The White House State: ‘Regulatory Reform’ in Sheep’s Clothing (OMB Circular A-4)

“The strong first impression is that OMB Circular A-4 is a fast-track means for the administrative state’s ‘all of Government’ agenda to combat the ‘existential threat’ of anthropogenic global warming.”

Last Friday April 7^th, The Hill reported:

The White House is [re]forming the country’s regulatory system, announcing a new executive order and guidance that experts say could be used to justify both more and stronger regulations. On Thursday, the White House released an executive order reducing the number of regulations that undergo a more rigorous White House review and promoting public participation from previously underrepresented groups at its Office of Information and Regulatory Affairs.

The article, “White House Issues Reforms to the Regulatory Process,” quoted two experts from the climate alarm/forced energy transformation side of the debate.

Billy Pizer, vice president for research and policy engagement at Resources for the Future … described the changes as a “pretty major overhaul.”

“It’s the most significant update for the U.S. government’s broad regulatory analysis policy since we’ve been doing regulatory analysis policy,” Pizer said. In particular, this could lead to both more regulations and regulations that are more protective. 

And from James Goodwin, a senior policy analyst at the Center for Progressive Reform:

It brings an entirely different way of thinking about the regulatory system. It does create more space for agencies to regulate more and…to [make] more protective regulations.

“They’ve sort of laid the groundwork to make it a big deal. Do you ever play with Legos? You sort of dump out the pieces. They’ve sort of dumped out the pieces. The question is: what are they going to build with it, if anything.”

The Washington Examiner‘s Daily on Energy (April 10th) published: How the OMB regulatory analysis changes will boost Biden’s climate agenda. It quoted a different perspective:

Chad Whiteman, vice president of environment and regulatory affairs at the U.S. Chamber of Commerce, said OMB’s proposal represents significant changes that are effectively putting a thumb on the scale and “ballooning the benefits” so the administration can justify much more stringent regulatory requirements.

In summary, there is a lot of information to unpack as to what OMB proposes and the implementation timeline thereof. However, we are well aware of OMB Circular A-4 as it presently stands and have started to review a new public review draft released on April 6^th.

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The strong first impression is that OMB Circular A-4 is a fast-track means for the administrative state’s “all of Government” agenda to combat the “existential threat” of anthropogenic global warming. The proposal aims at (among other things):

• Lower discount rates to boost life-cycle cost savings estimates of new regulations.
• Authority to account for social cost of carbon (SCC) estimates that occur outside of the United States.
• Increasing what constitutes a “major rule” (that requires more analytical scrutiny and transparency) from $100 million to $200 million per year of overall economic impacts.

Example: DOE in the Home

The U.S. Department of Energy is already using some of these advantages in ongoing appliance efficiency rulemakings. A case in point is DOE’s rulemaking for consumer cooking products. The following tables, excerpted from DOE’s  “Technical Support Document” (TSD), illustrate how DOE is inflating its cost effectiveness justification by including SCC and nebulous health  improvements for cooking products.

When energy savings amounts are broken down to the individual consumer level, the dollar value appears to be negligible; in the range of a dollar or two per year for a gas range. According to CEI’s Ben Liberman’s draft comments:

Average household energy use for cooking is low to begin with, less than $35 per year for either electric or gas cooking. Given the modest overall energy use from cooking, it is not surprising that the estimated savings from the proposed rule are quite small at about $1.50 per year for a gas cooktop.   In retrospect, it is for good reason that the agency had previously declined to bother with an efficiency standard for cooking products.

However, as shown in the above tables, adding SCC and ostensible health benefits increased cost savings to values that are far less negligible. The question is whether such methodologies can be shown to defy the legislative intent of the Energy Policy Conservation Act (EPCA). Adding another official discount rate, perhaps down to zero, would further inflate claimed cost effectiveness. (Note that mainstream environment advocates have wanted a zero discount rate for many years.) Perhaps they will finally get it now from Uncle Joe.

The good news (maybe) is there are supposed to be opportunities for public input.  Whether or not an official docket number is assigned to this is yet to be seen.  Without that, public comments may not be disclosed as they traditionally are via reggulations.gov.  

References for Executive Order & OMB Guidance

• The Executive Order of April 6, 2023: Modernizing Regulatory Review
• Strengthening Our Regulatory System for the 21st Century
• Preamble: Proposed OMB Circular No. A-4, “Regulatory Analysis”
• Proposed Revised Guidelines
• Circular A-4 – DRAFT FOR PUBLIC REVIEW – The White House

Appendix: Mike Solon on Circular A-4

Mike Solon of US Policy Strategies had these first impressions of Circular A-4:

OMB has proposed changes to “Circular A-4”, which gives guidance to agencies on how to perform regulatory analysis.  They will take public comments but are likely to adopt something very close to the proposal.  Three big changes will tip the scale toward activist government:

• 1) Lowering the discount rate from 3% to 1.7% (the current value based on their proposed formula).  Going forward, it will be easier to impose large, certain front-loaded costs to achieve uncertain benefits in the distant future.
• Magnifying costs and benefits borne/realized by lower income populations and geographic areas, on the theory that having fewer resources, they are disproportionately affected.  Arguably this is redistribution of wealth via regulation.
• Assuming those affected by regulation are risk-averse rather than risk-neutral, which sounds like giving extra credit for making people feel better off, even if they aren’t actually better off.  

By executive order, Biden also changed the definition of “significant regulatory action”, raising the threshold for more stringent review from “an annual effect on the economy of $100 million”, to $200 million, adjusted for GDP growth going forward.

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