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The Anti-Capture Justification for Regulatory Review

The Office of Information and Regulatory Affairs (OIRA), charged since the days of Ronald Reagan with overseeing the activities of regulatory agencies, is a consistent target of attack from across the political spectrum. Critics on the right argue that OIRA doesn’t do enough to rein in “job-killing” bureaucrats, while critics on the left argue that OIRA stands in the way of life-saving environmental, public health, and safety protections.

Academics in law, economics, and political science have entered the fray. Some offer defenses and justifications of OIRA review, while others deliver harsh critiques. Both the institution of executive level regulatory review, and the substantive standard of cost-benefit analysis that is used, have been the subject of significant academic commentary.

The two traditional justifications in favor of such review—increasing presidential power over the administrative state and checking agency overzealousness—are unconvincing.  The presidential power argument holds that OIRA fosters control of agency decision making by the president, which promotes democratic accountability and helps facilitate agency responsiveness to electoral demands. The “checking function” justification is based on the claim that agencies have systematic tendencies to overregulate, creating a need for a centralized office to act as a gatekeeper to stop inefficient rulemakings.

white house cherry blossomsBoth of these justifications are problematic. The normative desirability of maximizing political control of agencies, at the expense of impartial expertise, is subject to debate. More importantly, OIRA’s contribution to increasing presidential control is not clear. OIRA is not the President, and it is often OIRA career bureaucrats that supervise the work of political appointees at agencies. This is not a recipe for maximizing political control.

The second justification is equally weak. Bureaucratic incentives can lead to both over-regulation and under-regulation. A systematic check might help the first problem, but it will exacerbate the second. A “checking function” for OIRA, then, does not match the actual shape of potential shortfalls in agency performance.

The weaknesses in the justifications offered for OIRA review are surprising because OIRA review has been endorsed by Presidents as ideological diverse as Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama, and is likely to remain an enduring feature of the American administrative state.

Is there a better way to make sense of executive regulatory review? The concept of agency capture provides a more attractive normative justification for executive regulatory review. Capture describes situations where organized interest groups successfully act to vindicate their goals through government policy at the expense of the public interest. For groups that are repeat players before specialized agencies, the possibility of capture means that investments in long-term relationships can have substantial returns.

Because regulatory review shifts at least some decision-making authority from specialized institutions—the regulatory agencies—to a generalist institution—OIRA—there is a robust and persistent anti-capture justification for OIRA review. Generalist institutions are typically harder to capture than issue-specific agencies. Because OIRA’s docket includes all federal regulatory issues, the return on the investment of any particular interest group to build a relationship with OIRA is lower than for a specialized agency.

The structure of OIRA review also specifically limits the ability of outside interest groups to exert undue influence on the regulatory process. OIRA is charged with facilitating agency coordination on new regulatory proposals. By soliciting input from multiple agencies, the OIRA review process helps ensure that political appointees and career staff from several different backgrounds, and with different institutional perspectives and interests, are included in internal executive deliberations, helping to reduce the influence that any single interest group might have on a particular agency.

The substantive standard of cost–benefit analysis, with its accepted professional norms and its focus on the comprehensive effects of regulation, also facilitates the consideration of a wide range of interests and preferences. Finally, a tradition has developed, which would be costly to depart from, under which presidents have appointed OIRA administrators with broad knowledge of the regulatory process but few ties to specific interest groups.

We believe that the anti-capture role of regulatory review is compelling in theory. Importantly, this theory of review provides us with a foundation to offer an agenda for reforming how OIRA does its business, with the goal of bringing the practice of review more in line with its justifications.

Our most important recommendation is to eliminate a basic flaw that significantly limits OIRA’s capture-reducing potential: a near exclusive focus on agency action, without attention to agency inaction. Capture can have deleterious effects on the regulatory system by promoting unnecessary and inefficient rulemaking and also by impeding efficient regulation that serves the public interest.

Balanced anti-capture review needs to correct for the wide range of effects that outside pressure can have on agency decision making. Limiting review to agency action places an entrenched bias at the heart of OIRA review, sapping normative force from its anti-capture justification.

To remedy this problem, we propose a mechanism to review inaction through review of petitions for rulemakings that have been submitted to agencies, but which have been denied or have languished. This review would help OIRA identify important areas where agencies are failing to act, without remaking OIRA into a roving commission with the power to set agencies’ agendas. The petitioning process strikes a workable balance: debiasing OIRA’s role while providing agencies with continued discretion to set regulatory priorities.


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