Under Reagan, Scrutiny of Rules Became the Rule

As part of his economic philosophy that lower taxes and less regulation were the tonic for an ailing economy, President Ronald Reagan did more to change the dynamic of the federal regulatory system than any of his predecessors.

Though the Reagan administration is remembered most vividly for cutting agency budgets, eliminating rules and creating a task force to scrutinize regulations that the administration and business wanted to change, regulatory experts say the real effect of those years can be traced to a change in the process of creating rules.

Within weeks of taking office in 1981, the Reagan administration issued an executive order that, for the first time, set up a system of reviewing all of the rules issued by dozens of federal agencies. The Feb. 17 order set out a protocol of review and cost-and-benefit analysis that laid the groundwork for the way that the federal regulatory system works today. It replaced a much looser system of consultation where previous administrations reviewed some but not all rules.

The result was a kind of deregulation that did not depend so much on removing regulatory barriers for entire industries, as the Carter administration did for airlines in 1978. Instead, it used administrative tools that sometimes made it harder for federal agencies to issue rules as their regulatory agendas became subject to strict oversight by the White House.

Robert Hahn, executive director of the AEI-Brookings Joint Center on Regulatory Studies, said the Reagan executive order became the template for regulating in the United States and in other developed countries. Hahn said regulators now routinely take "a hard look" at how a rule will affect costs and benefits and try to quantify that effect -- a process that many consumer and liberal group oppose.

Sally Katzen, head of the regulatory review office in the Clinton administration, said the idea of centralized review of rules began in the Nixon administration, but Reagan "took an enormous step forward consolidating central review and embracing cost-benefit analysis as the way to think about regulation."

C. Boyden Gray, counsel to the new president's Task Force on Regulatory Relief (headed by Vice President George H.W. Bush), was one of the authors of the new executive order. The passage of the Paperwork Reduction Act, which was signed by President Jimmy Carter, also created an office dedicated to reviewing rules within the Office of Management and Budget. It was called the Office of Information and Regulatory Affairs (OIRA), and its first director was James C. Miller III, co-author of the new executive order.

"There were changes in the regulatory process that led to more cost-effective, more informed, enlightened regulation," said Miller, who is now a consultant. "When you force agencies to think more aggressively about the costs and benefits of their rules . . . that leads to better regulation."

That executive order was later changed by the Clinton administration, and it influences how the current Bush administration supervises the regulatory component of the federal government. But regulatory experts contend that the Reagan administration was the first to exert consistent control over the regulatory process at the presidential level. That control, they said, gave great power to the White House in crafting regulatory policy and redefining the old "iron triangle" that existed between powerful congressional committees, business lobbyists and the agencies in issuing new rules.

"Every president since then has adopted or refined that system. But no president has thought of abandoning it," said Cornelius Kerwin, provost at American University and a professor of public administration.