Federal Regulations: Efforts to Estimate Total Costs and Benefits of Rules Page: 4 of 21
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Federal Regulations: Efforts to Estimate
Total Costs and Benefits of Rules
Regulation, like taxing and spending, is a basic function of government. Unlike
taxing and spending, though, the costs that nonfederal entities pay to comply with
federal regulations are not accounted for in the federal budget process. Cost-benefit
analysis has long been used to try to account for the effects of individual regulatory
actions, and underlies at least part of most attempts to assess the cumulative effects
of regulations on society. Policy makers have long expressed an interest in cost-
benefit analysis and in developing an accurate measure of total regulatory costs.
Some have suggested that the federal government use that information to adopt a
"regulatory budget" that could limit the total volume of regulatory programs,
expenditures, and compliance costs, by setting a cap on the compliance costs each
agency could impose on the economy. However, measuring total regulatory costs
and benefits is inherently difficult. For example, researchers must determine the
baseline for measurement (i.e., what effects would have occurred in the absence of
the regulation) and aggregating the results of studies with different methodologies
and quality can be highly problematic. Some observers, including the Office of
Management and Budget (OMB), currently doubt whether an accurate measure of
total regulatory costs and benefits is possible.
Nevertheless, estimates of total regulatory costs in the hundreds of billions of
dollars are widely cited by policymakers, business interest groups, the media, and
others. This report provides information on how one widely cited study was
developed to illustrate the complexities associated with this type of analysis. The
report also provides information on how OMB's estimates of aggregate federal
regulatory costs were developed and have varied over time, and on estimates that
have been made of aggregate regulatory costs to businesses. Finally, the report
indicates that estimates of aggregate regulatory costs need to be interpreted and used
carefully. First, however, the report provides some background regarding the types
of rules that federal agencies issue and current cost-benefit analysis requirements.
Each year, about 60 federal agencies issue more than 4,000 final rules or
regulations on topics ranging from the timing of bridge openings to the permissible
levels of arsenic and other contaminants in drinking water. The federal government
has long regulated economic activity, often through independent regulatory agencies
or commissions. Although economic regulation is often dated to the creation of the
Interstate Commerce Commission in the late 1800s, it began in earnest during the
1930s with the creation of such agencies as the Securities and Exchange Commission
(SEC), the Federal Deposit Insurance Corporation (FDIC), and the Federal
Communications Commission (FCC). Social regulation in such areas as
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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/m1/4/: accessed April 21, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.