Tuesday, January 18, 2011

New Executive Order on Regulatory Impact Analysis

President Obama signed a new Executive Order (EO) today (available here), which does not replace but supplements the existing Executive Order 12866. The most significant  addition of the new EO is its requirement of regular post hoc regulatory reviews. Until now, federal executive branch agencies have only been required to prepare ex ante regulatory impact analyses (a form of cost-benefit) analysis for newly proposed regulations. This new requirement forces agencies to go back and periodically examine existing regulations to ensure that they are, and remain, cost-effective. It is a very sensible addition to the regulatory review process.

Unfortunately, the new EO does not address the issue of social discounting - the process whereby future streams of costs and benefits are expressed in present dollar values. I, for one, had been hoping that the new EO might adjust downward the current baseline discount rate of 7%, which is quite high especially for regulations with intergenerational effects.

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