Transcripts For CSPAN Brookings Institution On Deregulation 20171021

Independent research on regulatory performance and process, and to host events like this where we can have informed debate on regulation, and everything with the word reg in it. There is a long tradition at brookings working on regulatory policy. Way back in the 1990s in my youth and im going to stick by that being my youth i was affiliated on the aei side with the joint study on regulatory structures. That center no longer exists. I want to start something up again, and lo and behold, here we are. It is a particularly opportune one to focus our attention regulatory policy. In recent years we have seen increasing delegation of Policymaking Authority from congress to the agencies. We see this now nine months into the Trump Administration. If you look at the priorities of the president , on domestic policy on regulatory policy. Front, you had the repeal of the aca, and that did not go as planned. We have tax cuts or tax reform, depending on how you want to categorize it. It is moving along, but the process is uncertain. And we have any agenda of deregulation. Unlike the first two, the regulation does not require congressional participation. Isis safe to surmise that more proactively moving forward within the executive branch. The plan for today is for me to talk about 20 minutes or so on a new paper we just released tonight. It is a paper that i coauthored with my colleague at brookings, at the council on foreign relations. Bob is unfortunately recovering from illness, so he is not here today. I hope he is watching on our webcast online. Hello to everyone else watching online too. Thank you for watching us tonight. Will i finish my talk, we monitor a Panel Discussion of the paper and the state of trumps regulatory policy more broadly. As we do with our events at brookings, we will take questions from you. Save your questions for time. Type give you an overview of the paper. I encourage you to read the paper as well. We are looking at trumps regulatory plan, our twofold requirement. More or less running at the beginning of an administration, issued an executive order which set up a regulatory offset requirement, and a regulatory budget requirement. The regulatory offset is essentially what it says for every new regulation, we have to offset it by eliminating two regulations. The regulatory budget is each year, the omb director will come up with a budget for nch agency, and their convene there can be no net increase for that budget in the fiscal year. This is a break from the emphasis of democratic and republican administrations, where it was based on maximizing net benefits to society. There is a lot of methodological discussion and debate, and increased disagreement about how you measure benefits and costs. Ith trumps executive order, is not a discarding of that methodology, but a redoubled effort on the cost side. President reagan had an executive office saying that benefits should outweigh costs. Clinton changed that to benefits should justify costs. You can see a bit of nuance. Broadly speaking, the Democratic Administration puts more emphasis on distributed impacts and equity when considering regulation. By and large, the whole goal is to measure benefits and costs. So what is the rationale in the history of this . From an economic point of view, a redoubled emphasis on the cost side through an offset budget. Sense. Nt make economic if you have a regulation that is going to be extremely costly, but has even more tremendous fun of benefits, you would want to promulgate that sense. If you have a regulation regulan consistent with law. Nonetheless, from an economic point of view, that is a welfare improving regulation we should pursue, and we should not disfavor it with another regulation that would have smaller benefits, but less costs. Economically it doesnt make much sense. There is a, political economy argument why you would use such an instrument. Suggests there institutional framework of policymaking could lead to overregulation. Be unwilling to undo beulations that may not effective. The notion that some costs may be diffused, but if concentration benefits, you may have more political emphasis on one side, even though it may not be justified from a net benefit point of view. One way to think of trumps proposal is as a blunt political instrument against overregulation. It is in some sense analogous to what we do with fiscal budgeting, direct expenditures that limit agency spending. It is not like agencies can spend so long as net benefits are increasing. They are subject to Budget Constraints on the cost side. A regulatory budget is not a new idea. I am going to talk a little bit about brookings. If you go back to 1978, longtime economist here at brookings wrote a paper on economic activity, essentially advocating for a regulatory budget. Not an offset, but a budget. My coauthor at the time at brookings, wrote a book in 1983, again after getting for a regulatory budget. Even if you dig down and look at president carters economic report from the president , his counsel who wrote that book was chaired by someone from brookings. Air that out of thin these ideas have come up. One key difference, if you look at those historical advocates for a regulatory budget in those worlds, congress had a strong role in determining what those budgets to be. With trumps plan, it is through executive order. Role of congress, unlike the previous suggestion. There is also some International Experience with regulatory offsets and budgeting. British columbia in 2001 established a 2for1 offset requirement, every new regulation had to have two offsetting ones. It was regulatory requirements, which is a little bit more subjective than regulation. I will talk about how you go about measuring costs in a regulatory budget framework. That is a key issue. In the British Columbia example, they went through all the regulations. They counted what they thought was regulatory requirements. An action or step they have to do to be in compliance with a in 2012, often perceive success of the British Columbia policy, canada as a whole started the oneforone offset requirement in this case it was not it was actual regulation. They also sent a regulatory budget cap. The cost measure they used was the Administrative Burden cost, compliance cost to it is important to consider for all of these how you measure cost presents differences, challenges, and implications for what comes as a result of the the u. K. In 2001 instituted a oneforone, then increased it to a three for one offset. More more of a budget than an offset. For every dollar of regulation you had to reduce a dollar regulation elsewhere. They used net cost to business. You can imagine scenarios him of this happened, where society is not being made better even though you are reducing the net cost to business. If you have a rule saying that businesses can reduce engine costs to workers, it is transferred from the workers to the businesses. Under this definition it would be a Cost Reduction and you can get a perverse outcome if you are not careful about how you measure cost. With trumps plan, it faces both legal and practical challenges, which we outlined in the paper. First, the legal one, we had the good fortune of working with bob caseas part of arguing the the Motor Vehicles association versus state farm. In that case, what happened was president reagan came into office and wanted to resend an existing transportation rule on airbags and seatbelts the Carter Administration had promulgated. They went through with the administrative procedures act, a review process. Their argument was since they were resending a rule didnt need to meet the same standard of review. They could be a looser standard of review. And they lost. Procedurally, if the administration comes in they cant just eliminate a role. Eliminate a rule. They have to go through the standard administrative procedures act requirement. You cant just strike something. You have to provide a full notice and comment and provide evidence for the rulemaking you are promulgating. Also consistent with the law, you cant promulgate a role that the court sees as capricious. You have to establish an evidentiary basis that is consistent with existing statutes and provide evidence in support of the rule you are proposing. This constrains the administrations ability to deregulate. I think if you read the executive order and the guidance documents, and other documentation from the Trump Administration, there is language that suggests they understand and are deferential to the fact that they have to comply with these requirements. These are permeating the executive order. It acknowledges permits by law, otherwise required by law, in accordance with the administrative procedures act, etc. So there is an understanding in their actions that they may not need congress to do this, but there will be a judicial review coming and they better be prepared for that. On the practical challenges, there are a number of practical challenges. I already alluded to the biggest if you are going to require an one. Offset or a regulatory budget on cost, how do you measure cost . Such is life, generally the more that a measure gets to what we care about, the harder it is to , a cruelt reliable twist of fate. For example, it is rather easy to measure the pages in the code of regulations. You can count each year. If they go up, you can say this correlates to cost and cost is going up. If that is the if that is the requirement for budget neutrality, that is very imprecise. You can step it up more than that and count the number of regulatory restrictive words. This is where you get kind of biblical. The number of shalls and musts, i almost said thous, but that is the wrong book. Use that as a proxy for regulatory costs. It is somewhat informative, but not perfect for a cost. The u. K. In the u. K. , you could look at the cost to business. It gets harder to measure compliance cost and other costs in complying with the regulations. , the deregulation may inflict on them. It is onesided because transfers from workers, customers, to consumers or businesses wouldnt be captured in that. Economists have defined what the true costs are, opportunity costs . For this regulation, what with the private entity be doing with their resources . What would be the next best thing they would be doing and their willingness what would be the next best thing they would be doing and their willingness to pay for that . This is opportunity cost, not just for regulation, but for everything. When the government draws resources away from the private sector, opportunity cost is what would be done with those resources if they had it and subject to the rule . This is a conceptually correct approach to measuring opportunity cost, and is also enormously different. It is like the economist work program. It gives us lots of things to do and measure, but it is enormously difficult to do. Certainly on a regulation, broadly speaking, if you want a budget for all of the regulations of a given year, that is a hard number to come by. It does create a challenge, and that is the biggest challenge practically with achieving what the Trump Administrations rules are trying to do here. Are our questions over time. How far can they bank that in the future and use it later . Every agency has a cost setting. There is a question of that flexibility across agencies. That allows for some of the cost savings at one agency to be used as an offset for another agency. It is hard to see how that will work out, but it is at least in the guided documents conceivable. Then there is the big question of exemptions. What rules does this offset apply to, and what dont they . For one, it doesnt apply to nonsignificant rules, smaller rules, less than it does apply 100 million. To guidance documents. It doesnt apply to independent agencies. It might apply to international agencies. Then you have emergency regulations, Foreign Affairs functions. I think most of those it does not apply to, but there is some discretion about which rules would be subject to the offset requirement. Im going to be winding down soon. Ok, so scenarios, we can lay this out at the end of the paper. This is our attempt at what will happen. One of the luxuries, or challenges, when you have three authors for one paper, you can lay out lots of scenarios and we can all carry our own probability weights across those three scenarios. I dont know if we all necessarily agree on what will happen, but these are just possibilities. One thing that is omitted is offset in the budget doesnt make it difference. Not that we all agree on what will happen, these are just possibilities. One is that it is nonbinding. That is conceivable because if you have an Administration Like the Trump Administration, that is predisposed to this change in process not to regulate, the fact you are adding other constraints might not be binding. Plans to do the minimum out of propagation of new rules, meeting requirements on a budgetary or regulatory cap or offset might be relatively easy. That is probably an extreme version. Then we have best and worst case outcomes. On the worst case outcomes, you could have this being a total morass, and that might even be the design of it. As i said before we are talking about the legal challenges. If they want to promulgate a rule subject to this offset, they have to promulgate three rules. Measuring the opportunity costs and all the rest, so it is creating headwinds to promulgating new regulations and it could just mean irrespective of net benefits, is slowing the process down. Another bad possible outcome is we need to meet these requirements, how are we going to find two regulations to cut . Let to do it haphazardly because we dont have a well agreed upon inventory of regulations where were we have precise measures of opportunity cost. It could just be haphazard. On the pro side it could do with those advocates starting in the late 1970s and 1980s were suggesting. That it could be a political instrument to put some sort of budget discipline. If for each role you need to maintain a budget neutral, it is does give you an incentive to triage, to prioritize and go deeper in the existing rules to find out which ones are not effective or costly. That will that will be part of the discussion following my talk. I i will leave that for the discussions to probe deeper into. I want to highlight one additional thing. This slide tells you our take on the possibilities of what might happen. So the question as we move forward is what is happening . In addition to the paper we are releasing today, we are releasing something we are calling tracking deregulation in the trunk era. This is what we have online. This is not interactive what i have read here, but it is more interactive on the website. This is a screenshot. This is a screenshot. We are looking at the timeline of key regulations, the ones that have been most highlighted or most in the target of deregulation and giving a timeline of what happened. What happened under obama, what is happening under trump, and describing the process now. This, again, this is a screenshot. It is an interactive thing. Go interact with it. You will see on the website. You can also google it. You were also see in email. So we are looking for feedback, questions, suggestions, things we may have missed. We would love to hear from you. Im going to pause and an invite the panelists up. Let me introduce sheryl bolin, a reporter for bloomberg, a White House Correspondent who writes on regulatory policy. There you are. We are delighted she is here. I will sit down. My coauthor will represent me, lets hope, on the panel. Represent us on the panel. Thank you for being here. Panelists, come on down. [applause] sheryl alright. I am sheryl bolin. I am the White House Reporter for bloomberg bna. I have been covering regulatory policy since 2009. I finally recall asking our administrator at the time this really easy question, does regulation kill jobs . Little did i know books have been written on that topic. No such softballs for these guys today. Let me introduce our panel. To my left is howard shulansky. He is currently a professor at georgetown law. We have stewart schapiro. He is a professor at the edward faustian school of public records and university. And a senior fellow here in government studies at the brookings institute. And susan dudley, director of the George Washington University Regulatory studies center. And former administrator in the second term of president george w. Bush. What i would like to do is start off by asking the panelists to take one or two minutes. If you have any opening thoughts or have any observations about the paper, if you would like to share those thoughts with us. Powered . Howard howard . Pres. Trump howard i will start with a couple of observations about the paper. I think it is a terrific paper that is incredibly valuable right now. It does a nice job of pointing out some of the history of regulatory review, reform, and some of the challenges it will face. Looking at the actual executive orders, i think that there are things to watch out for as we watch the implementation of those executive orders Going Forward. One thing the paper points out is a very salient point. When one reads executive orders of that 13771 or 13777 relative to Regulatory Reform in the Trump Administration, no changes are being made to the underlying governing structure of regulatory review in the united states. Executive order set the criteria. Circulars omb has sent out to tell agencies how to do Regulatory Impact analysis and how to review rules is not being changed, but there is a shift on emphasis of regulatory costs. Because there is a lot to play in the joints in terms of data that is used, in terms of just the political valence this emphasis a particular administration has, without changing the underlying executive orders, a shift in focus to cost can have substantial impacts. If one looks at the leadership of the agencies have been doing, and the leadership of omb, there is a clear mandate being sent out through the executive branch, that the executive Branch Agencies and beyond to the independent agencies, better make sure that the benefits really justify the cost. That and that every cost is accounted for and, as well as possible, quantified. My evidence for that are two things. Most notably, what is interesting to me, is Mick Mulvaney at a certain point criticized the Obama Administration for not having taken into account cost and looking one sidedly added at benefits. That was not an accurate statement and was debunked in a subsequent Washington Post article. Where we only looked at one turned out we looked at about 15 rules where we only look at the costs. We did not look at the benefits. When one sees the perception of the government that will be running regulatory review, that is a pretty clear signal, i will be watching to any extent the agency has not accounted for costs, hence the cost emphasis. Similarly, when one looks at what the epa is doing on climate regulation, it is clear the emphasis is overwhelmingly on cost. Again, i would refer you to an interview that Chris Wallace had with scott pruitt on fox news , where prewitt was talking about how he was going to take down the Clean Power Plan. Wallace came back and said, what about the tens of thousands of asthma cases he year that will be prevented by the Clean Power Plan . What were you due to make up for those lost benefits . I am putting some words in his mouth. I am not sure he said lost benefits. He held his feet to the fire because he didnt have an answer. That signals im not looking at benefits. I am looking at cost. I think we will be entering a period where the emphasis is on cost. Costs will be the main criteria and we will see a lot of of rules pull down because of cost. The thing to watch for is insufficient and inaccurate the thing to watch for is insufficient and inaccurate accounting for very genuine benefits. Cheryl stewart . Thank you. Thank you for inviting me. I also really enjoy the paper. Thought it was a nice outlining of the world we are in right now. A lot of the rhetoric that has accompanied. Many things today i want to pick, accompanied many things today. These executive orders do not make that big of a difference. That is not an unlikely scenario. Quite frankly, given what howard said, if you tell scott pruitt he has to get rid of two regulations for every one he enacts or has to give costs and regulations within a budget, that is like telling my kids they have to either candy before they can have their vegetables. To put that in Political Science terms, the existing means of control of agency actions, particularly the appointment power and the fact that they republicans controlled congress right now i think is sufficient in the short term to ensure that there is not much regulatory accumulation and there is an emphasis on deregulation and eliminating regulatory costs. The real impact of this order is what happens after the shortterm, what happens in a longerterm period, where like gorsuch being replaced, scott pruitt eventually moves on and is replaced by whitman or someone like that. When Congress Goes to the democrats rather than being in the hands of the republicans. The question then is no longer, are the executive orders needed . But rather, are they sufficient to try and slow regulatory accretion . I think the answer there, this is more guesswork, is likely to be no. Once Political Forces align in favor of regulation, once judges tell the administration they have to issue regulations, those exceptions are going to loom very large in implementation of the executive order. In the longer term, when we have a Democratic Administration, i have to think these executive orders are among those that get revoked on the proverbial day one of the new administration. I i dont think these would be like executive order 12291, which was then modified by bill clinton and accepted and adapted and Regulatory Impact analysis became a permanent part of the regulatory framework. I dont think 241 regulatory budgets are the same, and i am happy to elaborate on that later and comment. Thanks. I do like the paper. I recommend everyone read it. I just want to emphasize i disagree with stuart. I think is real ambition behind this design and it would be a real disappointment if it all amounted to a complicated type of moratorium. I think the Business Community that, lets face it, is largely behind the push for this, it did not come out of president trumps head, they think regulatory accumulation is a really serious problem. This is designed to get agencies to use some of their energy to tackle accumulated regulation s that have built up over many decades now over a very active regulatory state. That is not something that is so off the wall, right . Well knows, the Obama Administration undertook a regulatory look back Program Designed to get some existing rules and say, lets assess these, lets get out of the deadwood where we can. Most people will say it was a fairly modestly sized effort, and this is designed to supercharge it. The point i want to make is that will be a real disappointment to a lot of people who have been instrumental in designing these executive orders if all that it amounts to is more new regulations. It is really designed to get agencies to get back into the closets and figure out what can be thrown out. Susan . Then i also really like paper, and i was in a coauthor. [laughter] susan i think it does a nice job stating up front what most economists would agree, and that is that benefit cost analysis, the net benefits test is the right measure, the right way to go about introducing new regulations and evaluating existing regulations, but there is a paragraph i will quote repeatedly that says, the reason for doing a constraint like this is not economic, but it is political economy. Adding that constraint is because there are problems with the way benefit cost analysis is done. As ted mentioned briefly, Agency Incentives to look at and evaluate new regulations and measure benefits and costs, but also to look back and evaluate the effect of existing regulation. The fact that often regulated parties once regulations are in place, not removing them or evaluating them. And that it is and that it is just plain hard to do. I think there are a lot of arguments. I think the paper makes an excellent case for why despite the fact that we all think things can be done perfectly, benefit cost analysis should be the governing rule. Having this having this as an overlay, and i think that is a key it is not point. Thiscing or should not be, is something that stewart or howard mentioned, should not be replacing that requirement for net benefits, but an overlay on top of it. I also think that the paper does a nice job of saying there are a a lot of challenges though, which is why we might have a different sense of what might the outcome b. Also, it is just hard to measure, it is hard to do the measurements, and measuring just costs is harder than measuring net cost or net benefits. I also i also like the way they laid out several scenarios. Stewart has added a fourth, but the best Case Scenario does depend on this new requirement being something that is overlaid on top of the existing requirements for net benefits , and that it actually stimulates and incentivizes real evaluation of existing regulations, which despite every president since carter and even before have told agencies dont only look Going Forward at the benefits and cost of future regulations, but look at the regulations on the book. Look and see whether they are achieving their intended objective. There really has never been an incentive, and i hope this incentivizes that and in so doing provides the tools we do not have right now to look back at existing regulations and look at their benefits and costs. Cheryl great. Thank you. So, moving on, the title of this panel is can trumps ambitious deregulatory agenda succeed . But but before we can determine if he can succeed, i have to ask, what is president trumps regulatory agenda . Does anyone have a good sense of the goal here, what he is trying to do . Is it really to cut regulations and5 or what have you, what would that look like . If if anyone has a view on where he is going. [laughter] i dont have a view on where he is going, but a couple of things that might help us to see where he might be going, what is likely to happen. I would draw a distention between retrospective review of regulations and deregulation. Retrospective review of regulations, as some of the crop executive order say, could be reforming a rule or strengthening a rule or repealing a rule. It can be any of those things. I think when one looks beyond some of the superficial language of the executive orders to the system it is setting up, it is not really a retrospective review effort that is designed to find out what is not working well, what could work better, how should we change things. It it is a deregulatory effort. It is an effort to get rid of rules. When one looks at 13777, which is the thing that sets up these Regulatory Task forces within agencies, they are deRegulatory Taskforces. Look at their mandate. So i think the objective is to look at rules that can be removed more so than rules that can be reformed, so that is one place he is heading. I think that is the biggest interest there. There are limited resources within agencies. You have a choice to strengthen a rule or get rid of one and live up for the twoforone executive order. You will get rid of the rule. That will be the ultimate objective. I think they are starting with rules that they perceived to have big political payoff, and whether it stops after that and becomes effectively just a moratorium remains to be seen. But i do think there is good evidence that what we will see where this is all really heading is getting rid of a bunch of big rules that have political payoff and then settling into what is really a roadblock to new rules. Part of the reason that is true is there is actually much less of a constituency for deregulation than people think, and this is what you discover when you get out there and try to get rid of rules. Give me your suggestions. Get those suggestions from the business roundtable. I waited. I got zero. Not one. Not one from business roundtable. Not one from the u. S. Chamber of commerce. Business has a few rules that have yet to be implemented like clean power and some others that they want to get rid of, but beyond that, they dont have a broad agenda that susan mentioned for getting rid of the stock of long existing rules because they absorbed the fixed cost of accommodating to them. They serve as frankly barriers to any new firm that wants to enter because they have to comply, so you actually do not have a big constituency from business knocking on the door to get rid of that old stock of rules. Who else is going to come to ask for that . Certainly not the Public Interest communities. Certainly not the unions. Certainly not agencies because they would rather go forward and backward. The forces, than backward. A forces aligned against is very limited want to get beyond a few highprofile rules, ones were industry has mostly not yet had to absorb the compliance cost. What i think, where i think trump is heading is a big statement of, its get rid of everything we can, lets give it of these big highprofile rules, and then lets really stick to the budget. I think we will see a blip of deregulation and the real emphasis is to be able to save at the end of whatever period of time, look how much lower we are on regulatory activity than half passed ss then then past administrations. On, than past administrations. The Obama Administration issued fewer rules than or the Reagan Administration or the bush administration. The Obama Administration issued fewer. It should more economically significant regulations, but when you strip away the congress, require the administration to do, this myth that regulatory activity under obama was a market departure from the historical norm is nonsens. Trump does not have some big inflated stock of terrible rules that this administration can just go in and sweep away. They are working off of a pretty well curated set of rules on the books. Once they get beyond the ones they do not like, even if they are good rules, they are going to have a harder time than they think sweeping away the stock. Susan, you look like, yes, i agree. I think the rhetoric is definitely deregulatory. That is certainly the language, more than we have seen in decades. I also agree that we will always be that there will always, i also agree that there will always be entrenched interests. Companies with the most for citrus opponents of a new regulation and what it was in place and the agency realized that was not effective, they were opponents of removing the same regulation. There is that, but i think if we look at the evidence from other countries, which this paper does nicely, they illustrate that there is some low hanging fruit, that there are ways to modify regulations so that they are easier to comply with, less redundant so there is less duplication and redundancy. Again, i am hoping for the best Case Scenario that the paper presented because it is in no great interest to get rid of regulations that have large net benefits and keep the regulations that dont, so i hope this focus is on, what are these regulations that we think can be done more efficiently . I will make a quick point. There are two parts to the executive order. One is rule rule, but the outcome be trivial. The authors are calling the budget part, that is going to be more binding. That is very explicitly about modifications at reduced costs as well as eliminations. I think that is important. I will largely agree with what howard and susan said. I do think that trumps goal was almost certainly not be 70 , which was a rhetorical flourish on the campaign trail, of which there were a few, but rather to do what howard said, which is to get some regulations trophies that he can go ahead and say, look what we did. We got rid of the Clean Power Plan, a couple of the other very controversial Obama Administration rules, and then possibly to slow the pace of regulation. I will add there is a constituency for deregulation. It is Small Businesses that want to expand possibly and people that want to start Small Businesses, but despite all the rhetorical attention given to Small Businesses, they are not a powerful political constituency compared to the Large Businesses that are generally happy with things the way they are. Did you want to, i think the administration would certainly make the point, and this will empower people like that because we need their ideas to meet the budget. We are not just saying that. Like, we really need that. We will be out looking for it. I think ideally, you know, that is what the administration would say it would be empowered by this rule. Now i would like to turn because we have touched on a couple of topics here that i was going to ask about, but an important question to me is the link between regulation and Economic Growth and job creation. Really, when you hear this administration talking about deregulation, they say they are doing it to grow the economy, to increase jobs, to spur innovation. And so my question to you is, is like the does regulation kill jobs . What is the link between regulation and Economic Growth . Does regulation d press economic, suppress Economic Growth . Does deregulation grow the economy . I will first answer the question you did not ask, and that is the regulation and jobs. It is not a good consensus on that. That is a very good talking point, a political point, but it is a harder one. The effect of regulation on Economic Growth, there is a general sense that excessive regulation definitely will constrain Economic Growth because it prevents innovation, it prevents new businesses from starting up, as stuart said, and it does protect entrenched interests. Empirically, it is so hard to measure in part because measuring, how do we measure regulation . How do we measure the cost . Is in the number of pages, the number of command words . We dont have a good estimate of the cost. We have estimates of Economic Growth, but less so on innovation and some of the things we care about. That is some stuff we are working on at the gw regulatory study center, and other groups have done some admirable efforts, but to me what to say empirically, yes, it does, and he was the point which is the right amount of regulation to be optimal for Economic Growth, i think a lot of people with agree that we are over that point. We are in the point that it may be inhibiting growth, but what is the optimal point, there is no empirical evidence that would tell you one number. I will add to that. Susan gets it absolutely right. I think the reason that this question has continued political resonance is some people lose their jobs because of the regulation. Some people gain jobs as of the regulation. But the people that either lose their jobs because of the regulation or who believe they lost their jobs because of the regulation remember it and vote and donate accordingly. People who gain jobs because of regulation are probably very unlikely to credit the regulation with them getting the job. So there is an asymmetry that. An addition to the issues talked about, which makes it hard to estimate the impact, there is clearly an imbalance political incentive. It is a great point. It is often the same person who loses their job or who gets you were hours may have actually gained a Greater Health benefit or something, but they discount that. You dont know about the illness not suffered. So there really is a difference that is extremely important, but when it comes to the link between growth and regulation, there is a sense that at some point, there is a link. It is better not to have rules that you do not need because we do not know what that point is. An analogy loosely speaking is Something Like the curve with Economic Growth and taxation. The laffer curve in brookings is like bringing a deepfried twinkie to a threestar restaurants. When you think about a curve that would show growth increasing as a curve of growth with regulation, at some point, growth is going to drop off when the regulatory load gets too high, but we do not know where that is. Thatthere is a very imported question when regulatory costs are a tiny fraction of gdp whether that can be really tagged with dragging things down. Over time, that turns out to be relatively little correlations between measures of Economic Growth and measures of regulatory cost. So people can talk about regulatory costs going up in the Obama Administration, and i would urge people to look carefully and closely at that data and the shape of that trend, but remember, job growth expanded through the whole administration. Now, admittedly, one has to be very careful when talking about job growth. What job . What is the quality of the work people are getting . Is regulation downgrading that quality . Those are all serious and difficult issues to take into account and we do not know about the jobs not created. Would we be at 3 unemployment without the regulation . No, i dont think so. Nobody thinks so. It is a very difficult stories to assess, story to assess. Our Regulatory Burden on the economy, and there are sectors where there may be exceptions, but as a whole, cannot really be tied very closely to our growth rate or struggles to get above a 2 growth rate. So, susan, you touched on this a little bit about the idea of excessive regulation, and that is a question i often have. This plays into some of what we have already said, but of course, this Administration Says it only wants to eliminate those rules that are unnecessary, outdated, duplicative, burdensome, excessively costly, or unlawful. Who can argue with that . So my question is, how much is too much regulation . How many of these monster regulations are out there . Why have we not been able to get rid of them before . Just sort of back to the basics, president clintons executive order 12866 that we are still operating under start with the premise that Market Forces and competition are pretty good regulators. That can regulate behavior. You are not going to cheat your customers because people will know about it. New technologies that were not around in 1993, 1990 61 clintons executive order, 1 996 when clintons executive order make that even easier so it is only when we find some material failure of those markets that it may be worthwhile intervening in regulating, and it is only then that we start a benefit cost. If we can get ourselves back to that requirement that every president has agreed on since 1981, that may be the way we can start to weed out the things that are excessive because too often, those legislators and regulators, too, in any crisis happens and that anecdote is enough to drive new regulatory policy, even if we have not identified what the core problem was and how we can best address it. I think there are clearly some regulations out there that are problematic for any of a number of reasons that were listed there. I was talking, in my research a couple weeks ago, with somebody who makes cider in the midwest, and they were complaining about how alcohol content gets too high, it gets regulated to wine, but the conservation content gets too low, it is regulated a different way. It has caused a great deal of burden for them, and all they want to do is make cider and sell it to a number of people, so there are examples out there like that. They are challenging to find. What you really need, and previous administrations have tried this and been successful only to a limited degree, is to be able to get out there and asked people, what are the problems . But if you do not have a good way of doing that, there is no easy way of doing that, it is hard to find the right answers to that question. Ok. So, yes, we are getting closer to the time when i will turn to audience questions, but i want to ask a couple more here of you. What i would like to turn to now is the issue of cost benefit analysis and whether that is at risk right now of turning political in this administration. Both omb director mulvaney and naomi ross have questioned some of the legitimacy of the Obama Administrations assumptions. Perhaps undervaluing cost and overestimating benefits. So im wondering, is it there just a standard way, isnt there a standard way of evaluating cost and benefits . For how much flexibility is there . How much front can we put in costbenefit analysis . I mean, costbenefit analysis is not some golden path to the truth. Is a way of clarifying assumptions and clarifying thinking that really serves very vital accountability purpose, but assumptions can be made differently, and a lot of what we are seeing in some of the very high profile rules is the Trump Administration will make very different assumptions than the Obama Administration did. An example i know is the Clean Power Plan. The question there is on one hand, should we count just benefits to the u. S. Citizens or benefits throughout the world . Traditionally, we have just looked at benefits to u. S. Citizens. The Obama Administration counted them globally. Trump administration will not. Similarly, do we count code benefits . , cobenefits . It has done what it is designed to, but it has these ancillary benefits. 99 of the benefits. Thank you. Much bigger than the benefits. Mercury. Yes. Basically, if your rule our plans to shut down, that has lots of Health Benefits even if nominally that is not, those benefits are not what the rule was designed to secure. There is a lot of that. It probably should not be overlooked just how much of these struggles are about the future of coal. That really is a running theme through a lot of these debates. I think we should understand what cost benefits analysis can get us and cant. It cannot solve political questions for us, but it ought to be a disciplining mechanism that really forces you to put your cards on the table. I will paraphrase winston churchill. Costbenefit analysis is the worst of all possible things for policy except for everything we have done, and i think it is exactly to a point that what it should be is your best laying out of the alternatives and the best information you have on the likely consequences, positive and negative. But there are so many assumptions in that. I will put in a plug right now for a paper that stuart and i are among 19 coauthors. Consumers guide to Regulatory Impact analysis. That kind of walks through 10 tips for when you look at a Regulatory Impact analysis or benefit cost analysis, what are the questions you should ask, and what should you be spectacle of skeptical so you understand what are the assumptions and what different outcomes you would get if you make a different possible assumption. They are huge as a philips example showed. There is always a little bit of politics to costbenefit analysis in the sense that you can make legitimate, there are different legitimate assumptions that one can use. It is not just a single right way of doing things. And so the choice of which of the methodological paths what is going to follow is somewhat dictated by policy preferences. I think that is natural and normal. There is a difference between cooking the books and a different set of methods and assumptions. I think what is ultimately important is, first of all, not to confuse the two an optical the difference in methodology cooking the books. But i also think what is critical is the assumptions and methods be carefully spelled out in Regulatory Impact analyses so they can be commented on, so they can be challenged. It might well be legitimate for somebody to decide that we should not include certain coal cobenefits or the evidence on a certain cost is too weak to count that cost, but one should spell out why one is making that determination and what the evidence is. Where the concern comes in is not where one gets two different results through two different administrations, but where some very important piece of data is left out or wrongly discounted or miss for trade, misportrayed. As long as the analyses are transparent and the methods are spelled out so that it can be see the light of day and experts can comment, that is ok. There will be legitimate pat hs. I want to put in a plug. This is what the staff spends their career days focusing on, whether they are in a Democratic Administration or a republican administration. They are pushing back on the assumptions that the agencies are making, whether they are proregulatory or deregulatory and making sure they are well grounded and legitimate and a reasonable lines truly could differ, minds could truly could differ. As long as the staff is given their free reign and independents to give doing that and as long as the administrator is willing to take the results up, the administrators in the debates higher up in the white house, but the white house, but the administrator has to bring the news to the ultimate decisionmakers. As long as they are there to hold peoples feet to the fire, the administrator is willing to give the news even when it is bad higher up the chain, i feel like i am not that worried about the fact that different paths through costbenefit analysis can lead to different results. I agree with all of that. I think that costbenefit analysis done well is a great aid to policymaking. There are many instances that any of us on this stage can come up with where it has improved policy outcomes, but it is not finance. It is based on assumption. Those assumptions can change, and the difficulty really comes in the way that it is communicated. If the changes are communicated poorly, then it is going to erode faith in the underlying analysis because it is going to look like we are cooking the books even if it is a legitimate change in assumption. There is just one criterium i would urge people to give an eye on Going Forward. There are certain things that can be well quantified, and if one over fetishizes it, one will lead without legitimate things that april can achieve that are not subject to classification, so there may be real benefits, but you cannot quantify them. And if one shrinks costbenefit analysis to a mandate to only count things that can be regular rigorously and properly quantified, then one rig the game. As a general rule, costs are more quantifiable than benefits. If one reads the executive orders, nonquantifiable benefits are permissible to be counted as in the basket of benefits that will justify costs. And if one moves away from nonquantifiable benefits, dignitary interests, equality, distributional goals, on kinds of things that many rules actually pursue, then one winds up in the situation where some very good rules, very significant social benefits will not pass costbenefit analysis. Not because there are not real benefits, but because we have shrunk the criteria to focus too much on what is quantifiable. That is one change that i think may be occurring and i would watch out for because that really could go beyond different legitimate methods for cost benefits to tilting costbenefit very much in the direction of overweighting costs. All right. My final question before we turn to audience questions is to bring out your crystal ball productions and how successful will trump be in deregulating, as whether you call it retrospective review, many administrations have tried often running up against courts. Not so many have succeeded. Can trump do it . What obstacles will he face . I will reverse it and start with susan. I think he will face obstacles, challenges in the courts, challenges in the agencies who are less enthusiastic about his goals. So i think at least in the short term what we will see is a continued slower pace of new regulations. We have not talked a lot about this, but it is in the paper. Removing regulations takes a long time. At least as much time as introducing a new regulation, and part of that is litigation that will come when you have two public records, the one supporting the regulation, and a new one supporting changing that regulation. That is as far as i am willing to go. Your crystal ball . I will say that this part of the Trump Administration work has been handled with a lot of professionalism. I do not see it necessarily as so distinctively trumpian in the way so many other of the president s sort of trademark initiatives might be. I think there are a lot of pro s onthejob here. A little better at being created as sort of permanent Standing Committees in each department. It is a clever managerial strategy that could turn out to be effective. I would just say that so far what i have seen from them is a pretty serious effort. I think if we set the criteria as we outlined earlier, as howard and i outlined earlier, as being the elimination of a few highprofile rules and a slowdown in regulatory accumulation, i think there is a reasonable chance he will succeed at that. It depends on the litigation of the highprofile rules, which is unpredictable. I think beyond that, i would be surprised to see largescale changes, but we will see. I think that if one measure success by the number of rules repealed, he will be more successful than past administrations, but probably not dramatically so. So i am probably largely in agreement with the rest of the folks here, but i want to point something out, and this is where the larger effect may be felt. There is a variety of ways to deregulate. One does not merely have to repeal the rule. One can stop enforcing the rule. When one looks at what happens in the agencies, one needs to look beyond the regulatory count to what is happening in the personnel who are experts at monitoring and enforcing. Can you sense that we start to see fewer Enforcement Actions and a depletion of the capacity within agencies perhaps taking people who were good at enforcement and moving them to Deregulation Task forces or who knows, to accounting . One might start to see some real effect out there that are deregulatory without repeal, and i will speculate, this is. Speculation, that that is actually where the larger impact will be felt out there, and that can endure. It is one thing to repeal a bunch of executive orders when a new administration gets into power and to initiate rulemakings to restore rules that were revealed. Toto rebuild can be a much slower process, so if the goal is to really make regulation less present an effective, he may be dramatically more effective than if we measure simply by the reduction of rules on the books. Thank you. I have a lot more questions, but i would like to give our audience an opportunity. We do have a microphone. Excellent. Lots of interest right up here in the front. If you could speak loudly, say your name and who you are with, and try to keep it to a shortish kind of question. The gentleman right up front. Robert with international investor. We heard something mentioned that we would like to hear about the opposing groups. We all know the analysis can be twisted or spun according to who is doing it. The medical community will get involved in a lot of this. We have not heard much from labor yet. I think there is other constituencies as well. Certainly food safety advocates, consumer safety advocate advocates. Will they become more evident . Will that add to the political turmoil trying to assess the actual cost of deregulation in terms of Peoples Health and the consequences for labor and consumers . Are you talking about their involvement in costbenefit analysis or lobbying certain rules . Both in the analysis and the political turmoil that will follow a lot of this. This is a perfect foil if you would for not just the democrats, but anybody who is going to fight against big business. There is already a lawsuit filed, and i should differ to lawyers, defer to lawyers who say the executive order itself is illegal. Generally, consumer advocacy groups, environmental groups are extremely well institutionally established as a permanent presence in washington. Trump has probably been very good for their fundraisers. [laughter]. These are all going to be quite contested. I do not know that those people have much influence among the political appointees in the Trump Administration, but certainly they do among civil service. And they will certainly be contesting everything every step of the way in court. Casey with the coalition for regulatory innovation, which is supported by the National Association of manufacturing and north americas building trade unions. Was curious if brookings intends to study potential legislative frameworks moving forward. You mean Regulatory Reform . Yeah. That is definitely one of the focuses of our center. We are keeping a close eye. Obviously, nothing is happening imminently. If i can just follow, looking at congress and Regulatory Reform legislation, do any of the panelists see a particular bill or proposal that you think might make it all the way through this year . I mean, it seems like there is the most optimism with the regulatory accountability act, which passed the house. A significantly different version, but senator portman looking for votes in the senate. It is not inconceivable it can count up to 60 votes with certain changes. That is not going to happen in 2017. We will see what kind of progress it can make a 2018. , in 2018. There were a couple of democratic senators. Ok. In the third row. Hello. Astrid ruiz with a private sector company, which works in rural revitalization and development. How does the cost benefit analysis take into account the urban, suburban, rural inequalities . How can it avoid being skewed in terms of its assumptions on Economic Development . We talked a little about this. Costbenefit analysis itself tends to not look at distributional impacts, but Regulatory Impact analysis is broader than benefit cost analysis. It uses that but also tries to look at different impact. The executive orders are quite explicit about that. It is an important part of regulatory analysis. On this other side of the room. I am ken with the competitive enterprise institute. One of the points that howard was concluding with about the difficulty, particularly distribution another social benefits. How much difference should how much deference should courts give the regulatory agencies when it is not spelled out in the statute . On the question of those benefits. The chevron difference. Our difference. Legal analysis here . [laughter] i wont, but one thought i had when howard was making that point, which is an important point, is there are also a lot of indirect costs and less quantifiable costs. It is very hard to measure the opportunity cost, which is what we care about. What does this mean about a new business Getting Started . Those are invisible. Compliance costs tend to be easier to measure. I think they are equally difficult things on the cost side. In terms of the cobenefits or the things, cobenefits and Global Benefits are probably examples of what you are asking about. It is the Clean Air Act asking the epa to protect u. S. Citizens. Should courts question whether the epa should count benefits of protecting or affecting nonus citizens . I am not a lawyer. We have lawyers here. I mean, look, i think it is a tough question. All of the benefits that flow from a particular action should be counted in the costbenefit analysis. The fact that you happen to get a benefit that is not exquisitely addressed by the statute, i am not sure. One would have to think hard about what is a legitimate case for saying and then you cannot count it. On the other hand, i think that if what we think is the primary purpose of the rule really is is to use some kind of shoehorn to get at those cobenefits outside the scope of the statute, then the rule is probably not valid. The fact that i am doing rules that i am authorized to do by mike granted authority from congress, it happens to have an externality from another great set of benefits that will flow to the benefits. If those are really inexistent, my costbenefit half says, why would i not count them . Whether i should be legally prohibited from counting them i think is not so much a difference question as a policy decision to be made in the agencies because we do not want to give agencies incentive to pursue rules that are not really high priority rules themselves under the grant of statutory authority, but you can get at Something Else you do not have authority at. That is the bigger concern. That was in this consumers guide 10 tips document. 19 coauthors, and we have very different views on things like how to handle cobenefits. The way we settled on that is making a point that usually it is more costeffective to target those benefits directly rather than as a side effect of Something Else, so you should look at your regulation, and if there is some other way to get at those, that is probably the better way so you should question cobenefits that dominate the end, that dominate the benefits, that dominate your analysis because there is probably a better way to get it. I would add that costbenefit analysis is at the end of the day a tool for assisting policymakers to make decisions. The questions about the legal propriety of those decisions may have been impacted by some of the cost benefits, but usually there are other specific questions that are more important. All right. Where is the microphone . There it is. In the blue. Hi. Michelle mcintyre. My question is the impact of Agency Budgets and what is going on with staff in a lot of these agencies, rulemaking, especially in compliance with the one and two out. I think howard talked about enforcement. I think the effect will be Agency Budgets will be dwarfed by the effect. The biggest part of that will be the effect on enforcement. When you talk about the number of people at an agency that are tasked with enforcement compared to the number tasked with rule routing, enforcement is much bigger, so there are large cuts in agency, that is where you will see the largest effect. There is a capacity issue. If you see the executive order really working in the optimistic scenario, it will take a lot of work to do these retrospective analyses well, and so some agencies may have more economists laying around that they can apply to that than others. It will be interesting to see how omb tries to support agencies in that task. That being sort of in the active optimistic scenario. Oh, this side. Thank you. Tim. I was from literature of the Commodity Futures Commission from 2000 14 to 2017, 2014 to 2017. I thought it was an excellent paper and discussion. I would like to offer a few observations. One is a lot of times people may have seen these measurements of how many rules were issued, and they are often talk to pages of the federal register, the problem is in the rule, you first have a proposed rule and you have a final rule. Each of those has a lot of things that are not the actual rule like the discussion of cost benefits. In the final, you have to have a discussion of all the comments he received, and you have to respond to all of those comments. Otherwise the rule is not valid. I had my staff at one time go back after one of these editorials came out and measure how many pages of rules and rule proposals did we issue . And how many of those pages are the actual rules . The actual rules were less than 10 . More like 5 , i think. That is not to say we should not try to simplify and eliminate some rules. I agree with a lot of the comments that were made. In the staffing issue i think is a very real one because if you are in an agency and you are mandated to implement. Dodd frank, you dont have the staff to go back and look at the rules in the books over time even though you know they could be over simple fight or maybe we dont need them anymore. It is a challenge. All the comments on costbenefit were right on point. This is not a science. This is not a mathematical equation. Particularly in the financial regulatory space, the challenge for us was a lot of the rules we were mandated to issu were designed to reduce the risks of certain types of activity so that you might reduce the risk of a failure of firms, not because we want to prevent the failure of a particular firm. We want to have an economy where firms can fail, but we are trying to prevent the possibility of the next financial crisis. You have to measure the impact of that and the probability that this rule will have it reducing that risk. It is a very hard thing. That is why it is not a science. So i can assume from that that is a tall stack of pages from the federal register is not a good way to measure Regulatory Burden. Ok. Does anyone want to respond to that . I would just go out one point, which we have not dwelt on, but i think the way the eo is set right now, things are not covered by it, so that is just worth pointing out. Although there is an mo you. Sam. I guess i would be interested to hear your thoughts on the threat to costbenefit analysis just as a concept at this point. You have a situation which some people suggest you not accurately capturing all the benefits. You are overestimating costs, etc. And then you have the Obama Administration come in and say we will do a really good hard look at this, and we will put forward rules that have significantly more benefits than costs. Howard probably knows this off the top of his head. 8. 5 times more . You have the trump decision come in and say, ok, lets ignore benefits and focus on the cost, which gives a sense that the object here is not to find net beneficial activity. It is to reduce costs on certain Large Businesses. Just to get your sense of whether this sort of next step really, to the extent in which it calls to the attention with serious concerns about costbenefit analysis in the first place. One Quick Response to that. I would note be things phil said about the text of the executive orders. What is interesting to me is somebody did look carefully and think about writing the Current Trump executive orders because they say a lot of the right things. The devil is in the implementation details. So i do not think costbenefit analysis, i dont feel costbenefit analysis itself is under threat. I know there are a lot of people who would like it to be and would be delighted if the system got broken here and people said it is too politicized, we are never going to do it. I think everyone on this panel but certainly at least three of the four of us are serious proponents despite its flaws of the art and science of costbenefit analysis. Maybe my optimism is coloring my response a bit, but i think given that there is some real thought when you read 13777 that since mvd the deRegulatory Task force, it says a lot of the right stuff. You could actually have imagined another administration having written that to sincerely set up a retrospective look back at institution within the agency. It is the same people who are thinking about maintaining that legitimacy. It is naomi and the faults of a group that are given a voice that they should have in this process. I think in the end what you will have is as we , described earlier a tilting of , the scales of the ways toward cost, but not to a degree that threatens or breaks the integrity and the durability of costbenefit analysis. I am a little more pessimistic, i think, t howard on this. Because you want to be . I have a huge advocate of analysis, but i think the threat is not from these orders in particular, but the threat for analysis and science more broadly when you see complaints about the Congressional Budget Office and proposals to restructure it. When we see the debate over costbenefit analysis, when we see disputes over the science underlying certain policy issues, i think those are all of one piece, and that is what worries me. In addition to 13777, which explicitly references the previous executive order on these guidance, the staff that howard talked about being very important in all of this, their guidance is very explicit about the values of benefit cost analysis, and it is not cost to businesses. I think that is inaccurate and a mistake. It is the opportunity cost for society at large, not just the business costs, which we see in canada and the u. K. One more thing. Maybe i will think about it. Just one followup that i think is really important, and it is similar to the potential degradation of enforcement capability capacity. We are seeing a deliberate and widely reported degradation of the scientific capacity in the agencies, and to build on the point about the broader threat to analysis, the reduction of that capacity will again be very difficult to build back up. That does affect the quality of the cost benefit analysis. I was a particularly the benefit analysis, but actually both sides of it. It may lead to a situation where you have fewer good scientists in the agencies or fewer economists or less good data or areas, aspects of science or data you are not allowed to look at. When that happens, you are shortcircuiting the very function, which is why i think one needs to look just as one needs to look at budgets and enforcement levels, one also needs a look at whats happening with the scientific staffing and the people to do costbenefit analysis. I do not view the announcement of scott pruitt made earlier this week that scientists who have received any grant from epa cannot serve on epas Scientific Advisory boards. That is not an innocuous decision. That means some of the very experts who spent their time studying the issues that epa is looking at are not going to be able to chime in and say what the results are. I dont think the conflict of interest rationale holds a lot of water there for keeping them out of the process. Well, on that note, we have come to the noon hour. Now that we have answered all your questions, no more debate here. I want to thank brookings, this panel. It has been an excellent discussion, thank you, audience, for your great questions. [applause] on thursday, the Senate Passed their version of the budget resolution. Details now from a capitol hill reporter. Sera fairest covers the budget and appropriations for political. Before the senate gaveled out outthe wii, the gaveled insideate took this