Sen. Fred Thompson (R-TN) is pushing a rider, Sec. 620, Treasury, Postal Services and General Government Appropriations Bill, that would require OMB to conduct a cumulative cost-benefit analysis of all agency rules and paperwork -- referred to as regulatory accounting -- on a permanent basis, each and every year. (OMB Watcher Online article) Sec. 620, Treasury, Postal Services and General Government Appropriations Bill 1. It contains a potentially burdensome requirement for cumulative cost-benefit analysis that has no practical utility for public policy. For the last four years, Congress has enacted appropriations riders requiring OMB to conduct a cumulative cost-benefit analysis, expressed in monetized figures, for all federal regulation. In its three completed reports, OMB makes a special effort to point out that rulemaking decisions are made on a case-by-case basis, as they must be, and that throwing all of the government's diverse regulations, from environmental standards to economic controls, into the same pot has little practical utility for public policy. "[W]e still believe that the limitations of these estimates for use in making recommendations about reforming or eliminating regulatory programs are severe," OMB states in its second report. "Aggregate estimates of the costs and benefits offer little guidance on how to improve the efficiency, effectiveness, or soundness of the existing body of regulations." Further calling into question its applicability to policy-making is the inherent uncertainty involved in cumulative cost-benefit analysis. OMB discusses a litany of factors that, in its words, make it "difficult, if not impossible, to estimate the actual total costs and benefits of all existing Federal regulations with any degree of precision." 2. It takes an all-things-are-possible approach. The Thompson regulatory accounting rider calls for OMB to estimate the annual costs and benefits of rules and paperwork (a) in the aggregate, (b) by agency, agency program, and (c) by major rule. In addition, OMB would have to assess the impacts of federal rules on federal, state, local and tribal governments, small business, wages, and economic growth. The biggest problem with these new requirements is that much of the information called for is not currently generated during agency rulemakings, leaving OMB with nothing to base its analysis on. For instance, under the Paperwork Reduction Act, agencies are not currently required to conduct cost-benefit analyses for paperwork; rather, the agency is to assess "practical utility" and burdens imposed. Nor do agencies currently conduct analysis by "agency program." In testifying against regulatory accounting legislation (S. 59), OMB has said that these, and other requirements, would mean that "agencies may have to be called upon to compile detailed data that they do not now have, and undertake analyses that they do not now conduct, using scarce staff and contract resources, regardless of any practical analytic need as part of the rulemaking process." 4. It contains slanted analytical requirements. The bill asks for subanalyses of impacts on state and local governments, small business, wages, and economic growth. But there is no such specificity in evaluating benefits, although there are certainly subcategories here worth considering — including effects on vulnerable populations, such as children, the elderly and the disabled. Moreover, such an aggregate accounting inherently overstates costs. The rider says nonquantifiable factors should be considered by OMB. But in practice, cumulative regulatory accounting, as demonstrated by OMB's three reports, is an excercise of monetization. However, agencies often evaluate benefits using qualitative factors, such as the reduction in health or safety risks to children, while costs are more easily stated in monetary terms. Such an analytical discrepancy is only accentuated when you attempt to add up all federal regulation at once in a monetized study, producing numbers that are greatly misleading. 5. It masks value judgements. When seemingly qualitative factors are converted to monetized figures — as OMB has begun to do to fulfill its regulatory accounting obligations — value judgements become hidden behind a mask of technical expertise. For instance, OMB incorporated the estimated benefits of reducing lead in gasoline, including the prevention of IQ loss in children. To quantify IQ loss, OMB estimated the loss of future earning capacity — although it's hard to imagine any parent who would regard their child's drop in IQ as adequately captured by such an estimate. And this is just one of the many value judgements buried in OMB's numbers.