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Cherry-picking on Regulation


Q: Did Bush propose more costly regulations in his last two years than Obama did in his first two years?

A: Yes. But Obama’s regulations are far more costly than those of Bush’s first two years, and the yearly average is higher than that of the Bush administration.

FULL QUESTION

Is this true?

[Head of the White House Office of Regulatory Affairs] Cass Sunstein said, “The annual cost of regulations has not increased during the Obama administration. In its last two years, executive agencies in the Bush administration proposed far higher regulatory costs than did those agencies in the Obama administration in our first two years.”

FULL ANSWER

Accusations of runaway regulation by the Obama administration have become a common line of attack from conservatives who warn over-regulation is stifling job creation.

In a Nov. 17, 2010, speech, U.S. Chamber of Commerce President Thomas Donohue said that “the biggest single threat to job creation facing us today is a regulatory tsunami of unprecedented force.”

Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs, sometimes referred to as the regulation czar, sought to “set the record straight” about the so-called “regulatory tsunami” in an opinion piece published by the Washington Post on June 30.

Sunstein, June 30: First, the annual cost of regulations has not increased during the Obama administration. In the past decade, the costs of economically significant rules reviewed by the White House Office of Information and Regulatory Affairs (OIRA) were highest in 2008. In its last two years, the administration of George W. Bush imposed far higher regulatory costs than did the Obama administration in its first two years.

As backup for Sunstein’s claim, the White House Office of Management and Budget provided a breakdown of the estimated cost of “significant regulations” issued for executive agencies.

Here’s their tally (in 2001 dollars):

Regulation costs calendar year 2007: $10 billion

Regulation costs calendar year 2008: $11 billion

Regulation costs calendar year 2009: $1 billion (Bush); $4 billion (Obama)

Regulation costs calendar year 2010: $10 billion

In other words,$22 billion in the last two years (and part of the month of January 2009) under Bush, compared with $14 billion in the first two years under Obama.

But Sunstein cherry-picked his numbers by using only the last two years of the Bush administration. There was a marked acceleration of regulations in those years.

That spike is actually typical, said Susan E. Dudley, who served in the Bush White House as administrator of the Office of Information and Regulatory Affairs (the same position currently held by Sunstein) from April 2007 to January 2009. It’s known as the “Cinderella Effect,” Dudley said in a phone interview with FactCheck.org. Outgoing administrations historically seek a wave of new regulations as political appointees seek to leave their mark on an agency before they head out the door.

Jay Cochran, a research fellow in the regulatory studies program at the libertarian Mercatus Center at George Mason University, studied the trend and documented an appreciable increase in the output of rules in post-election quarters (from Republicans and Democrats alike) going back to 1948.

Dudley, now the director of the George Washington University Regulatory Studies Center, said she was aware of the trend and sought to harness it, but had only limited success.

“I learned from my experience during the midnight hours of the Bush administration that midnight regulation is inevitable,” she wrote in an article for the Federalist Society in July 2009.

“As I saw firsthand, the incentives for policy officials to put their stamp on policy by issuing regulations on their way out the door is simply too strong,” she wrote.

As a result, she told us, “It’s true that in the last two years of the Bush administration, there were a lot of regulations issued, no doubt about it.”

Our own research backs that up. We compared Obama’s first two years with Bush’s first two years, and what emerges is a much different picture than the one Sunstein paints.

In its 2011 report to Congress, OIRA reported that the estimated cost of federal regulations under Obama from Jan. 20, 2009, (when he took office) to the end of the 2010 fiscal year was somewhere between $8 billion and $16.5 billion (see Table 1-3 and Appendix D). During the same initial stretch under Bush, the estimated cost of new regulations was between $1.3 billion and $3.4 billion (Appendix D). OIRA inflation-adjusted all figures to 2001 dollars.

The rest of the report presents data from fiscal years rather than calendar years, so some years overlap administrations, which complicates comparisons.  The report also shows a range of projected costs, rather than a single figure.  Still, it is clear that the cost of new regulations issued in the first six years of Bush’s administration — ranging from a midpoint of $1.3 billion in 2002 to a midpoint of nearly $5 billion in 2005 — was far below the average of $7 billion a year under Obama.

The Sunstein numbers also ignore independent agency regulations, which do not go through OIRA. Meg Reilly, a spokeswoman for the White House Office of Management and Budget, defended the inclusion of only executive agency regulations, saying: “We have no say over what the independent agencies do.”

But James Gattuso, senior research fellow in regulatory policy at the conservative Heritage Foundation, said that presents an incomplete picture. “Much of the Obama regulatory agenda, for instance, has been carried out by independent agencies, and it would be misleading to exclude them,” Gattuso stated via email. “The agency heads and most members of commissions are selected by the president, and – while independent – broadly share his broad policy agenda. And – especially in the case of finance and health care – are implementing laws adopted at the president’s urging.”

By Heritage’s count — including the regulations from independent and executive agencies —  the Bush administration issued regulations that cost about $60 billion over 8 years. The Obama administration, meanwhile, has imposed new major regulations with reported costs of about $40 billion in just over two years. Even with a handful of rules that reduced regulatory costs by $1.5 billion, that still leaves a net increase of more than $38 billion, Gattuso said. That translates to a much higher average, per year cost of regulations under Obama, Gattuso said. The cost of regulations may largely fall on businesses, he said, but the expense is often passed on to the consumer.

Sunstein’s broader point that “the annual cost of regulations has not increased during the Obama administration” is misleading. It is technically accurate — as he said — that the estimated cost of regulations in the first two years under Obama has been less than that of the last two years under Bush. But given that administrations have historically issued costly regulations at an accelerated pace in their last year or two, comparing the first two years of any administration with the last two of a predecessor makes for a distorted view.

— Robert Farley

Sources

Donohue, Thomas J. Speech: “Addressing the Challenges of a Nation at Risk.” 17 Nov 2010.

Sunstein, Cass. Op-Ed: “The smart approach to reforming regulations.” Washington Post. 30 Jul 2011.

Cochran, Jay. “The Cinderella Constraint: Why Regulations Increase Significantly During Post-Election Quarters.” Mercatus Center at George Mason University. 8 Mar 2001.

Dudley, Susan E.  “Administrative Law & Regulation: Regulatory Activity in the Bush Administration at the Stroke of Midnight.” Federalist Society. July 2009.

Office of Management and Budget, Office of Information and Regulatory Affairs. 2011 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities.

Gattuso, James and Katz, Diane. “Red Tape Rising: A 2011 Mid-Year Report.” Heritage Foundation. 25 Jul 2011.

Dudley, Susan E. Former administrator of the Office of Information and Regulatory Affairs. Interview with FactCheck.org. 21 Sep 2011.

Gattuso, James. Senior research fellow in regulatory policy at the Heritage Foundation. E-mail interview with FactCheck.org. 21 Sep 2011.

Reilly, Meg. Spokeswoman, White House Office of Management and Budget. E-mail interview with FactCheck.org. 21 Sep 2011.