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Today I have a treat for you, an issue of BIG written by an anonymous government lawyer buried deep in the bowels of American bureaucracy. One of the reasons Americans are losing faith in our political institutions is because laws passed by democratically elected officials increasingly don’t matter. One of my favorite regulators, Rohit Chopra at the Federal Trade Commission, said explicitly, as a sort of challenge to the commission, that “FTC orders are not suggestions.”
Of course, laws and regulators that affect the powerful are increasingly suggestions, and that’s why we’re in a political crisis. This anonymous lawyer is going to lay out one of the key institutional mechanisms by which economists and corporate interests wreck our ability to actually have laws take effect once they’ve been passed.
His explanation of how bureaucracy works will show that we should be paying attention this Wednesday to an obscure nomination of a corporate lawyer, Paul J. Ray, to be head of an agency of economists, the Office of Information and Regulatory Affairs, or OIRA. Because OIRA is where power really lives in Washington. It’ll be interesting to see if any Senators show up; Democratic Presidential nominee Kamala Harris is on the relevant Senate committee.
Why Congress Couldn’t Outlaw Prison Rape
Prison rape is one of the most horrifying and abhorrent practices in American culture. Prison rape is pervasive, a form of soft torture so extensive it is the butt of endless jokes in popular culture (as John Oliver noted in a long segment on how Hollywood jokes about the practice). In 2003, Congress unanimously passed the Prison Rape Elimination Act, a bill directing the Attorney General to issue regulations detecting and eliminating prison rape in Federal jails. In 2012, Erich Holder finally did so.
Congress gave discretion to the Attorney General, but because of an obscure regulatory agency, Holder didn’t have the final word. Instead, the Department of Justice was required to conduct an extensive cost-benefit analysis of its proposed rule and submit it to a small group of economists in the White House for their thumbs up on whether the Attorney General would be allowed to finalize the rule.
This group of economists is located in an obscure agency called the Office of Information and Regulatory Affairs, or OIRA, staffed at the time by a close friend of Obama, legal legend Cass Sunstein. Most agencies wishing to put out a must draft an extensive Regulatory Impact Analysis (RIA) detailing the costs and benefits of the rule, justify the need for the rule to OIRA, and make any changes OIRA economists demand. In this instance, technocrats issued a 168-page RIA questioning how much money the rape victims would be willing to pay to avoid rape, or how much they would be willing to accept in exchange for being raped. (The estimates were $310k to $480k for an adult victim, and $675k for a juvenile victim, for the ‘highest’ form of sexual assault.)
In the end, the regulations put forward were cruel and weak, exempting immigration facilities and putting "tight restrictions on inmates who report rape.” It also removed the requirement that prisons actually *do* anything except have a plan to reduce prison rape. Failure to execute on the plan meant they’ll need another plan.
Nine years after Congress passed the bill and more than two years after DOJ began working on the prison rape rule, the status quo prevailed. Or worse. McClatchy found that rate of sexual abuse in prisons has doubled over the past decade. Because of the secrecy involved in the process of cost/benefit analysis calculations, the public has no way to know what role OIRA played. All we know is that the law turned into a suggestion, buried in an exhausting swamp of fecklessness.
The Regulatory Impact Assessment is here, if you want to to go through the cost/benefit analysis of prison-based sexual assault. Or you can just read a key paragraph, which details the amount it is ‘worth’ per victim.
Gutting Rules on Vaping, Coal Ash, Rearview Cameras on Cars
While prison rape may be an extreme example, it’s not the only one. Over more than three years, OIRA and the National Highway Transportation Safety Administration (NHTSA) spent years negotiating over a statutorily-required regulation mandating rearview cameras that would help prevent backovers, including parents accidentally backing over their children. Despite evidence that hundreds per year die this way, according to one article, one OIRA staffer asked “How could anybody run over their own kid?” and worked to prevent NHTSA from issuing the rule.
Reportedly, OIRA pulled out every trick to stop NHTSA from finalizing this rule (which, remember, NHTSA was required by law to enact.)
Similarly, OIRA and the Environmental Protection Agency spent five years going back and forth over a proposed regulation governing the handling of coal ash, which is produced by coal-fired power plants and contains noxious chemicals. OIRA permitted EPA to finalize this rule only after downgrading the designation of coal ash from a “hazardous waste” to “solid waste,” and with less restrictive handling and disposal requirements.
Recently, the Los Angeles Times reported that the Obama Administration’s FDA tried to ban vaping flavors in 2015, only to have the rule substantially weakened by OIRA. According to one anti-tobacco advocate, “The failure to ban these egregious flavors more than three years ago literally opened the door to what was an entirely preventable explosion in youth addiction.” The Times reports that “Scientists expect more than 1.5 million years of human life to be lost,” all because, in the words of one Obama Administration official, “Is it reasonable to effectively shut down all of these vape shops and businesses when the benefits and harms were still inconclusive?”
How to End This Madness
OIRA has the authority to do all of this because of Executive Order 12,866, which was signed by President Clinton in 1993 “to reform and make more efficient the regulatory process.” Every president since Clinton has reaffirmed E.O. 12,866, often with their own “twist;” Obama emphasized that agencies should “consider...values that are difficult or impossible to quantify,” and Trump has put in place a regulatory budget. Regardless (especially since OIRA never took consideration of values impossible to quantify seriously), E.O. 12,866 has the end result of elevating economists above scientists and public health experts and giving economists a veto over all health, safety, and environmental regulations.
E.O. 12,866 requires any agency wishing to publish a “significant” rule to provide OIRA with an assessment or quantification of the proposed rule’s costs and benefits and explanation of why the proposed regulation is preferable to alternatives. With this information, E.O. 12,866 provides OIRA with up to 120 days to review the proposed rule and either send it back to the agency with comment or permit the rule to go into effect. If an agency disagrees with OIRA’s assessment (i.e., proposed changes), its only recourse is to appeal to the Vice President.
None of this is necessary, or particularly hard to fix. The President can just repeal E.O. 12,866 with a signature. Without E.O. 12,866, agencies would still be required to fully consider the data available to it, and the effects of their regulations. They could not regulate contrary to facts, logic, and rationality. They just wouldn’t be required to conduct the quantified cost-benefit analysis that the order mandates, unless Congress specifically told them to do that.
Of course, President Trump is doubling down on the executive order--he recently subjected non-binding guidance documents to quantitative cost-benefit analysis and OIRA review requirements--so his administration likely won’t repeal it any time soon. (Though given the deregulation his administration is undertaking, perhaps slowing down new rules is a positive.)
The order, and how OIRA has implemented it, are an unmitigated disaster. To actually govern again, we should get rid of it. That won’t fix everything, but it will stop centralized economists from breaking our democratic government.
So that’s the deal with OIRA. This anonymous lawyer wrote more on OIRA, but it’s kind of technical, so I put it below my signature so you can read it if you are interested.
This Wednesday, we’ll see if any Senators actually push the nominee - Paul J. Ray - on Wednesday about his agency’s behavior. Questioning of nominees in obscure hearings like this matters. Ray’s boss will be Congress, and if Congress is paying attention, he’ll know he’ll have a harder time messing with laws he doesn’t like.
At any rate, now’s the moment in our democratic process where we take notes on what we want changed in the bureaucracy. No one really wants to do anything right now, but soon the dam will break. Let’s put E.O. 12,866 on our checklist.
Thanks for reading. And if you liked this essay, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you want to really understand the secret history of monopoly power, buy my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.
Technical Specifics on OIRA
The order, and how OIRA has implemented it, are an unmitigated disaster. Scholars have noted four primary points of concern with E.O. 12,866 and OIRA’s implementation:
OIRA Lacks Transparency and Acts Arbitrarily - Although E.O. 12,866 requires OIRA to “make available to the public all documents exchanged between OIRA and the agency during” OIRA’s review of a rule, frequently this information is not made public. Draft copies of rules with redlines may be released, but not written communications. Perhaps more egregiously, although OIRA is required to provide agencies written explanations for its decisions to return a rule to the proposing agency for changes, the last time OIRA published such a letter was in 2011. Instead, it appears OIRA is forcing agencies to withdraw their regulations from OIRA review so that there is no paper trail, and also removes these proposed rules from OIRA’s statistics. In addition, OIRA has been known to put the kibosh on rules without explanation or approve rules without the required RIA out of political concern to the White House.
OIRA Slows Down Regulations - EO 12,866 provides OIRA 90 days to review an agency’s proposed regulation. While a delay of up to three months is extra time that a regulation is not effective, OIRA routinely takes more than its permitted time to review a regulation. Scholars have noted that OIRA “refuses to acknowledge submissions in order to stop the clock from starting on its review” and “bullies agencies into requesting that OIRA take additional time, and sometimes just sits on regulatory actions indefinitely.” Some proposed rules have sat with OIRA for several years. Every moment that a rule is delayed is less time for the rule to be effective, potentially harming the American public.
OIRA Takes Power Away from Policy Experts - Congress grants rule-making authority to specific regulatory agencies, not the White House, and certainly not OIRA. However, OIRA takes it upon itself to act as the policy expert, overriding the expertise of career scientists and public health officials. In one instance, OIRA urged the EPA to lessen limits on motorcycle air emissions “on the ground that the catalytic converter reducing emissions poses a safety threat,” and relented “only after motorcycle manufacturers convinced OIRA that its concerns were baseless.” In another, OIRA required EPA to make changes to a rule which the Second Circuit found to be in violation of the Clean Water Act. (It should also be noted that, although OIRA is generally said to consist of economists, many OIRA desk officers are not. These policy analysts are in no way qualified to critique the work of actual agency economists, scientists, and health officials.
OIRA Routinely Weakens Safeguards - OIRA is responsible for reviewing the cost-benefit data provided to it by agencies and suggesting ways to tweak regulations to improve benefits and decrease costs. However, OIRA routinely recommends agencies dilute the rules, rather than increase their strength. As one academic noted, “OIRA review functions as a one-way ratchet, almost always seeking to weaken standards whenever OIRA seeks changes, regardless of CBA's results.” Although I haven’t reviewed every instance of OIRA review (especially since many times OIRA’s comments are not made publicly available), I have not found an instance of OIRA strengthening a proposed regulation, nor have I run into anyone who has. Cost-benefit analysis conveniently seems to produce results heavily weighted against government action and consideration of those “values that are difficult or impossible to quantify” always seem to fall by the wayside.
Lisa Heinzerling, a professor at Georgetown University Law Center, articulated the issues with OIRA quite succinctly:
OIRA blows past the deadlines imposed by the order with casual abandon. Average review times are longer by far than they have ever been. OIRA and the agencies disobey almost all of the transparency requirements of the order. OIRA engages in “informal” review of agency actions so that it can pass on their wisdom before any public record of its involvement is created. Elevations of disputes beyond OIRA and the agency are not disclosed. Descriptions of changes insisted upon by OIRA are often lacking, and even when they are provided, they usually take the form of impenetrable redlined documents showing revisions that occurred after a rule went to OIRA. Rules die at OIRA without a written explanation. Rules are elevated beyond the agency and OIRA in an unstructured and even chaotic environment, in which any office or person in the White House might have a voice in determining whether a rule will issue. Meetings with outside parties on rules under review at OIRA are dominated by industry groups and the public has little information about what occurs during those meetings.
Without E.O. 12,866, most agencies would not be required to produce a quantified cost-benefit analysis. There are plenty of well-researched pieces detailing the issues with cost-benefit analysis. Congress almost never requires government agencies to conduct these analyses.
Instead, Congress may require an analysis of a rule’s effects on a specific industry (such as describing the impact of the rule on small entities), may cabin the analysis to a rule’s effects to one set of issues (such as effects on the environment), or may require that an analysis only consider what is technologically or economically feasible. In these cases, Congress did not enact a requirement to compare generalized costs and benefits or even quantify specific costs and benefits. Congress has never required an agency to conduct a quantified cost-benefit analysis of the kind E.O. 12,866 requires.
This is not to say that agencies are free to make rules without analyzing their potential consequences. The Administrative Procedure Act, a law passed in 1946 that sets requirements for agencies to follow when making decisions affecting the public, prohibits agencies from acting in an “arbitrary and capricious” manner, and allows judges to set aside such rules. Courts have interpreted this language to allow judges to overturn a regulation when the agency “entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise;” failed to “examine the relevant data and articulate a satisfactory explanation for [the] action including a rational connection between the facts found and the choice made;” or failed to consider “less restrictive, yet easily administered” alternatives. All nine Supreme Court justices even hold that agencies must consider the costs of potential rules before issuing them.