Federal Regulations: Efforts to Estimate Total Costs and Benefits of Rules Page: 2 of 21
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Federal Regulations: Efforts to Estimate
Total Costs and Benefits of Rules
Cost-benefit analysis has long been used to try and measure the effects of
individual regulatory actions, and underlies at least part of many attempts to assess
the cumulative effects of regulations on society. Some policy makers have expressed
an interest in cost-benefit analysis and in developing an accurate measure of total
regulatory costs as a first step in developing a "regulatory budget"that would set a cap
on compliance costs. Although measuring total regulatory costs and benefits is
inherently difficult (e.g.,determining what effects would have occurred in the absence
of the regulation and aggregating the results of studies with different methodologies
and quality), estimates of regulatory costs have been used in support of legislation
(e.g., H.R. 2432 in the 108th Congress) and are widely cited by policymakers, the
media, and others. This report examines one such study to illustrate the complexities
of this type of analysis.
In 2001, W. Mark Crain and Thomas D. Hopkins estimated total regulatory
costs at $843 billion in 2000. To arrive at that figure, the authors developed
estimates for different types of regulations (environmental, workplace, economic, and
tax compliance) using various sources and sometimes making assumptions to adjust
the results from previous studies. For example, to estimate the cost of
environmental rules, the authors used only the upper end of a previous estimate range
($96 billion to $170 billion) that had been produced by the Office of Management
and Budget (OMB), and then they adjusted it further upward. Also, the authors'
estimate of the cost of economic rules ($435 billion) is heavily dependent on the
accuracy of estimates from a previous study. The Crain and Hopkins study (as well
as other studies) also indicated that federal regulations cost small businesses more
per employee than larger businesses.
Since 1997, OMB has been required to issue an annual report containing, "to the
extent feasible," an estimate of the aggregate costs and benefits of federal regulations.
OMB's estimate of regulatory costs for 2000 ($146 billion to $229 billion) was
significantly smaller than the Crain and Hopkins estimate ($843 billion) because
OMB considered it inappropriate to include certain types of costs that the authors
used (transfers and tax compliance). More recently, OMB has concluded that
aggregate estimates of regulatory costs and benefits are not feasible, and instead has
provided a 10-year rolling summary of costs and benefits only for certain major rules.
OMB's draft report for 2004 indicated that the estimated costs of 85 major rules that
the office reviewed from October 1993 through September 2003 ranged from $34
billion to $39 billion, with benefits estimated at between $62 billion and $168 billion.
Although accurate measures of the costs and benefits of all federal rules would
be useful, decisionmakers using studies of aggregate regulatory costs and benefits to
guide public policy need to be aware of those studies' conceptual and methodological
underpinnings. This report will be updated periodically to reflect changes in OMB's
estimates of regulatory costs and benefits, as well as the estimates developed by
parties outside of the federal government.
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Federal Regulations: Efforts to Estimate Total Costs and Benefits of Rules, report, May 14, 2004; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc805490/m1/2/: accessed April 19, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.