Responding to agency avoidance of OIRA.

Author:Mendelson, Nina A.
Position:Office of Information and Regulatory Affairs - Introduction through II. Agency Avoidance C. A Broader Typology of Potential Avoidance Tactics 1. Understating Impact or Splitting an 'Economically Significant' Rule into Smaller Rules, p. 447-485 - The Conflict Between Executive Discretion and the Rule of Law

INTRODUCTION I. PRESIDENTIAL OVERSIGHT OF AGENCY REGULATION THROUGH OIRA REVIEW II. AGENCY AVOIDANCE A. Prior Literature B. Incentives and Strategic Behavior by Agencies and OIRA 1. Presidential and OIRA Incentives to Require Review of Agency Action 2. Incentives for Agencies to Cooperate with OIRA Review 3. Incentives for Agencies to Avoid OIRA 4. Dislike of Perceived Institutional Intrusion on Agency Policymaking 5. Dislike of Changes or Delays in Regulatory Outcomes 6. Agency-Oversight Relations as a Repeated Game C. A Broader Typology of Potential Avoidance Tactics 1. Understating Impact or Splitting an "Economically Significant" Rule into Smaller Rules 2. Guidance Documents 3. Other Subregulatory Statements 4. "Bunching" or Combining Rules 5. Obfuscation and Other Means of Exploiting Information Asymmetry 6. Incorporation by Reference of Private or International Standards 7. Deferring or Delegating to State-Level Standards 8. Litigation and Settlements 9. Enforcement Litigation 10. Agency Adjudication 11. Coalition Building 12. Being or Becoming an "Independent" Agency III. EVALUATING RESPONSE MEASURES TO REDUCE AVOIDANCE A. Avoidance and Response in a Repeated Game B. Evaluating Each Response Option IV. CONCLUSIONS INTRODUCTION

For more than two centuries, Presidents of the United States have sought to oversee the regulatory state. (1) Since about 1980, presidential oversight has become centralized in the Office of Information and Regulatory Affairs (OIRA). (2) Under a series of executive orders, Presidents of both political parties have required federal regulatory agencies to assess the benefits and costs of important regulations, and to submit the resulting regulatory impact assessments to OIRA for review.

Although OIRA review has become a settled feature of the American regulatory state, concerns have recently been raised that regulatory agencies might be trying to avoid it. (3) Agencies may face incentives to avoid OIRA oversight if they find it burdensome or irksome. Avoidance of OIRA review might occur in several ways; for example, agencies might frame regulatory actions to slip below OIRA's thresholds for review, or shift substantive policy decisions into documents or forms of agency action that are not subject to OIRA review, or write impact assess-assessments in ways that make review difficult, or run out the clock so that OIRA review is truncated by legal deadlines or the end of a presidential term. (4) Agencies also might enlist other regulators, such as state institutions, to act in place of federal agencies. (5) Finally, some entire agencies (dubbed "independent" agencies) have historically operated outside the OIRA review process. (6) Normative appraisals of agency avoidance vary; advocates of presidential oversight through OIRA see it as a problem, while critics of such oversight see it as a welcome development.

The concerns about agency avoidance have raised the question whether response measures are warranted to buttress OIRA review. For example, OIRA might broaden the scope of its review by lowering its thresholds, expanding the types of agency actions it reviews, or conducting spot checks to catch attempts at avoidance. OIRA could also be given more funding and staff to carry out its reviews. Courts could encourage agencies to undergo OIRA review by adjusting judicial review to take account of whether or not OIRA has completed a review. In general, advocates of OIRA review seem likely to favor stronger responses; critics of OIRA review seem likely to prefer milder responses or none at all.

In this Article, we take no position on whether agency avoidance of OIRA is a crisis or a mirage (or something in between), or on which specific responses are warranted, if any. Rather, in Part III, we propose a path that seems to have been overlooked in the debate, yet should be prominent: response measures to address agency avoidance of OIRA should, in principle, be evaluated in a systematic fashion, similar in concept to the way OIRA evaluates agency regulations. This evaluation should consider alternative response options--including no action--and their important impacts, which are discussed further in Part III. Because response options and their enforcement may be costly, and OIRA's resources are limited, (7) the optimal level of enforcement of OIRA oversight is likely to tolerate some avoidance--just as optimal regulation tolerates some acceptable risk rather than trying to eliminate all risk or ensure perfect enforcement.

Our proposal frames the problem of agency avoidance and response measures as a problem of optimal regulation--not only optimal agency regulation of private activities, but also optimal OIRA regulation of agencies. Our proposal requires consideration of questions very similar to those now raised in OIRA review of agency regulations, notably:

* How serious is the problem of agency avoidance? Although there may be salient examples of avoidance, a more comprehensive assessment of the extent of avoidance, its likelihood, and its consequences would be helpful for understanding the scope and severity of the issue for the regulatory system and society.

* What are the plausible alternative response options? The evaluation of this question should include a range of alternative response options, including the option of no action.

* What are the benefits, costs, and other impacts of these alternative response options?

Some preliminary comments may be helpful regarding these key questions. First, it remains unclear whether avoidance of OIRA is actually widespread and serious. The answer to the first question above depends on the type of avoidance. Agencies may have good reasons and incentives to cooperate with OIRA review. Agencies' incentives to cooperate or avoid might differ when they are facing OIRA review as compared to judicial review, when they are weighing different types of avoidance tactics, and when they are anticipating different potential responses to avoidance. Further empirical analysis is needed to understand how often agencies actually avoid OIRA review, in what ways, and with what consequences. (8) A few examples are insufficient; anecdotes could be atypical outliers--or the tip of a large iceberg. Some examples used to illustrate avoidance may (by virtue of having been identified) also illustrate that avoidance can be found out and remedied. (9) Some recent attempts at empirical analysis of larger data sets have found little evidence that agencies are significantly avoiding OIRA review. (10) Still, it remains possible that avoidance may be occurring in just a few--but important--cases, or at just a few agencies, (11) or that it is occurring more often, but in ways that these studies have not captured.

Second, different types of avoidance may be more or less likely to occur than previous studies have suggested, once repeated interactions with OIRA over time are taken into account. To help identify the kinds of agency avoidance of OIRA review that deserve further empirical evidence, this Article offers a broader typology of the many types of agency avoidance of OIRA review that might occur. We need a more complete typology of avoidance tactics, and the incentives driving agencies to choose among these types, in order to understand and estimate the significance of the issue. In our typology, we also comment on which avoidance tactics appear to be more likely to circumvent OIRA oversight successfully. We move beyond prior literature by identifying not only a broader array of avoidance tactics, but also potential response options that could be used as countermoves to each avoidance tactic. Agency anticipation of detection, as well as the imposition of response measures, may deter initial agency avoidance. Drawing on game-theory analyses, we situate agency avoidance and response measures within a repeat-player relationship.

As a result, we suggest that the avoidance tactics on which there has been the most scholarly focus so far may turn out to be relatively less likely to escape OIRA review and response in practice, because OIRA and the agency have repeated interactions over time regarding these types of tactics. These tactics include the use of guidance documents instead of rules and attempts to understate the economic significance of rules or to split rules into smaller pieces so as to slip below the threshold for review. At the same time, other tactics, such as the use of agency enforcement powers and litigation settlements that compel the agency to regulate, may turn out to be more likely to escape OIRA oversight because they are more difficult for OIRA to detect or address. These are our conjectures; more empirical study is needed to understand the frequency of each tactic, the likelihood of its use escaping oversight, the influence of responses and repeat playing, and the consequences of avoidance.

Third, even if agency avoidance of OIRA is significant, it remains an open question which remedies, if any, would be warranted in response. The proper remedy depends on the incentives of the actors, the type of avoidance and the consequences of each potential response option. As noted above, a good evaluation of response options to agency avoidance requires consideration of alternative response options (including no action) and their important impacts, both adverse and beneficial. Thus, in principle, responses to agency avoidance should be evaluated similarly in concept to the way that OIRA would evaluate agency regulations.

Further, the evaluation of response options needs to take account of the dynamic relationship between OIRA and the agencies. The very existence of agency avoidance implies that the agency is a strategic actor. OIRA is also a strategic actor. The agency may react to OIRA's oversight response measure by complying, or by shifting to a new avoidance tactic. (12) This dynamic relationship makes the evaluation of response options more complex...

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