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The Rule Czar's Balancing Act

By Cindy Skrzycki
Tuesday, January 13, 2009

A tough economy and the prospect of Cass Sunstein as regulatory czar may moderate the Obama administration's wholesale elimination of President Bush's last-minute rules and the direction of health and safety policy.

Transition officials and congressional Democrats are compiling an arsenal of administrative weapons to rescind or remove final rules they want off the books. Yet the momentum may be slower than public-interest allies hope when President-elect Barack Obama's team calculates how those rules will affect a stimulus package and its new bottom line -- jobs.

This prospect delights the business community, which is coming to realize that the rising U.S. unemployment rate is its most powerful antidote for fighting environmental and other groups that want to roll back many of the 102 rules the Bush administration has issued since November.

Industry trade associations also have been quietly applauding Obama's appointment of Sunstein to run the White House office that reviews regulations. Sunstein has written prolifically on the costs and benefits of rulemaking, and some of those writings worry Obama supporters.

"These appointments say, 'There has to be analysis,' " said Thomas Sullivan, who was the official advocate for small business in the Bush administration. He was referring to Sunstein and Peter Orszag, the proposed head of the Office of Management and Budget.

Orszag runs the Congressional Budget Office. Sunstein was nominated to lead the OMB's Office of Information and Regulatory Affairs, which reviews major rules, some of which are politically charged.

Those who know Sunstein say his academic career at the University of Chicago, where he knew Obama, and at Harvard has been devoted to defending regulation while also balancing the cost and value of rules.

William Kovacs, vice president of environment, technology, and regulatory affairs at the U.S. Chamber of Commerce, says he is sanguine about how Obama's appointees will handle old and new rules because of the incoming administration's emphasis on tax cuts and spending $800 billion on creating new jobs.

"Not everything the Bush administration did was bad," Kovacs said. "If I were them," he said, referring to Obama regulators, "I would proceed with great caution and worry about the economy first."

Some public interest groups expressed concern that Sunstein, 54, may slow the pace of regulation once he is confirmed. They are poring over his academic papers and looking for red flags.

Some cite a paper he wrote last year on whether the Occupational Safety and Health Administration is unconstitutional.

"He is smart and prolific, but he is a true believer in cost-benefit analysis," said Rena Steinzor, a University of Maryland law professor and president of the Center for Progressive Reform, a liberal academic think tank in Edgewater, Md. "He would not have found an arsenic regulation to be justified. This makes him extremely conservative on regulatory issues."

David Vladeck, a law professor at Georgetown University who has litigated dozens of worker health and safety cases for Public Citizen and other groups, also voiced concern.

"There is a lot of fear that he is a John Graham in progressive garb," Vladeck said. "But there is a huge difference from looking at something from an academic perspective and as a regulator."

John Graham, who ran the Office of Information and Regulatory Affairs from 2001 to 2006, centralized review of rules in the White House; used financial analysis aggressively; and locked horns continually with liberal-minded public interest groups, particularly on environmental issues.

Graham, now dean of the Indiana University School of Public and Environmental Affairs, said Sunstein is an innovator in applying cost-benefit analysis, taking into account the environment and low-income populations. "He cares deeply for the president's need for leadership in regulatory policy," he said

Sunstein's wrote a book in 1990 called "After the Rights Revolution: Reconceiving the Regulatory State," which talks about the superiority of regulation to free market economics.

Another book, "The Second Bill of Rights: FDR's Unfinished Revolution and Why We Need it More Than Ever," may explain another connection to Obama. The title is a reprise of Roosevelt's call for government to provide economic security, a theme that runs through the president-elect's remarks on the U.S. economy.

Obama will have several ways to undo so-called midnight rules issued by the Bush White House, including freezing those in the pipeline, quickly issuing interim or new rules to override the Bush products, and putting a moratorium on rules -- as Bush did when President Clinton left office.

In addition, Congress can block funding to enforce rules or dust off a congressional review law to kill them.

"This is an intellectual giant," Gary Bass, head of OMB Watch, said of Sunstein. "I want to give him an opportunity to hear his viewpoints."

Bass said the litmus test will be whether Sunstein can reconcile what he has said on paper with the new president's professed agenda to overhaul the regulatory system to address workplace, environmental, consumer and financial protections.

Cindy Skrzycki is a regulatory columnist for Bloomberg News. She can be reached at cskrzycki@bloomberg.net.

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