until, in the hearing, he delivered these unscripted remarks, directed at Breyer:
I think it’s incredibly presumptuous and elitist for political scientists to conclude that the American people’s cultural values in fact are not ones that lend themselves to a cost-benefit analysis and presume that they would change their cultural values if in fact they were aware of the cost-benefit analysis. I have no doubt … people know that more people die of cigarettes than they do of other substances but they’ve concluded they’d rather have the money spent on research in other areas. We make those decisions every day, and I am delighted that as a judge, you are not going to be able to take your policy prescriptions into the Court.
In reforming our approach to regulatory policy, President Biden should think like a future-minded leader who takes seriously the noneconomic values embedded in the legislative programs entrusted to the executive branch for implementation. He should, in other words, think like a president, not an economist.