The Trump Administration’s weakening of regulatory benefit-cost analysis vests unequal power in executive review.
In late October, the acting administrator of the Office of Information and Regulatory Affairs (OIRA) issued a memo attempting to speed up the pace of deregulation. The memo has three sections. Two of the sections deal explicitly with OIRA review of regulations and the related requirement that agencies conduct a benefit-cost analysis in certain cases when regulating or deregulating. The remaining section concerns the legal basis for deregulation.
Regulatory benefit-cost analysis and the parallel requirement for OIRA review have a long and controversial history. The two were coupled first in President Ronald Reagan’s Executive Order 12,291 and then in President Bill Clinton’s Executive Order 12,866, which remains in effect. Benefit-cost analysis was opposed by those who believed that it was inevitably biased against regulation. Presidential review of agency regulations, delegated to OIRA, has always been wrapped up in questions of presidential authority over congressionally created agencies.
The pairing of the two procedural controls on agency regulatory actions was seen by some as complementary. Analysis helped make the impacts of regulation more transparent, facilitating executive review. But when analysis went counter to presidential preferences—either showing such preferences were not economically efficient or showing that policies that the President opposed were economically efficient—OIRA, which reviews both the regulation and the underlying analysis, was in a difficult position. In these situations, presidential preferences almost always won out.
From 1981 until 2017, the marriage between benefit-cost analysis and executive review endured. But the underlying politics surrounding benefit-cost analysis changed. As economists got better at measuring the benefits of regulation, particularly environmental and health benefits, benefit-cost analysis began to be seen as a tool that supported more stringent regulation of the economy.
This point of view led to the first Trump Administration taking steps to abandon regulatory benefit-cost analysis. Specifically, Executive Order 13,771 initiated a process whereby agencies had a budget for the regulatory costs imposed and also required agencies to eliminate two regulations for every new regulation issued. Neither of these requirements accounted for regulatory benefits, essentially discarding the benefit-cost framework that had existed for the previous 36 years. Analyses conducted by the Trump Administration were generally derided as being deeply flawed from an economic perspective.
President Joseph R. Biden, Jr., repealed Executive Order 13,771 on the first day of his term. In 2024, the Office of Management and Budget issued changes to Circular A-4, the guidance that instructs agencies how to conduct benefit-cost analysis for regulations. The changes, including lowering the rate at which future benefits are discounted to present values, examining distributional impacts of regulation, and counting global effects of climate change as part of the benefits, generally ensured that benefit-cost analysis would lend even greater support to regulations than it had before.
The changes were not well received by opponents of strict government regulation. The Trump Administration withdrew the changes to Circular A4 almost immediately upon taking office.
The October OIRA memo issued is, in part, the product of this shifting ground concerning benefit-cost analysis. The first section of the memo instructs OIRA to reduce its review time of deregulatory actions from 90 days to 28 days—and to 14 days for repeals of “factually unlawful rules.” This instruction would give OIRA practically no time to weigh in on the legal, policy, or economic implications of deregulatory actions. The third section lists certain benefits of deregulation that do not need to be quantified, such as “increases in the scope of private freedom” and reductions in aggregated impacts.
The memo largely codifies the unequal relationship between regulatory benefit-cost analysis and executive review. Deregulation is a top priority of the Trump Administration. If high-quality analysis suggests that deregulation is costly, and it often will, the memo effectively instructs OIRA to turn a blind eye. It formalizes the idea that OIRA is first and foremost an arm of the President.
Some may argue that this codification is no different than President Biden’s change to Circular A-4 or individual regulatory decisions by Presidents of both parties that ignored analyses that went against their priorities. But all previous Presidents felt constrained by the norm that Presidents Reagan and Clinton established: that benefit-cost analysis led to better and smarter regulations. Their actions were always taken in a way that endeavored to respect that norm.
The formal instructions to OIRA and agencies to ignore benefit-cost analysis in certain circumstances may mark an end to this era. There is now little reason for a pro-regulatory President to require detailed economic analysis of stringent environmental or worker-safety regulations. If regulatory benefit-cost analysis is to survive, it will have to be outside the executive branch of government.