Today marks the 20th anniversary of a little-known but remarkably important document: Executive Order 12866, issued by President Bill Clinton in 1993. Executive Order 12866 replaced an order issued by President Ronald Reagan in 1981. Both of these documents set out a process whereby the White House – acting through the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) – would review major agency rules before they were issued.
Executive Order 12866, and the Reagan order before it, ushered in a new era in administrative law, one in which the White House would become the dominant force in administrative rulemaking and in which cost-benefit analysis would become the overarching framework for evaluating the wisdom of rules. Professional career staff in the agencies, steeped in the technical fields relevant to the agencies’ work, would see their work product changed, sometimes dramatically, by professional career staff in OIRA. Political management at the agencies would find their actions scrutinized, revised, and sometimes stopped altogether by political operatives at the White House.
Even where statutes (as most do) charged a particular agency with making a particular technical finding and set forth a decision-making framework other than cost-benefit analysis, the White House process of regulatory review displaced those agency decision makers and supplanted the statutory standard with a cost-benefit test. The executive orders under both Reagan and Clinton qualified their reach by stating that they were to be applied “to the extent permitted by law,” but administrative law developments in the Supreme Court subsequent to the Reagan executive order – in particular, the famous Chevron decision – give tremendous leeway to agencies in interpreting the statutes they administer, and OIRA has taken upon itself to instruct agencies how to interpret these laws. Thus the constraint of following existing law is more illusory than real.
“The easiest way to save money,” President Obama declared in his 2012 State of the Union address, “is to waste less energy.” In his 2013 State of the Union address, President Obama took another step and issued “a new goal for America”: “let’s cut in half the energy wasted by our homes and businesses over the next twenty years.” The President also vowed that if Congress did not “act soon” to address climate change, he would “direct [his] Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”
Such welcome sentiments! So sensible and right and good! But here is a puzzling fact: at the same moment President Obama was uttering these wise and welcome remarks, his White House was blocking rules to promote the very energy efficiency he was extolling. Far from urging the Cabinet to come up with executive actions on climate, his own White House was blocking his Cabinet from taking executive actions on climate. That situation persists to this day.
To understand this rather startling state of affairs, we need some background about how the regulatory system works today. Congress has passed laws to increase in many different respects the energy efficiency of the “homes and businesses” the President talked about. Like most complicated contemporary laws, the laws on energy efficiency are implemented by an administrative agency, in this case the Department of Energy (DOE). DOE writes rules that take the basic mandates given by Congress and give them shape; the agency specifies, for example, just how efficient new refrigerators and microwaves and lamps and buildings must be to meet Congress’s requirements.
Once DOE writes a rule, however, it does not simply issue it. Instead, the rule must first pass through a White House office that oversees the federal rulemaking process – the Office of Information and Regulatory Affairs, or OIRA. Under executive orders reaffirmed or issued by President Obama, no rule deemed significant by OIRA can be issued without OIRA’s approval. In the Obama administration, moreover, OIRA has increasingly become simply a portal into the political machinery of the larger White House. Rules go to OIRA and, from there, to the Domestic Policy Council, the White House economic offices, the White House Chief of Staff, even sometimes the President himself. (The former head of OIRA in this administration, Harvard law professor Cass Sunstein, documents (and lauds) this new reality in his recent book, “Simpler: The Future of Government.”)
This is how the White House has come to block the very kinds of initiatives President Obama seemed to praise in his State of the Union addresses: energy efficiency rules have gone from DOE to OIRA and have never left. As of this writing, nine rules from DOE on energy efficiency are stuck at OIRA. Five have been there since 2011, three since 2012. Six are not final rules; they are merely proposals. Four of the rules are not even economically significant (that is, they do not impose costs of more than $100 million per year). But all of these rules are stuck, all the same.
A series of catastrophic regulatory failures in recent years has focused attention on the weakened condition of regulatory agencies assigned to protect public health, worker and consumer safety, and the environment. The failures are the product of a destructive convergence of funding shortfalls, political attacks, and outmoded legal authority, setting the stage for ineffective enforcement and unsupervised industry self-regulation. From the Deepwater Horizon spill in the Gulf of Mexico that killed eleven and caused grave environmental and economic damage, to the worst mining disaster in 40 years at the Big Branch mine in West Virginia with a death toll of 29, the signs of regulatory dysfunction abound. Peanut paste tainted by salmonella, lead-paint-coated toys, sulfur-infused Chinese dry wall, oil refinery explosions, degraded pipes at U.S. nuclear power plants: At the bottom of each well-publicized event is an agency unable to do its job and a company that could not be relied upon to put the public interest first.
Although everyone should be able to agree that these events are intolerable to the extent they are preventable, thoughtful analysis is too often sidetracked by the nation’s polarized debate over the role of government in our daily lives. Conservative commentators argue that accidents like the Gulf spill are the inevitable byproducts of industrialization, daunting in the best of times but having little to do with government failure. They say that over-regulation is a far more serious problem than under-regulation because bureaucrats run-amok are hobbling the country’s long-delayed recovery from a devastating world-wide recession. Progressive commentators respond that one of the government’s most important jobs is to prevent industry from trading safety for profit, by compelling manufacturers to install redundant, fail-safe mechanisms to protect public health and the environment. Spills, explosions, unchecked carbon emissions, tainted drugs, and unhealthy air pollution represent chronic failures by government to forbid conduct that lies in the mainstream of business as usual.
During his presidential campaign, Barack Obama seemed to subscribe to the progressive view, declaring that the role of government is to help people when they cannot help themselves and raising the strong expectation that he would sponsor affirmative reform to prevent the damage produced by the sharper edges of a capitalist economy.