This article appears in the October 2022 issue of The American Prospect magazine. Subscribe here.
The government agencies of the New Deal revolution were created to check the cruelties of unregulated capitalism. They were born progressive. Their leaders were deeply committed to their goals. This match of ideology, agency, and mission lasted for about a generation. Though strategic reactionaries like Steve Bannon claim that the administrative state is still an impregnable bastion of liberalism, the Rooseveltian deep state was already on the ropes half a century ago, assaulted from multiple directions.
As New Deal fervor waned and corporations regained political power, one assault was regulatory capture by regulated industries. The original Nader’s Raiders, in the late 1960s and early 1970s, wrote scathingly accurate investigative reports, with arch titles like “The Interstate Commerce Omission.” The corruption of the regulatory state helped set the table for deregulation. Jimmy Carter, having bashed government rhetorically, became a full-on convert to bashing it in practice, deregulating airlines, railroads, trucking, and energy. Even liberal lions like Ted Kennedy helped him along with some deregulation that promised greater competition, notably airlines.
Carter’s Paperwork Reduction Act of 1980 created an obscure but powerful agency lodged in the White House called the Office of Information and Regulatory Affairs. The idea was to have a final filter to make sure that regulations proposed by other branches of government were consistent with the president’s program. OIRA was given the power to review, revise, or veto the regulations of other government agencies. It was a deep-state agency explicitly created to undermine the deep state.
Beginning with Reagan, whose Cabinet departments were plenty hostile to health, safety, environmental, labor, or consumer regulation, OIRA was mobilized to block any regulations that might slip through. Reagan’s Executive Order 12291, signed in 1981, required OIRA to use cost-benefit tests in a manner that systematically understated benefits and overstated costs. It explicitly prohibited regulations unless the benefits could be shown to outweigh the costs.
The use of OIRA to gut regulations reached its apotheosis not under Reagan but under Barack Obama, when it was headed by Obama’s friend Cass Sunstein. Obama had gotten to know Sunstein when they were both law professors at the University of Chicago.
A quirky, conservative liberal who reveres markets, Sunstein has spent much of his career trying to square an impossible circle: tinkering with market norms rather than overriding them with regulations. A favorite Sunstein conceit is the “nudge.” The idea is to encourage ordinary people to behave more like Chicago school economists. Sunstein’s preferred “default rules” would gently prod rather than require people to buy fuel-efficient cars, or put more money into retirement savings. Sunstein terms this strategy “libertarian paternalism.” The are no notable examples of its success. Sometimes a coy oxymoron is just a contradiction.
Sunstein has been enamored of OIRA ever since its birth. In 1981, as a Justice Department lawyer, he helped write Reagan’s OIRA regulations. In 2009, Obama appointed Sunstein to his dream job as head of the agency, allowing him to leave the academy for a laboratory with real power, to test his pet theories.
At OIRA, Sunstein became a scourge to progressives. He used OIRA to gut regulations proposed by federal agencies. Delays of final rules doubled in duration compared to the Bush years. After leaving office, Sunstein bragged that “the Obama administration issued fewer regulations in its first four years than did the Reagan, George H. W. Bush, Clinton, and George W. Bush administrations in their first four years.” He wrote that his goal at OIRA was to “proliferate veto points on regulatory activity … because regulation was an obstacle to economic growth and job creation.”
K. Sabeel Rahman is part of a network of progressives who are turning what was once a roadblock to activist use of government into a facilitator.
An egregious case was the EPA rule on ground-level ozone, commonly known as smog, which causes respiratory problems as well as heart disease. Ozone pollution comes from power plants, factories, and vehicles. The Clean Air Act explicitly directs the EPA to reduce such pollutants to a level consistent with public health, irrespective of cost. The Supreme Court, in a 2001 decision written by Justice Antonin Scalia (!), upheld EPA’s mandate to regulate pollutants such as ozone without a cost-benefit analysis. The vote was 9-0. In January 2010, EPA Administrator Lisa Jackson announced that she would set the standard at between 60 and 70 parts per billion, because Bush-era levels “were not legally defensible given the scientific evidence in the record.” But in September 2011, after extensive industry lobbying and OIRA review, Jackson was told that the White House was rejecting the EPA’s standard because of the cost of compliance.
Following Sunstein’s disastrous reign, which was compounded by Trump’s further gutting of regulation, many progressives hoped the next Democratic president would just neuter or eliminate OIRA, so that regulatory agencies could do their mandated jobs. But a young law professor named K. Sabeel Rahman, who during part of the Trump years served as president of Demos, had a more ingenious idea. What if OIRA could be turned into its opposite? Suppose OIRA could review plans by government departments to make sure they were effectively regulating in the public interest—and use OIRA’s own resources to help them do so?
Like Sunstein, but in reverse, Rahman would get the chance to put his ideas into practice. Today, he serves as OIRA’s associate administrator, charged with making over the agency into an ally of effective regulation. He is part of a network of progressives who are turning what was once a roadblock to activist use of government into a facilitator.
RAHMAN FIRST PUBLISHED THE GERM OF HIS CONCEPT in a 2017 book, Democracy Against Domination, which addressed the relationship of the regulatory state to participatory democracy. Rahman contended that regulation had become an insider’s game, overly technical and vulnerable to industry and ideological capture. He posed the question: How might the regulatory process itself become part of a movement to energize democratic participation?
Rahman became involved with an informal working group on enhanced democracy and the state. In 2020, two scholars at the Roosevelt Institute, Todd Tucker and Raj Nayak, fleshed out the idea in a paper titled “OIRA 2.0.” As part of our Day One Agenda series on things the next president could achieve by executive action, the Prospect hosted a roundtable in April 2020, in which several scholars and experts argued the case, pro and con, for abolishing OIRA versus repurposing it.
In the meantime, Rahman was informally helping the Biden campaign, on several regulatory issues. As a volunteer, he co-chaired a committee on regulatory reform that submitted several recommendations to the campaign. Picking up on an idea promoted by the Prospect as far back as fall 2019, Biden issued several Day One executive orders drafted during the transition. One of them, crafted by Rahman, set in motion the strategy of reversing the role of OIRA.
K. Sabeel Rahman
The memorandum, issued on Biden’s first day in office, directed the Office of Management and Budget, where OIRA is housed, to use the OIRA regulatory review process to “promote public health and safety, economic growth, social welfare, racial justice, environmental stewardship, human dignity, equity, and the interests of future generations.”
Biden’s memorandum also called for a revision of cost-benefit tests to promote “policies that reflect new developments in scientific and economic understanding,” and also take into account “the distributional consequences of regulations,” and to assure that regulations “do not inappropriately burden disadvantaged, vulnerable, or marginalized communities.”
The memorandum explicitly requires OIRA to “play a more proactive role in partnering with agencies to explore, promote, and undertake regulatory initiatives that are likely to yield significant benefits.” It directed OMB to undertake a study and submit recommendations within six months. All this was revolutionary, and admirably specific.
A week later, on January 27, 2021, Rahman was appointed senior counselor at OIRA—a position that did not require Senate confirmation—and prime architect of its role reversal, with a game plan ready to go. During the campaign and transition, Rahman worked closely with Sharon Block, a Harvard law professor who was featured in the Prospect roundtable taking the side of reimagining OIRA. Block took a leave from Harvard to serve as OIRA’s acting administrator. The White House was well aware that finding a confirmable administrator committed to OIRA’s radical remake would be a challenge, and was happy to begin with acting chiefs and nonconfirmed counselors.
The reversal of OIRA’s mission is a case study on an aspect of governing and empowerment where conservatives often outplay progressives. Though Republicans abhor activist government, the right has become expert in learning the details of how government actually works, the better to throw sand in the gears. The left has the reputation for policy-wonkery, but too few progressives spend the time in the bowels of the government working out the practical details. It’s more exhilarating to work on the policy from 30,000 feet and assume that implementation will take care of itself. “Progressives have never cared enough about this level of governing,” says Sharon Block.
TODAY, HOWEVER, THERE IS A NOTABLE GROUP of expert progressives who do care about this level of governing, and they are in it for the long haul. They include Rahman and New York University Law professor Richard Revesz, whom Biden appointed OIRA administrator in early September, subject to Senate confirmation. Raj Nayak, co-author of the Roosevelt study on OIRA, is now assistant secretary of labor for policy. Nayak had previously been deputy director of the National Employment Law Project, and knows these regulatory issues in fine detail. Nayak’s deputy is another careful student of the deep state, Alex Hertel-Fernandez, who has been specifically assigned to work with OIRA. And there is a whole backup contingent at the Roosevelt Institute, Public Citizen, and other public-interest groups, keeping close watch on OIRA’s makeover.
One area where previous administrations had either deliberately weakened regulations, or slow-walked them for fear of being reversed by the courts, was occupational safety and health. At the Labor Department, Nayak has worked closely with Rahman to strengthen them.
OSHA, which is part of the Labor Department, issued a proposed standard to protect workers against transmissions of infectious diseases in 2010. The regulation just sat there for the remainder of the Obama and Trump administrations. The new assistant secretary responsible for OSHA, Douglas Parker, testified last May that such a standard would have been useful in reducing transmission of COVID. In his previous job, as head of California’s state worker safety and health agency, Parker was a leader in enforcing a state standard on workplace transmission of infectious diseases.
With the leadership of Parker and Nayak, reinforced by Block and Rahman at the White House, the Biden Labor Department issued two emergency worker safety and health standards and got them finalized in record time. In June 2021, OSHA issued a standard on health care workers and COVID. The initial rule was sent to OIRA for review on April 26 and was finalized less than seven weeks later. A second rule, mandating vaccines and testing for large employers, was sent to OIRA by the Labor Department on October 12 and completed November 4. That rule was stayed by the Supreme Court in January, pending resolution of several lawsuits filed by employers.
Bulletproofing regulations against reversal by right-wing courts has become an OIRA priority. In the Inflation Reduction Act, Congress explicitly defines carbon dioxide as an air pollutant, potentially making it harder for courts to undermine EPA’s work.
Typically, the rhetoric about regulation has focused on the compliance burden on corporations, not on citizens.
In nearly all cases, relations between agencies and the new OIRA are collaborative. In the case of Biden’s executive order requiring a $15 minimum wage for federal contractors, OIRA worked with the Labor Department to devise a rule that would be as expansive as possible. Another pending Labor Department/OIRA rule will strengthen enforcement of the Davis-Bacon Act, requiring “prevailing” wages (typically union-scale wages) on federal construction contracts.
In the case of the FDA rule allowing over-the-counter sales of hearing aids, which will drastically cut costs to consumers, this was a personal Biden priority that was explicitly mentioned in the president’s executive order to enhance competition and reduce monopoly power. The law requiring the rule passed in 2017, but the rule had been held up for five years. “The White House, the National Economic Council, FDA, and OIRA all worked together on that one,” recalls Sharon Block.
A lot of the discussion between OIRA and the agencies is at the technical level, where the agency advises the best way of achieving regulatory goals.
For the most part, such collaboration is the norm, though under Biden, OIRA occasionally prods agencies to be tougher. In one case last December, OIRA reviewed EPA’s draft regulations on greenhouse gas emissions for cars and light trucks, advising EPA that its standards were inadequate. EPA’s draft rules had been the subject of extensive lobbying by the auto industry, which was complaining about increased costs to automakers and consumers. The rules aim to increase the average fuel economy of new passenger cars and trucks between 5 and 10 percent each year from model year 2023 through 2026.
EPA initially had proposed offering automakers incentives for pollution reduction through model year 2025—such as double-counting electric-vehicle sales and extra credit for certain technologies. OIRA urged EPA to limit those incentives to just model year 2023. The final rule compromises, allowing the incentives for model years 2023 and 2024. Environmental activists had criticized EPA for being a little too solicitous of the auto industry, which has struggled during the pandemic. “It’s unprecedented for OIRA to strengthen a rule to increase net benefits,” James Goodwin, a senior analyst at the Center for Progressive Reform, said in an interview with E&E News. “To my knowledge, that argument has never been made.”
As a matter of law, OIRA did not have to compromise. In principle, it has the authority to block agency rules until they meet its criteria. In practice, the president or the White House chief of staff has to balance OIRA’s view against the agency’s. For the most part, OIRA’s relationship with EPA has been excellent, and the Biden EPA has pushed to toughen regulation. But OIRA, instead of reinforcing industry pressure, as it did under Sunstein and all Republican administrations, has served as a salutary counterweight.
Very infrequently, relations become testy. Agencies still remain accustomed to OIRA meddling to weaken their authority, and occasionally resist OIRA as a matter of turf. In several rulemakings on energy efficiency standards, the Department of Energy, having been repeatedly burned by OIRA under Trump, resisted providing information requested by OIRA, fearing delay, leading to a standoff. As of August, five of eight standards awaiting OIRA approval exceeded the required 90-day review period. “It got adversarial and slowed down the entire process, producing the opposite outcome from the one DOE wanted,” Block says. “But this is very much the exception.”
At least one energy efficiency rule, for manufactured homes, wound up weakened, though that was likely due to Department of Housing and Urban Development concerns that tougher standards would weaken affordability. That mirrored the claims of manufactured home owners, though DOE’s analysis showed costs would be lower.
Last winter, as the White House was negotiating with Joe Manchin on Build Back Better, EPA was working on a regulation to reverse a Trump rule and restore tougher Obama standards on emissions of mercury and other toxic substances from oil- and coal-fired power plants. OIRA itself had reviewed the rule and basically okayed it in just 30 days. But then the EPA draft rule was delayed another 90 days, presumably due to intervention at a higher political level than OIRA, out of sensitivity to Manchin. But climate groups were outraged and blamed EPA, which in turn blamed OIRA. Relations have since improved.
“It’s clear that OIRA finished its technical and policy review of the mercury rule, but then delayed the rule by making it look like it was still under review in order to appease Sen. Manchin,” says Amit Narang, who covers OIRA for Public Citizen. “This shows how easily OIRA review can be manipulated for political purposes, and how badly we need transparency and accountability reforms at OIRA as envisioned under the Modernizing Regulatory Review memo.”
DEREK KOUYOUMJIAN
Sharon Block
SIX MONTHS TO THE DAY AFTER BIDEN’S DAY ONE ORDER on repurposing OIRA, the agency sent Biden the first requested report, on revising OIRA to promote equity. The report called for department-by-department equity assessments, noting that the government had never undertaken a comprehensive review of how its diverse programs and policies promote or impede equity. One intriguing observation in the report, which turns OIRA’s usual premises upside down, is the insight that administrative burdens often fall on the intended beneficiaries of public programs, deterring access.
“These burdens include time spent on applications and paperwork, but also factors like time spent traveling to in-person visits, answering notices and phone calls to verify eligibility, navigating web interfaces, and collecting any documentation required to prove eligibility,” the report noted. It also highlighted the essential inequity of administrative burdens that lead to underutilization among the most marginal: “Burdens that seem minor when designing and implementing a program can have substantial negative effects for individuals already facing scarcity.”
This insight is a revolutionary reversal. Typically, the rhetoric about regulation has focused on the compliance burden on corporations, not on citizens. The right deliberately loads up programs for the poor with eligibility tests and paperwork requirements that at worst are intended to deter participation and at best have that direct effect. The best government programs are ones like Social Security and the enhanced Child Tax Credit under the 2021 American Rescue Plan, where eligibility is virtually automatic. The worst ones have complex enrollment and eligibility tests, as in the Affordable Care Act, undermining both participation in the program and faith in government generally.
Biden’s OIRA is also using its review of the “regulatory agenda,” a twice-a-year look ahead by the agencies of the regs they plan to do in the upcoming year, to ask agencies to take into account the customer experience, in addition to meeting presidential priorities on equity, the pandemic, climate, economic recovery, and the new initiative around competition.
Michael Lipsky’s classic book, Street-Level Bureaucracy, studied all of the ways that red tape overwhelmed intended beneficiaries and frontline government workers. Bureaucrats tend to cover their butts by requiring even more documentation; no bureaucrat ever got in trouble by finding someone ineligible. This OIRA initiative is the first government-wide intervention on the other side. President Clinton’s project, Reinventing Government, began by seeking ways to make government more efficient, but soon joined conservatives in bashing and weakening government. Clinton’s means-tested Temporary Assistance for Needy Families (TANF) program, the one that “ended welfare as we know it,” is a textbook case of using complex eligibility tests to deter benefits.
In April 2022, OMB issued a follow-up directive, requiring all government agencies to formulate plans to reduce information and compliance burdens, including increased outreach to stakeholder groups. It’s brilliant for the left to take a favorite theme of the right—burdensome rules—and make it a progressive cause. Getting this sensibility included in both the crafting of legislation and the drafting of regulations will be no mean feat. OIRA’s initiative is a promising start.
Richard Revesz is a longtime scholar of OIRA and a critic of its use of ideologically tilted cost-benefit analysis.
But the real great white whale for reformers is reversing OIRA’s use of cost-benefit analysis, which has been biased toward deregulation since the agency was established. The OMB guidance governing regulatory criteria and procedures for OIRA and other agencies, known as A-4, was implemented in 2003 under President George W. Bush, and has never been revised or repealed. Like the predecessor documents beginning under Reagan, the conception of cost-benefit analysis is tilted to emphasize cost.
A section of A-4 titled “The Presumption Against Economic Regulation” begins, “Government actions can be unintentionally harmful, and even useful regulations can impede market efficiency.” The circular also endorses the widely discredited QALY (quality-adjusted life year) metric, which systematically devalues the lives of poor people relative to rich people, older people relative to younger ones, and people with disabilities entirely. The use of QALYs has been criticized on both ethical and technical grounds. In addition, traditional cost-benefit analysis systematically understates the value of new technologies that are stimulated by prohibitions of hazardous substances.
“There are so many things that are not easily shoehorned into a conventional cost-benefit analysis,” Rahman said at a White House summit on evidence-based policymaking last April. “We really want to make sure we’re thinking about human dignity, equity, the intergenerational effects of climate change, among other considerations.”
Before A-4 was issued, it was reviewed by an outside panel of reviewers. The lead reviewer was Cass Sunstein. Another prominent reviewer was an extreme foe of regulation, W. Kip Viscusi of Harvard Law School, who has argued against tobacco litigation on the ghoulish premise that deaths from smoking are offset by the savings to the health system when people die prematurely.
IF OIRA MANAGES TO FIX COST-BENEFIT ANALYSIS, then it will have completely transformed the regulatory landscape in the U.S. As it happens, the person just appointed as OIRA administrator has made this objective the focus of his scholarly work.
For the first two years of the Biden administration, the effort to transform OIRA was largely directed by Block and Rahman, neither subject to Senate confirmation. But as this piece was going to press in early September, the White House officially nominated and sent to the Senate a permanent OIRA administrator, Richard Revesz, a professor of administrative law and former dean at the NYU law school. Revesz is a longtime scholar of OIRA and critic of its use of ideologically tilted cost-benefit analysis. He is also an advocate of the argument that some areas involving rights, issues of social justice, and planetary survival cannot be reduced to cost-benefit calculations at all. When Block and Rahman were setting out to reposition OIRA, Revesz served as an informal adviser.
Revesz recently published an exhaustive law review article on the failure of traditional cost-benefit analysis to address distributive justice. The piece, co-authored with Revesz’s student Samantha Yi, is titled “Distributional Consequences and Regulatory Analysis.” It begins by praising Biden for issuing his order directing OIRA to require agencies to systematically assess distributional consequences of regulations, and adds, “This Article focuses on what it would take for the Biden effort to succeed where the Clinton and Obama efforts failed.”
The piece concludes, “The review of the academic literature coupled with our review of the major EPA regulations promulgated during the Obama administration establishes that despite repeated presidential directives to do so, agencies have not seriously considered distributional impacts …” Rather, agencies simply assert that “because pollution disproportionately affects disadvantaged communities and the regulation in question is designed to reduce pollution, it follows that the distributional consequences of the regulation are good.”
Richard Revesz
Revesz and his co-author go on to point out that costs and benefits may hit different classes and races differently. Suppose costs were imposed mainly on the poor (which is the history of the failure to regulate pollutants) while benefits went to the rich. And suppose a regulation reversed that pattern. Distributional analysis would show that it is well worth enacting, in contrast to traditional cost-benefit analysis, which looks at averages or, worse, values the life of a poor person as worth less than the life of a rich one. Revesz, assuming he is confirmed, will soon get the chance to put these revolutionary concepts into practice. The week Revesz was appointed, Rahman was elevated from senior counselor to associate administrator, the number two job at OIRA.
There is an instructive backstory here. Last spring, the White House vetted Vanderbilt University law professor Ganesh Sitaraman for the OIRA administrator post. Sitaraman is also a close adviser to Sen. Elizabeth Warren (D-MA) and her former senior staffer. (Sitaraman, who also serves on the Prospect board, told me that he could not discuss what had occurred, even off the record.) Other sources have confirmed that Sen. Kyrsten Sinema (D-AZ) had advised the White House that she could not support Sitaraman. The White House then spent several months looking for an OIRA administrator whom Sinema could live with. That turned out to be Revesz, who had the support of OIRA careerists as well as the new, pro-regulation regime.
This broad-church backing of Revesz makes some on the left ambivalent about his appointment. Narang calls the idea of reversing the thrust of cost-benefit analysis “a fool’s game,” arguing that subjecting health, safety, or environmental regulation to economic tests at all is a slippery slope. He adds that under Trump, OIRA simply ignored cost-benefit analysis and just deregulated willy-nilly. For the most part, however, supporters of converting OIRA into an ally of regulation view Revesz as part of their movement, bringing deep technical expertise as well as being a source of reassurance to OIRA’s career staff.
SYSTEMATICALLY TAKING BACK THE REGULATORY STATE while also connecting it to enhanced democracy requires a combination of vision, a passion for excruciating detail, and a commitment to the long term. One also needs to pay careful attention to what our colleague Paul Starr terms entrenchment. Given that Republicans govern as well as Democrats, how should progressives best structure criteria for good regulations, so that they are not undone as soon as the pro-business party takes power? And how to maximize opportunities during periods when progressives govern?
The obstacles are immense. Even under Democratic presidents, corporate Democrats abound, both inside agencies (Sunstein) and in Congress (Sinema). Sitaraman was superbly qualified, but his close connection to Warren made him radioactive to corporate allies of centrist Democrats. The power and money of corporate lobbies and their lawyers tends to overwhelm both public-interest groups and understaffed public agencies, and intimidate elected officials. It is so much easier to go with the flow and give business what it wants.
During their eight years of power, Obama’s OIRA appointees did not bother to revise the Bush-era A-4 document, because they accepted its deeply conservative premises. Biden’s people, thankfully, are not making the same mistake. Congress can also help by limiting the ability of courts to overturn regulations on fanciful grounds.
That said, however, it’s inevitable that there will be periods of backsliding. This suggests the power of Rahman’s insight that regulation, rather than being an insider’s game, needs to be anchored in participatory democracy. The more that the citizenry values health, safety, environmental, consumer, and labor regulation, and the more visible its benefits are, the higher will be the political price if Republican administrations try to reverse it.
Even so, keeping the administrative state in the role of effective ally of the common people is a labor of Sisyphus. With great struggle, the rock can stay put for a long time. We had 30 years of strong, effective unions, which helped a generation of working people become middle-class. We made progress on race in the 1960s, which the right-wing courts are now trying to undo. We are belatedly making gains on climate. We won reproductive rights in the courts; now we will need to win them politically. Nothing lasts forever, but the joy is in the struggle. As Camus wrote in the famous last line of his essay, “One must imagine Sisyphus happy.”
This article has been updated to accurately describe K. Sabeel Rahman’s assistance to the Biden campaign.
