Earlier this month, the Office of Management and Budget released its draft report to Congress on the many cost-benefit analyses the federal government performed during fiscal year 2023. The report covers a lot of topics, touching on major regulations federal agencies analyzed over the past year and their impacts at the federal and state levels.
Later on in the report, there is a chapter that includes recommendations to reform the regulatory process. Below are the three recommendations that we at Scioto Analysis are paying the most attention to in the coming years.
A Government-Wide Approach to Improve Benefit-Cost Analysis
Currently, government agencies do much of their analytical work independently. However, as our methods for identifying impacts improve, we are seeing that regulations in one agency might impact outcomes in another. Because of this, the authors of this report suggest that federal regulators begin to take a more collaborative approach to analyzing federal regulators. By working across agencies, analysts can overcome common analytical challenges, share valuable insights, and enhance the overall quality of regulatory decisions.
Quantifying the Social Cost of Greenhouse Gases Using the Best Available Evidence
In the realm of environmental policy, understanding the true cost of greenhouse gas emissions is crucial. The report advises that agencies should rely on the most up-to-date scientific evidence when estimating the social cost of greenhouse gas emissions. This recommendation is timely, considering the rapid advancements in climate science and the evolving understanding of how these emissions impact the planet.
The 2023 memorandum from the Interagency Working Group on Social Cost of Greenhouse Gases serves as a guiding document, encouraging agencies to exercise professional judgment in selecting the most appropriate estimates for their analyses. By grounding regulatory decisions in the best available evidence, we can ensure that policies are both scientifically sound and effective in mitigating the adverse effects of climate change.
We’ve seen with the first Trump administration and the Biden administration how quickly measures like the social cost of carbon can change. We might expect another dramatic change in this value come January. Hopefully agencies can cut through the politics and rely on the best evidence with these measures.
Distributional Analysis Under Incomplete Information
Public policy often involves navigating tradeoffs, particularly when it comes to balancing distributional equity with maximizing net benefits. At Scioto Analysis, we talk about the equity-efficiency tradeoff every time we do an analysis. In such cases, agencies are encouraged to consider statutory provisions, public input, and their own historical practices in making these decisions.
Consistency is key. Maintaining a standardized approach in how distributional concerns are addressed can lead to fairer outcomes. Additionally, the report suggests exploring compensatory measures, such as grants or spending programs, to mitigate undesirable distributional effects. This approach not only promotes equity but also ensures that the benefits of regulation are broadly shared across society.
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These recommendations reflect some of the most important challenges facing policy analysts going forward. Understanding how to collaborate with experts from other fields, using the best available evidence, and developing solid empirical methods to perform distributional analysis are key topics that are going to drive this discipline forward. These conversations are happening at the federal level, and hopefully we can apply these same techniques to state and local policies as well.