(Kevin Lamarque/Reuters)

“It is our position that the previous administration failed to follow the law in many, many circumstances. And that they simply imposed regulation without proper regard to the cost side of that analysis.”
— White House budget director Mick Mulvaney, interview with Bloomberg BNA, April 20, 2017

A reader pointed out an article that appeared April 27 in Bloomberg BNA with a provocative headline: “Obama Regulators Failed to Follow Law, OMB’s Mulvaney Says.” The reader wondered about the accuracy of Mulvaney’s phrasing, particularly the suggestion that the Obama administration did not properly consider costs in formulating its regulations.

Mulvaney told BNA that the actual costs of regulation “were often ignored. … We think that what the previous administration was doing was sort of fudging the analysis when it came to the cost side of the equation.” Mulvaney said “we actually plan to look at the costs of regulations. And one of the reasons you’ve seen us repeal certain regulations already is we think that the previous administration didn’t do that.”

Luckily, the data on regulations are carefully recorded. What does the record show on whether the Obama administration considered costs?

The Facts

One big problem for Mulvaney’s statement is there is no “law” that generally requires cost-benefit analysis for all rules.

The broadest requirement is in Executive Order 12866, which states that agencies are to “assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” OMB Circular A-4 lays out how agencies are to do cost-benefit analysis for major rules (such as those with a $100 million annual impact on the economy). But both the EO and the Circular have phrases like “where feasible” and “to the extent permitted by law.”

So, basically, these requirements are not legally binding. However, there are a few cases, such as Michigan v. Environmental Protection Agency in 2015, in which the courts have struck down regulations for an agency’s failure to consider costs.

Here’s a rundown of what happened during the Obama administration, though the data for fiscal 2016 have not been tabulated yet. (Note: this chart has been updated to correct an error in the totals.)

Source: OMB Reports to Congress on the Benefits and Costs of Federal Regulations

More than half of the major rules issued during this period were transfer rules (such as setting reimbursement and prospective payment levels for Medicare and Medicaid), which primarily involve federal funds flowing to beneficiaries — not rules involving traditional regulatory costs and benefits. For the remaining non-transfer rules issued during this period, agencies provided monetized estimates of both costs and benefits in 51 percent of the cases.

Indeed, contrary to Mulvaney’s claim, federal agencies were much more likely to only estimate costs (54 rules) than to only estimate benefits (16 rules). In the 16 rules where only benefits were estimated, 15 of them were Interior Department migratory bird hunting rules (e.g., setting duck seasons). The one remaining rule involved federal agency disbursement practices.

In response to a query, Mulvaney’s staff walked back his statement a bit. “There are relatively few statutes that call for a benefit-cost analysis as explicitly as OMB’s Executive Orders,” an official acknowledged. But the official added: “There have been many high-profile rules of the previous Administration halted or overturned by the courts or Congress, including the Clean Water Act Jurisdictional rule, the Department of Labor’s so called Fair Pay rule that has since been overturned under the congressional Review Act, and the Clean Power Plan. We believe that developing a better analysis would have led to a better and more justified outcome for these rules, and we intend to do just that.”

We’re not sure how three citations add up to “many,” considered the hundreds of major rules issued by the Obama administration.

In any case, the three cases cited by the official did not involve problems with an agency’s cost analysis.  The “Waters of the United States” rule was challenged over the reach of federal regulations on wetlands and waterways, not regulatory costs and benefits. The “Fair Pay” rule was stopped by a court order, and later overturned by Congress using the congressional Review Act — not because of inadequate consideration of costs, but because of concerns that contractors would have to “publicly disclose mere accusations of labor law violations that have not been fully adjudicated.”  Similarly, the Clean Power Plan was not challenged over inadequate consideration of costs but on legal, constitutional and procedural grounds.

In other words, the Trump administration may believe these rules are unlawful, but an agency’s consideration of the costs is not what got these particular rules in trouble.

The Pinocchio Test

Mulvaney’s sweeping claim is not supported. Instead of ignoring costs, the Obama administration clearly considered the cost side of the equation in a majority of the rules. Mulvaney may believe that the Obama administration had an incomplete or inadequate consideration of the costs — what he called at one point “fudging the analysis” of costs — but that’s different from suggesting a complete refusal to consider costs. Indeed, the career people at the Office of Management and Budget who now work for Mulvaney probably worked on these costs estimates, so he might consider asking them what they did.

Three Pinocchios

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Obama "simply imposed regulation without proper regard to the cost side of that analysis.”
in an interview with Bloomberg BNA
Thursday, April 20, 2017