Executive Order 12866 in the United States, issued by President Clinton in 1993, requires a cost–benefit analysis for any new regulation that is "economically significant", which is defined as having "an annual effect on the economy of $100 million or more or adversely affect[ing] in a material way the economy, a sector of the economy, productivity, competition, [or] jobs," or creating an inconsistency with other law, or any of several other conditions.William J. Clinton, Exec. Order No. 12866, Regulatory Planning and Review, 58 Fed. Reg. 51,735 (Oct. 4, 1993). The Order established a "regulatory philosophy" and several "principles for regulation", among them requirements to explicitly identify the problem to be addressed,Exec. Order 12866, § 1(b)(1) determine whether existing regulations created or contributed to the problem,Exec. Order 12866, § 1(b)(2) assess alternatives to direct regulation,Exec. Order 12866, § 1(b)(3) and design regulations in the most cost-effective manner possible.Exec. Order 12866, § 1(b)(5) Section § 1(a) summarizes this regulatory philosophy as follows:
Agencies were directed to fulfill these requirements though economic analysis,Exec. Order 12866, § 1(b)(6)-(8) most notably the preparation of Regulatory Impact Analyses (RIAs).Exec. Order 12866, § 6(a)(3)(C) Regulations within this definition are colloquially termed "economically significant".
Executive Order 12866 Scope Though the term effect is crucial for determining the likelihood that a rule is economically significant, the term was not internally defined. Rather, all interpretative determinations critical to implementation were delegated to the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB).Exec. Order 12866, § 6(b)
Procedure Executive Order 12866 provides for a centralized review conducted on behalf of the President by OIRA (the same agency directed by Congress to implement the Paperwork Reduction Act). This alignment of executive and statutory functions enhances the efficiency of Executive Office oversight because virtually every rule contains information collection requirements.
Under Executive Order 12866, the procedure for determining whether a draft rule is significant (and thus subject to OIRA review) or economically significant (and thus subject to the requirement to prepare a Regulatory Impact Analysis) begins with agencies preparing entries to the semi-annual Unified Regulatory Agenda,5 U.S.C. § 602. which OIRA reviews before publication in the Federal Register, along with each agency's Regulatory Plan.Exec. Order 12866, § 3(c) Agencies are required to engage in prior consultation with both private and public stakeholders before drafting notices of proposed rulemaking, and ensuring that they have at least 60 days for public comment.Exec. Order 12866, § 6(1)(a)
Agencies are required to provide to OIRA comprehensive lists of planned regulatory actions, including agencies' provisional determinations of whether each action is significant.Exec. Order 12866, § 6(a)(3)(A) Drafts of significant regulatory actions must be transmitted to OIRA for review, along with assessments of their potential costs and benefits.Exec. Order 12866, § 6(a)(3)(B) For economically significant regulatory actions, agencies also must provide OIRA with a Regulatory Impact Analysis.Exec. Order 12866, § 6(a)(3)(C) After OIRA review is completed and each draft proposed or final rule is published in the Federal Register, agencies are required to make all analyses public and "[i]dentify for the public, in a complete, clear, and simple manner, the substantive changes between the draft submitted to OIRA for review and the action subsequently announced; and ... those changes in the regulatory action that were made at the suggestion or recommendation of OIRA."Exec. Order 12866, § 6(a)(3)(C)(ii) to (iii).
OIRA may return a draft rule to an agency "for further consideration of some or all of its provisions," accompanying any return with "a written explanation ... setting forth the pertinent provision of [Executive Order 12866] on which OIRA is relying."Exec. Order 12866, § 6(b)(3).
The reach of Executive Order 12286 was extended in 2011 to require agencies to conduct retrospective reviews of existing regulations.See Barack Obama, Exec. Order No. 13563, Improving Regulation and Regulatory Review (Jan. 18, 2011), 76 Fed. Reg. 3821-23 (Jan. 21, 2011).
Regulatory Impact Analyses under Circular A-4 Regulatory Impact Analyses are governed by guidance issued by OMB, OMB Circular A-4.Office of Management and Budget, OMB Circular A-4, Regulatory Analysis, https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4, (Sept. 17, 2003). Circular A-4 requires agencies to clearly identify why regulation is needed, consider a reasonable number of alternative regulatory approaches, and for each alternative conduct a rigorous and objective benefit-cost analysis. OIRA reviews RIAs for transparency, utility, and objectivity.
Judicial review Executive Order 12866 concludes with the statement Enforcement of the Order occurs during a public comment period after the agency receives public comments, and before the agency publishes a final rule. Notices of Executive Order reviews are not published—an interested member of the public has to watch OMB's web site daily to see when the agency submits a rule for review. OMB receives comments and will conduct meetings (with agency representatives present) to conduct reviews. These are not entirely satisfactory, since the final rule remains unpublished, and members of the public can only comment on the rule as proposed in an NPRM. Nonetheless, OMB does block or require further changes to a handful of rules every year.
History
Origin of benefit-cost analysis: President Ford's Executive Order 11821 and the Council on Wage and Price Stability
President Gerald Ford's organized, comprehensive effort at regulatory reform, and to address inflationary impact of federal government activities and regulation, began with establishment of the Council on Wage and Price Stability (CWPS) in August 1974. The council was charged with monitoring the private sector economy, and reviewing government programs to determine their impact on inflation. In November 1974, President Ford issued Executive Order 11821, which established procedures for preparing Inflation Impact Statements, that required agencies to evaluate economic impact of regulatory proposals, specifically their effects on productivity and competition, and to submit those statements to CWPS for review.
President Reagan's Executive Order 12291
Executive Order 12291See Ronald W. Reagan, Exec. Order No. 12291, Federal Regulation, 48 Fed. Reg. 13193 (Feb. 19, 1981) and Exec. Order No. 12498, Regulatory Planning Process, 50 Fed. Reg. 1036 (Jan. 8, 1985). required OIRA review for regulations that "may [h]ave an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities."
Replacement by President Clinton: Executive Order 12866
Executive Order 12866 (October 1993) replaced Executive Orders 12291 and 12498.
The key procedural difference between today's Executive Order 12866 and the 1980s-era Executive Order 12291 is that, under Executive Order 12291, OIRA formally reviewed all draft proposed and final rules before signature by the relevant agency official and transmission to the Federal Register for publication, whereas under Executive Order 12866, OIRA formally reviews only those draft rules covered by § 3(f) ("significant regulatory action"). This distinction is significant, for during the 12.5 years in which Executive Order 12291 was in place, OIRA reviewed an average of 2,382 draft rules per year, but during the 24 years that Executive Order 12866 has been in force, OIRA has reviewed only 596 draft rules per year.Data from www.reginfo.gov, comparing the period Feb. 19, 1981 through Sept. 30, 1993, with the period Oct. 1, 1993 through Sept. 30, 2017. This 75% reduction in the scope of OIRA review undoubtedly enabled more focused attention, but it did so at the expense of incentivizing agencies to evade OIRA review by misclassifying draft rules below the threshold set in § 3(f).
Revisions by President George W. Bush -- Executive Orders 13258 and 13422
President George W. Bush amended Executive Order 12866 in Executive Orders 13258 and 13422. Executive Order 13272 is related, requiring consideration of small entities.
Revisions by President Obama -- Executive Order 13563
Ten days after entering office, President Obama issued Executive Order 13497, which revoked President Bush's Executive Orders 13258 and 13422.74 Fed. Reg. 6113 (Jan. 30, 2009)
In 2002, Cass Sunstein, who would later serve as President Obama's Administrator of the Office of Information and Regulatory Affairs, co-authored an article on a proposed replacement.Robert W. Hahn and Cass R. Sunstein, A New Executive Order for Improving Federal Regulation? Deeper and Wider Cost-Benefit Analysis, 150 Univ. Penn. Law Rev. 1489-1552 (May, 2002).
Executive Order 13563, Improving Regulation and Regulatory Review, was issued by President Barack Obama in 2011., 76 Fed. Reg. 3821 (Jan. 21, 2011). It reaffirms and amplifies the principles embodied in E.O. 12866 by encouraging agencies to coordinate their regulatory activities, and to consider regulatory approaches that reduce the burden of regulation while maintaining flexibility and freedom of choice for the public. It directs agencies to, where feasible and appropriate, seek the views of those likely to be affected by a proposed rulemaking before a notice of proposed rulemaking is issued. E.O 13563 requires agencies to quantify anticipated benefits and costs of proposed rulemakings as accurately as possible using the best available techniques, and to ensure that any scientific and technological information or processes used to support their regulatory actions are objective.
To the extent feasible and permitted by law, E.O. 13563 also directs agencies to provide timely online access to the rulemaking docket for proposed and final rules, along with any relevant scientific and technical findings, on regulations.gov, and to afford the public the opportunity to comment on proposed regulations through the Internet. With regard to existing regulations, E.O. 13563 instructs agencies to periodically review their significant regulations with the goal of making their regulatory programs more effective or less burdensome.
Revisions by President Trump (first administration): Executive Orders 13771, 13777, 13891, 13892, and 13893
Executive Order 13771 The provisions of Executive Orders 12866 and 13563 were significantly narrowed in some respects and expanded in others by Executive Orders 13771 and 13777.Donald J. Trump, Exec. Order No. 13771, Reducing Regulation and Controlling Regulatory Costs (Jan. 30, 2017), 82 Fed. Reg. 9339-41 (Feb. 3, 2017); Donald J. Trump, Exec. Order No. 13777, Enforcing the Regulatory Reform Agenda (Feb. 24, 2017), 82 Fed. Reg. 12285-97 (Mar. 1, 2017) Among the significant narrowing provisions are a more parsimonious description of the stated purposes of regulation. Whereas Executive Order 12866 contained a long list of regulatory principles, in which the maximization of net social benefits is one of many, Executive Order 13771 directs agencies "to be prudent and financially responsible in the expenditure of funds, from both public and private sources" and to "manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations".