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Cass Sunstein on how government regulations could be a lot simpler

Over the last four years, regulations have been one of the most bitterly disputed topics in Washington.

Conservatives and industry groups say that the Obama administration is putting out way too many regulations — rules for coal plants, rules for automobiles, rules for Wall Street. Progressive groups, meanwhile, often complain that the White House is slow-walking too many key regulations that could improve health and safety.

And at the center of this debate is the little-known Office of Information and Regulatory Affairs (OIRA), an obscure White House agency that is in charge of making sure that the costs of regulations don't outweigh the benefits. Cass Sunstein was the head of OIRA between 2009 and 2012, and he recently wrote a book about the experience of trying to streamline regulations, "Simpler: The Future of Government."

I talked to Sunstein, now a professor at Harvard Law School, by phone about his new book, about what OIRA actually does, how regulations have changed over the past four years, and some of the criticisms that have been directed at his tenure there.

Brad Plumer: When you joined OIRA in 2009, what did you think needed to change about how the government did regulation?

Cass Sunstein: I thought there were two things the government had been doing very well for a long time. One was the idea of interagency coordination and consultation, so that when a rule came from the U.S. Department of Agriculture, the people at the Department of Justice and the Environmental Protection Agency and Council on Economic Advisers were aware. That's really valuable. And the second thing was the careful consideration of costs and benefits — that's been an enduring aspect of regulation for many years.

BP: And wasn't there anything that needed to change?

CS: One thing I thought was very important was to ensure greater openness and transparency. We did a lot of things to try to improve the process by which the agencies considered public comments. So has been substantially upgraded, and people can see what rules are being proposed. There are 100,000 different data sets on for product recalls, environmental quality, crime, and much else.

The other thing I wanted to do, under the president's direction, was embark on an even more disciplined analysis of costs and benefits — to try to consistently quantify whatever could be quantified. We wanted to acknowledge that in an economically difficult time, it was important to keep the costs of rules down and the net benefits up.

But there was also an interest from many people, including co-workers, in acknowledging that some values, including human dignity, couldn't easily be turned into monetary values [when doing cost-benefit analysis]. So the phrase "human dignity" appears in Executive Order 13563. This wasn't a license to throw numbers to one side, but if you're looking at a rule for veterans to get access to a building, or to let people who are HIV-positive into the U.S., then monetized figures don't always capture everything that's at stake.

BP: Now your book is called "Simpler." Was there the view in 2009 that too many regulations were too complicated?

The way the government had been operating, I do think complexity was a serious problem. Many rules are hundreds or thousands of pages, and they didn't even have executive summaries for people to get a sense for what's in them. That’s not ideal. The fact that paperwork burdens would accumulate and there hadn't been a serious effort to have a large-scale reduction — that was a problem.

BP: Okay, so one common criticism of the Obama administration was that it put out too many costly rules. Is there evidence that these regulations actually got simpler?

CS: Broadly, the best evidence is to look at the net benefits of the regulations that were put out. The net benefits averaged upward of $91 billion in the first three years, which was higher than the average under Presidents Clinton or Bush.

I do think that in the first four years, we took steps in the direction of simplification. The fact that we were able to use regulatory lookback to eliminate billions of dollars in regulatory costs. The administration quietly announced in January that it had eliminated more than 100 million hours of paperwork burdens — I believe that's the largest reduction the U.S. has ever had.

Other things are a bit harder to quantify. The fact that complicated rules are now accompanied by plain language summaries. There are now executive summaries that include not just the primary requirements of the rule, but also the legal authority, and the costs and benefits.

There was also a new effort for international regulatory cooperation with Canada, so that companies in the U.S. and Canada weren't dealing with inconsistent regulatory requirements. There are a lot of areas where the two countries agree, such as fuel economy. It's hard to quantify that, but it makes things easier for consumers and companies.

BP: Are there obstacles in the way of simplifying further?

CS: One big challenge is statutory requirements [i.e., the laws written by Congress]. Right now, the American public spends about 9 billion hours per year on paperwork and reporting burdens. About 6.7 billion of those hours come from the IRS, and a big part of that is just statutory requirements. So sometimes efforts to simplify regulations are blocked by legal mandates. That's a challenge.

Future administrations will also face a challenge in making sure that simplification effort continues. For example, there's the Plain Language Act of 2010, which calls for federal agency communications to be intelligible to the public. And since people are used to the language that they're used to, and that language can be pervaded with jargon, it’s challenging to make sure people who write communications actually speak in terms they can understand.

I think also with the regulatory look back, that could be challenging to continue. There was great progress in the first term, and the president asked for that to continue. But people are busy, they have a lot to do, they're going forward with new regulations involving public health and safety and environment. So any department of federal government or office has a lot of balls to juggle, and simplification is just one of those.

BP: I bet this strikes many people as surprising. The federal government spends a lot of time predicting the costs and benefits of rules, but it doesn't always go back to make sure those regulations worked as predicted.

CS: What we found was there's a lot of low-hanging fruit here. The regulatory lookback initiative turned out to be terrifically successful in the Department of Transportation, Health and Human Services, in the EPA, in the Department of Interior. They found a lot of stuff they could streamline or eliminate.

And that often has good human consequences. More people can get college aid and therefore attend college if we simplify the Federal Student Aid program. Or people could navigate the airports more easily through the global entry program. Truck drivers can spend more time with their families rather than spending time filling out excessive forms.

And one of the values of this streamlining exercise is that it could happen at same time as new health care, financial reform, highway safety, and environmental protections were being issued. So you can walk and chew gum at the same time, by issuing rules that promote improved fuel economy, while also regulating more clearly.

BP: Does OIRA go back and look at whether the predicted costs and benefits of regulations were actually correct? 

CS: The section calling for retrospective analysis was in regulatory order 13563, which calls for a reanalysis of the numbers. It's not often done systematically. We do have outside analysts who look at these numbers, so we do have some sense for dozens of rules, of how well the anticipated costs correspond with the actual costs. But I think it’s right to say that this needs to be more common and systematic.

BP: Now some environmentalists and others have said that OIRA sometimes imposed cost-benefit analysis on rules where this was inappropriate — such as environmental or pollution rules that were only supposed to be set according to a public health standard.

CS: What has priority here is the law. If the law requires cost-benefit analysis, that’s what you use. If the law prohibits it, then you don't. The Supreme Court issued a decision called Entergy v. Riverkeeper, saying that in the face of ambiguity, agencies are allowed to make cost-benefit analysis and use their judgment to proceed. That is important for many rules.

In other cases, even if an agency is not required to use cost-benefit, that analysis can still inform the decision. There are rules like the National Ambient Air Quality Standards, which are supposed to be cost-blind, as a matter of law. But it's still useful for the public and members of Congress to see what the costs and benefits of regulations are. Fortunately, environmental rules typically have benefits far in excess of the cost.

BP: So that brings us to the standard for ground-level ozone, or smog, which the White House directed the EPA to withdraw. As I understand it, the law says cost-benefit analysis isn't supposed to be used when setting those national smog standards.

CS: If you look at the president’s statement and the letter he directed me to write, he did not say the benefits were low compared to the costs. My letter said plainly that benefits and costs are not the basis of the decision under the Clean Air Act.

The problem with the EPA’s planned course was not that the costs were higher than benefits, but that there would be a great increase in uncertainty to set one ozone standard in 2011 when there was another already scheduled for 2013. We emphasized the fact that the EPA would be finalizing one rule for 2011 based on outdated science while it was already compiling new science for 2013. So to have a standard for a short time period that would force states and localities to gear up for one set of rules, which a lot of science would soon make obsolete — the president didn't think that was an approach he supported.

BP: Another criticism often raised by progressive groups is that many regulations get stuck at OIRA for long time periods without action.

CS: Often if a rule is taking a long time, it’s because there’s some substantive issue where people haven’t yet reached agreement. My highest priority was to make sure that the laws that were reissued would be lawful and seen as such by federal judges. So frequently, when there's a long process, it's because lawyers are trying to figure out how to get it right.

Sometimes the hold-up could also be that the issuing agency might not see the rule in question as a high priority. They'll say, okay, we see, there are problems in what we sent over, and you know, we’re not going to focus on that one for next six months.

BP: A lot of critics will say that these rules are being held up for political reasons, especially in an election year.

CS: The process of getting regulations right is described publicly as far more political than in fact it is. It's essentially a legal and technical enterprise. For instance, another thing is the indispensable role of public comments in making rules simpler and better. And here I have to tip my hat to Hayek, who emphasized the importance of dispersed information in society. It just is the case that American citizens will often know a lot more than even well meaning government officials, and public comments can reflect that.

In response to rules that are staying at OIRA, people are working hard to get public comments responded to. Often people will say this comment is pretty powerful, we either need a substantive response that’s convincing, or we need to accommodate it. And there the delay is actually inspiring and not frustrating.

BP: What about the criticism that these decisions are often made in secret?

CS: I don’t think any administration thinks that its own internal deliberations, which are often tentative, should be made public, even if they're time-consuming. If the Department of Justice says there are legal problems or scientists in the government say we think the science you're relying on isn't sound, that's something the administration needs to think about internally.

BP: Now that you've left government and are looking from the outside, do you think there are still ways to improve the regulatory process?

CS: I think there are. Before I left, I issued a memo on the cumulative effects on regulation. You can have one regulation from one department, another from another department, a third from a third, and they could all overlap. Then the private sector will be burdened and baffled. The problem of cumulative burdens deserves a lot more attention.

There are also ways to improve international regulatory cooperation, especially with Europe, and Asian countries, in order to avoid pointless inconsistency and cost. It just is the case that we can further important public health and safety goals while also reducing costs.

BP: That means trying to harmonize our regulations with, say, Germany? Is that possible? Don't they have very different laws?

CS: If the laws are different or there are differences in judgment or factor values, then we can’t get on same page. But we often agree more frequently than one might expect. One thing we did was with hazardous warnings for workers. We made sure the warnings that U.S. companies give are harmonized with other countries, so that if you move from one nation to another, you don’t have to change your warning system. A global harmonized system can save hundreds of millions in regulatory costs every year, and it's good for worker safety.

Interview has been very lightly edited for length and clarity.