Sound Regulation Act of 2014 - Establishes additional requirements for rulemaking under the Administrative Procedure Act (APA), including:
Requires the Comptroller General (GAO), for purposes of congressional review, to examine and report on: (1) each agency cost-benefit analysis for compliance with the requirements of this Act, including the agency methodology for such analysis; (2) risk analysis pertaining to the cost-benefit analysis; and (3) agency quadrennial regulatory reviews for consistency with the requirements of this Act.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3863 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 3863
To amend title 5, United States Code, to establish uniform requirements
for thorough economic analysis of regulations by Federal agencies based
on sound principles, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 14, 2014
Mr. Brady of Texas introduced the following bill; which was referred to
the Committee on the Judiciary
_______________________________________________________________________
A BILL
To amend title 5, United States Code, to establish uniform requirements
for thorough economic analysis of regulations by Federal agencies based
on sound principles, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Sound Regulation Act of 2014''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Growing Federal regulation that is highly prescriptive
in nature burdens American industry and impairs its
international competitiveness.
(2) Prescriptive regulation takes away flexibility, is
adversarial in nature, leads to unintended consequences, and,
especially as it proliferates, slows economic growth and job
creation.
(3) Despite evidence of increasing regulatory costs,
Federal agencies hold fast to the presumption that their rules
are in the public interest.
(4) Some statutes prohibit consideration of costs and
benefits in rulemaking, although none prohibit agency analysis
of costs and benefits for informative purposes.
(5) For independent regulatory agencies cost-benefit
analysis is not institutionalized. Executive agencies perform
cost-benefit analysis pursuant to Executive order and under the
purview of the Office of Information and Regulatory Affairs
(OIRA), which takes direction from the President. No peer
review is required of analyses by either set of agencies.
(6) There are no statutory standards for cost-benefit
analysis in Federal rulemaking and there are no consistent,
material consequences when rules are based on faulty or
inadequate analysis.
(7) Agencies conduct their own regulatory impact analyses
largely by methods of their own choosing and only on a small
fraction of the rules they issue. Agencies use regulatory cost-
benefit analysis mainly in support of favored, preconceived
rules rather than as a decision tool. Common deficiencies
include--
(A) lack of a coherent theory by which to define a
problem, determine why it occurs, and guide the agency
to the most efficient response;
(B) lack of objective evidence that an actionable
problem actually exists, what its dimensions are, and
how they differ from acceptable norms;
(C) lack of comprehensive analysis to determine
whether a market malfunction exists and orient
rulemaking to its causes, not its symptoms;
(D) failure to set clear and realistic objectives
whose benefits justify the cost of achieving them;
(E) objectives that are set disconnected from costs
and may be expansive and vague so that any regulation
can be made to appear beneficial;
(F) agencies increasingly claiming incidental
benefits (so-called co-benefits) that are not in
furtherance of the stated objective and even private
(as opposed to public) benefits for their rules;
(G) failure to develop regulatory options in light
of market analysis and rank them by how efficiently
they will improve the market process;
(H) inconsistent assumptions and methodologies
across agencies;
(I) invalid baselines for gauging regulatory
effects;
(J) omissions of important impacts, such as on
employment and international competitiveness of U.S.
firms;
(K) failure to reevaluate regulations after
implementation; and
(L) failure to consider the cumulative costs of
regulation by the various Federal, State, local, and
tribal agencies.
(8) Despite continually changing market conditions,
agencies do not regularly review their existing regulations and
regulatory regimes. They also do not review the division of
functions among different Federal agencies or among Federal,
State, local, and tribal agencies. Regulations lose their
purpose, yet linger and accumulate, imposing unnecessary costs
and slowing economic growth to the detriment of material living
standards and, to some extent, the very social conditions that
are the objects of regulation.
(9) Agencies typically do not conduct regulatory cost
studies proactively and report to Congress unnecessary costs
that are not under the agencies' control because of the way
laws are written. Agency recommendations on how to improve the
efficiency of regulation by modifying an existing statute could
be helpful to Congress.
SEC. 3. UNIFORM USE OF COST-BENEFIT ANALYSIS.
Section 553 of title 5, United States Code, is amended by adding at
the end the following:
``(f)(1) Prior to any rulemaking under this section, an agency
shall comply with the following:
``(A) The agency shall identify, in the context of
a coherent conceptual framework and supported with
objective data--
``(i) the nature and significance of the
market failure, regulatory failure, or other
problem that necessitates regulatory action;
``(ii) the reasons why national economic
and income growth, advancing technology, and
other market developments will not obviate the
need for the rulemaking;
``(iii) the reasons why regulation at the
State, local, or tribal level could not address
the problem better than at the Federal level;
``(iv) the reasons why reducing rather than
increasing the extent or stringency of existing
Federal regulation would not address the
problem better; and
``(v) the particular authority by which the
agency may take action.
``(B) Before the agency increases the extent or
stringency of regulation based on its determinations
pursuant to subparagraph (A), it shall--
``(i) set an achievable objective for its
regulatory action and identify the metrics by
which the agency will measure progress toward
the objective;
``(ii) issue a notice of inquiry seeking
public comment on the identification of a new
objective under clause (i); and
``(iii) give notice to the committees of
Congress with jurisdiction over the subject
matter of the rule.
``(C) The agency, if the agency is not seeking to
repeal a rule, shall develop at least 3 distinct
regulatory options, in addition to not regulating, that
the agency estimates will provide the greatest benefits
for the least cost in meeting the regulatory objective
set under subparagraph (B) and, in developing such
regulatory options, shall apply the following
principles:
``(i) The agency shall assume that
individuals are rational and not qualify that
assumption unless the agency--
``(I) has conclusive evidence of a
detrimental systematic behavioral bias;
and
``(II) can devise behavioral
regulatory options that do not preclude
any choices of market participants.
``(ii) The agency shall, to the extent
practicable, attempt to engage private
incentives to solve a problem and not supplant
private incentives any more than necessary.
``(iii) The agency shall consider the
adverse effects that mandates and prohibitions
may have on innovation, economic growth, and
employment.
``(iv) An agency's risk assessment shall be
confined to its jurisdiction, subject to
specific regulatory authority. Agency
assessments of the risks of adverse health and
environmental effects shall follow standardized
parameters, assumptions, and methodologies. An
agency also shall provide analyses of increases
in risks, whatever their nature, produced by
the regulatory options under consideration.
``(v) The agency shall avoid incongruities
and duplication in regulation at the Federal,
State, local, and tribal levels.
``(vi) The agency shall compare and
contrast the regulatory options developed and
explain how each would meet the regulatory
objective set pursuant to subparagraph (B).
``(D) The agency shall estimate the costs and
benefits of each regulatory option developed,
notwithstanding any provision of law that prohibits the
agency from using costs in rulemaking, at least to the
extent that the agency is able to--
``(i) exclude options whose costs exceed
their benefits;
``(ii) rank the options by cost from lowest
to highest;
``(iii) estimate the monetary cost of any
adverse effects on private property rights,
identify the categories of persons who
experience a net loss from a regulatory option,
and explain why the negative effects cannot be
lessened or avoided;
``(iv) establish whether the cost of an
option exceeds $50,000,000 for any 12-month
period, except that the dollar amount shall be
adjusted annually for inflation based on the
GDP deflator, and the President may order that
a lower dollar amount be used for a particular
period; and
``(v) identify the key uncertainties and
assumptions that drive the results and provide
an analysis of how the ranking of the options
and the threshold determination under clause
(iv) may change if key assumptions are changed.
``(E) The estimates pursuant to subparagraph (D)
shall--
``(i) follow the methodology established
pursuant to paragraph (2)(A);
``(ii) to the maximum extent practicable,
comply with any guidelines issued by the
Administrator of the Office of Information and
Regulatory Affairs pertaining to cost-benefit
analysis; and
``(iii) include, at a minimum--
``(I) agency administrative costs;
``(II) United States private sector
compliance costs;
``(III) Federal, State, local, and
tribal compliance costs;
``(IV) Federal, State, local, and
tribal revenue impacts;
``(V) impacts from the regulatory
options developed on United States
industries in the role of suppliers and
consumers to each industry
substantially affected, especially in
terms of employment, costs, volume and
quality of output, and prices;
``(VI) nationwide impacts on
overall economic output, productivity,
consumer and producer prices;
``(VII) international
competitiveness of United States
companies; and
``(VIII) distortions in incentives
and markets, including an estimate of
the resulting loss to the United States
economy.
``(F) The agency shall publish for public comment
all analyses, documentation, and data under
subparagraphs (A) through (D) for a public comment
period of at least 30 days (subject to applicable
limitations under law, including laws protecting
privacy, trade secrets, and intellectual property) and
correct deficiencies or omissions that the agency
becomes aware of before choosing a rule to propose.
``(2)(A) Beginning not later than the date that is 180 days
after the effective date of this section--
``(i) each agency shall, by rule, establish
and maintain the specific cost-benefit analysis
methodology appropriate to the functions and
responsibilities of that agency and establish
an appropriate period for review of new rules
to assess the cost effectiveness of each such
new rule at achieving the objective identified
under paragraph (1)(B)(i) the new rule was
intended to address;
``(ii) the methodology so established
shall--
``(I) include the standardized
parameters, assumptions, and
methodologies for agency assessments of
risk under paragraph (1)(C)(iv);
``(II) comply, to the maximum
extent practicable, with technical
standards for methodologies and
assumptions issued by the Administrator
for the Office of Information and
Regulatory Affairs;
``(III) include the scope of
benefits and costs consistent with the
framework used and the metrics
identified in the establishment of the
regulatory objective under paragraph
(1);
``(IV) not include consideration of
incidental benefits but only those
benefits that were considered in the
establishment of the regulatory
objective;
``(V) limit consideration of costs
and benefits to costs and benefits that
accrue to the population of the United
States;
``(VI) constrain the agency from
presuming that continued augmentation
or tightening of mandates and
additional prohibitions cause benefits
and costs to change linearly but
determine at what point benefits will
rise less than, and costs will rise
more than, proportionally;
``(VII) include comparison of
incremental benefits to incremental
costs from any action the agency
considers taking and refrain from
actions whose incremental benefits do
not exceed their incremental costs; and
``(VIII) include analysis of
effects on private incentives and
possible unintended consequences; and
``(iii) the agency shall adhere to the
methodology so established in all rulemakings.
``(B) If the agency does not select the least-cost
regulatory option as its proposed rule, the agency
shall justify its selection, explaining--
``(i) how that selection furthers other
goals or requirements relevant to regulating
matters within the agency's jurisdiction and
why these should override cost savings; and
``(ii) why each of the other regulatory
options not chosen would not sufficiently
further such other goals or requirements.
``(C) If the agency makes a determination under
paragraph (1)(D) that the monetized cost of a rule
exceeds the applicable monetary limit under clause (iv)
of such paragraph for any 12-month period, the agency
head shall--
``(i) first issue an advanced notice of
proposed rulemaking;
``(ii) provide notice to the appropriate
Congressional committees and keep such
committees informed of the status of the
rulemaking; and
``(iii) ensure that--
``(I) the agency shall notify the
Administrator of the Small Business
Administration, the Director of the
Office of Management and Budget, and
affected parties, and provide each such
person with information on the
potential effects of the proposed rule
on affected parties and the type of
affected parties that might be
affected;
``(II) not later than 15 days after
the date of receipt of the materials
described in subclause (I), the
Director, in consultation with the
Administrator, shall identify
representatives of affected parties, 25
percent of which shall represent small
business concerns (as such term is
defined in section 3(a) of the Small
Business Act), when possible, and all
the major stakeholders shall have the
opportunity to obtain advice and
recommendations about the potential
effects of the proposed rule;
``(III) the agency shall convene a
review panel consisting wholly of full-
time Federal officers, employees, and
contractors in the agency responsible
for the proposed rule, the Director,
the Administrator, and the
representatives of affected parties
identified pursuant to subclause (II);
``(IV) the agency shall conduct a
detailed analysis of the costs and
benefits of the regulatory option it is
advancing, and, in doing so--
``(aa) the agency shall
consider the cumulative and
interactive costs of regulatory
requirements of Federal, State,
local, tribal, and (where
applicable) international
regulations; and
``(bb) the agency shall
identify the key uncertainties
and assumptions that drive the
results and provide an analysis
of how the ranking of the
regulatory options changes if
the key assumptions are
changed;
``(V) the panel shall review agency
material prepared in connection with
this subsection, including any draft
proposed rule, and review the advice
and recommendations of each affected
party representative identified;
``(VI) not later than 60 days after
the date the agency convenes a review
panel pursuant to subclause (III), the
review panel shall report on the
comments of the affected party
representatives and its findings as to
issues related to the provisions of
this subsection, and such report shall
be made public as part of the
rulemaking record;
``(VII) where appropriate, the
agency shall modify the proposed rule
or the cost-benefit analysis under
subclause (IV) based on the report
under subclause (VI);
``(VIII) subject to applicable
limitations under law, including laws
protecting privacy, trade secrets, and
intellectual property, the agency shall
publish for comment all analyses,
documentation, and data under this
paragraph for a public comment period
of at least 30 days and correct
deficiencies or omissions that the
agency becomes aware of before adopting
a proposed rule; and
``(IX) affected parties, including
State, local, or tribal governments,
and other stakeholders may participate
in the rulemaking by means such as--
``(aa) the publication of
advanced and general notices of
proposed rulemaking in
publications likely to be
obtained by affected parties;
``(bb) the direct
notification of interested
affected parties;
``(cc) the conduct of open
conferences or public hearings
including soliciting and
receiving comments over
computer networks; and
``(dd) reducing the cost or
complexity of procedural rules
to ease participation in the
rulemaking.
``(D) Every 4 years the agency shall conduct a
review of all rules of the agency in effect and
determine based on objective data whether its rules are
working as intended, furthering their objectives,
imposing unanticipated costs, and generating a net
benefit or not, and shall amend such rules if
appropriate. The agency shall report to Congress the
findings of each such review.
``(E) Any person may petition an agency to amend an
existing rule made prior to the establishment of
methodology under this paragraph, and, if the agency
denies such a petition, that denial shall be subject to
review under chapter 7 of this title.
``(F) Notwithstanding any other provision of law,
including any provision of law that explicitly
prohibits the use of cost-benefit analysis in
rulemaking, an agency shall conduct cost-benefit
analyses and report to Congress the findings with
specific recommendations for how to lower regulatory
costs by amending the statutes prohibiting the use
thereof.
``(3) For purposes of this subsection--
``(A) the term `regulatory options' means any
action an agency may take to address an objective
identified under paragraph (1)(B)(i), including the
option not to act;
``(B) the term `private incentives' means financial
gains or losses that motivate actions by private
individuals and businesses, and does not include any
law or regulation that prescribes private actions or
outcomes; and
``(C) the term `incidental benefit' means a claimed
benefit outside the specific regulatory objective or
objectives identified under paragraph (1)(B)(i) a rule
is intended to address as identified in paragraph
(1)(A).
``(4) All determinations made under this subsection shall
be subject to review under chapter 7.''.
SEC. 4. CONGRESSIONAL REVIEW.
Section 801(a)(2) of title 5, United States Code, is amended by
adding at the end the following:
``(C) The Comptroller General shall examine the
cost-benefit analysis for compliance with the
requirements of section 553(f), including the agency
methodology established under section 553(f)(2)(A).
``(D) The Comptroller General shall examine any
risk analysis under section 553(f)(1)(C)(iv) pertaining
to the cost-benefit analysis for compliance with the
requirements of section 553(f).
``(E) The Comptroller General also shall examine
the agencies' quadrennial regulatory reviews for
consistency with the requirements of section 553(f) and
report to Congress on the results.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on the Judiciary.
Referred to the Subcommittee on Regulatory Reform, Commercial And Antitrust Law.
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