Sunstein's Successor Meets Skepticism About Regulatory Czar's Role

WASHINGTON— A Senate panel held a confirmation hearing Wednesday to fill the White House’s post of “regulatory czar” – a powerful but little-known position charged with reviewing rules proposed by government agencies.

President Obama tapped Howard Shelanski, an economist and lawyer, for the post in April.

If approved by the Senate Homeland Security and Governmental Affairs Committee and confirmed by the Senate, Shelanski would serve as administrator of the Office of Information and Regulatory Affairs (OIRA). While not a cabinet-level position, the OIRA administrator must receive the Senate’s approval.

The administrator post at OIRA has been vacant since last August when Cass Sunstein departed after three years in the job. Boris Bershteyn, a lawyer who had served as counsel at the Office of Management and Budget (OMB), took over as acting administrator.

A small but influential office, much of OIRA’s work is to help federal agencies work through the rulemaking process. The obscure agency is in charge of making sure that the costs of regulation do not outweigh the benefits.

The Paperwork Reduction Act established OIRA in 1980 as part of the OMB. Under the 1980 act, no federal agency is allowed to collect information from American citizens without permission from OIRA. Shortly after assuming office, President Reagan gave OMB the additional responsibility of reviewing and approving rules from federal agencies. That responsibility is exercised by OIRA within OMB.

In his largely anecdotal book, Sunstein described just how much power the OIRA wields in the Obama administration. According to Sunstein, as the OIRA administrator he had the authority to ensure that rules were never implemented, or that the favorite rules of regulators were rejected.

“Although some people think we need to choose between regulation and having a robust, growing economy, I disagree. I believe that federal regulations should only be issued when there is a real need, when they are cost-effective, and when they make sense,” Sen. Tom Carper (D-Del.), the committee’s chairman, said during the hearing. “When these conditions are satisfied, federal regulation serves an essential purpose in protecting the environment, health, safety, consumers, and our financial system.”

Shelanski said that he would continue the regulatory look-back process emphasized by Sunstein, noting that prioritization and the approach of retrospective reviews is the primary responsibility of the OIRA administrator.

“I think it’s extremely important to ensure that even as we move forward as a country with new regulations achieving new objectives, or furthering old objectives, that we look back at regulations on the books to ensure that there are no longer burdens in place that are not achieving their objectives,” Shelanski said.

He also vowed on Wednesday to tackle a backlog of pending regulations if he wins Senate confirmation. He said that his priorities would be to ensure that regulatory review occurs in “as a timely manner as possible.”

By executive order, OIRA has to review proposed and final rules within 90 days. But as of last month, 87 rules had been sitting at OIRA for more than 90 days, while 51 had been under review from more than a year, Sen. Carl Levin (D-Mich.) told Shelanski.

Some Democrats in Congress, including Sens. Tom Harkin (Iowa) and Sheldon Whitehouse (R.I.), and liberal-leaning groups have complained about the delays.

“Key standards to protect public health, worker safety, and the environment have languished at OIRA, in some cases for years,” the senators told the White House in a letter sent last week. “OIRA frequently holds onto rules without explaining its concerns, preventing agencies from taking steps to address them.”

Supporting the senators’ concerns, the Coalition for Sensible Safeguards (CSS), a coalition of health, labor, and consumer groups, released a report on Tuesday arguing that more than 120 proposed regulations have stalled at OIRA. Some of the rules questioned by the CSS include regulations requiring an extension of minimum wage laws to home-care workers and better energy efficiency standards to reduce energy usage and save consumers money.

Sen. Ron Johnson (R-Wis.) used the hearing to criticize the Environmental Protection Agency over new ozone proposals, which he deemed “well-intended,” but suggested that when you increase the number of regulations, you reach a “point of diminishing returns.”

Shelanski said, just like his predecessor, he would emphasize cost-benefit analysis and retrospective review to assess the actual costs of regulation.

“I think it is important that agencies are able to carry out their statutory objectives of ensuring a sound environment, but it is also necessary to ensure that where costs and benefits can both be effectively taken into account that these objectives are not achieved at a higher cost than it’s necessary,” Shelanski said.

Johnson asked Shelanski how he planned to get the public involved in the rulemaking process, emphasizing the importance of getting the opinion of businesses on regulations. Shelanski replied that he hopes to increase public participation in the regulatory process by increasing transparency and communication.

Senate Republicans raised concerns over “unintended consequences” of rules that may impose “burdensome” regulatory costs on the economy. Sen. Rob Portman (R-Ohio), an OMB director under President George W. Bush, noted that the costs of rules issued in 2012 exceeded the combined costs of all regulations in the entire first terms of President Bush and President Clinton. The Ohio senator said last year there were 90 rule changes, saving $3.3 billion, which is good, but not in the context of $236 billion that agencies say the rules cost.

“There are high costs to regulation, but there is only so much one can learn from looking at the cost side,” Shelanski said. “The question is always whether the benefits that the regulation achieved can justify the costs.”

Shelanski, currently the director of the Federal Trade Commission’s Bureau of Economics, has both a law and an economics degree and had a clerkship under U.S. Supreme Court Justice Antonin Scalia. He has also been a professor at the Georgetown University Law Center since 2011, after working as a faculty member at the University of California at Berkeley for 14 years.