Beyond obvious rhetoric, are there discernible differences among the ways that Democrats and Republicans tackle economic analyses of federal regulations? Yes—and no, according to our content analysis of all the Office of Management and Budget’s (OMB) annual Reports to Congress on the Benefits and Costs of Federal Regulations (or, for our purposes here, Reports) issued during the Clinton, Bush, and Obama administrations (since 1997). Although there are many similarities in the Reports across administrations, our analysis reveals some differences between the ways that Republicans and Democrats consider the impacts of regulations.
- The role of OMB. First, although all the Reports seek to enhance the overall quality and analytic rigor of regulatory impact analyses (RIAs), they differ on the role played by OMB in the process. The early Bush-era Reports tend to place OMB in the top-down position of gatekeeper for rulemaking and overseer of the quality of the analysis.In contrast, the Reports issued during Democratic administrations, especially during the Obama era, place OMB in more of a hands-off approach, relying on greater transparency and openness of agency rulemaking processes to incentivize quality analysis.
- Qualitative benefits versus uncounted costs. A second area of difference is the relative emphasis on the benefits of regulations, generally favored by the Obama administration—including difficult-to-measure or qualitative benefits, such as the values of ecological services, dignity, and intergenerational equity. In contrast, the Bush administration provides more discussion of the uncounted costs of regulation and its impact—for example, on small businesses. The emphasis of the Clinton administration lies somewhere between the two. In looking back at previous rulemakings, the Bush administration seems to see the few available studies as supporting the view that RIAs overestimate benefits more than costs, whereas the Obama administration appears to interpret the literature as indicating no apparent bias in the estimates of benefits versus costs.
- Using information as a tool. A third area of difference is the willingness to design policy approaches relying heavily on information disclosure as a regulatory tool. Here the Bush administration focused on specific actions (for example, trans fat labeling for foods), whereas both Democratic administrations offered broad encouragement to disclosure-based approaches to inform consumers. Also, the Obama Reports shift to a discussion of “behaviorally informed” regulation to address problems with household decisions beyond the traditional concern with market failure associated with asymmetric information.
- Reaping the benefits: now or later? The treatment of intergenerational benefits is a fourth area of difference. Despite reasonable consistency across administrations on the issue of discounting, the approach has evolved somewhat over time, with the Bush administration requiring the use of both 3 percent and 7 percent as discount rates in its Circular A-4 guidance (compared with earlier Clinton guidance that specified 7 percent). Although it has retained Circular A-4, the Obama administration has taken an additional step in its assessment of the social cost of carbon by considering a still lower discount rate range, thereby increasing further the relative weight assigned to future benefits.
- Regulation versus employment. A fifth area of difference concerns the connection between environmental, health, and safety regulations and the broader economy—specifically, economic growth and employment. On this issue, we find that the Bush administration tends to emphasize the trade-offs between regulations and more broadly defined economic performance. In contrast, the Obama administration places greater emphasis on the potential for a positive link between regulation and overall “well-being.” Similarly, since the impact of regulation on employment has become a subject of discussion relatively recently with the Great Recession, this topic has been given greater emphasis in the Obama-era Reports. These recent Reports have pointed to studies supporting the job-creation aspects of regulation, arguably off-setting earlier evidence of negligible or possible negative impacts on employment.
What’s the bottom line? While some may see deep meaning in our findings—that Republicans care more about costs and Democrats care more about benefits, or that Democrats give greater weight to future generations—we see the key elements of economic analysis as largely insulated from politics, not subject to wild swings of emphasis across administrations. The noted topics of monetization, cost definition, behavioral economics, intergenerational benefits, and the general equilibrium impacts of regulation are actively debated in the economics profession and remain important areas of research.
See our complete findings in our article in the Journal of Benefit-Cost Analysis or in our new RFF discussion paper.
