[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3863 Introduced in House (IH)]

113th CONGRESS
  2d Session
                                H. R. 3863

To amend title 5, United States Code, to establish uniform requirements 
for thorough economic analysis of regulations by Federal agencies based 
              on sound principles, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 14, 2014

Mr. Brady of Texas introduced the following bill; which was referred to 
                     the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
To amend title 5, United States Code, to establish uniform requirements 
for thorough economic analysis of regulations by Federal agencies based 
              on sound principles, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sound Regulation Act of 2014''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Growing Federal regulation that is highly prescriptive 
        in nature burdens American industry and impairs its 
        international competitiveness.
            (2) Prescriptive regulation takes away flexibility, is 
        adversarial in nature, leads to unintended consequences, and, 
        especially as it proliferates, slows economic growth and job 
        creation.
            (3) Despite evidence of increasing regulatory costs, 
        Federal agencies hold fast to the presumption that their rules 
        are in the public interest.
            (4) Some statutes prohibit consideration of costs and 
        benefits in rulemaking, although none prohibit agency analysis 
        of costs and benefits for informative purposes.
            (5) For independent regulatory agencies cost-benefit 
        analysis is not institutionalized. Executive agencies perform 
        cost-benefit analysis pursuant to Executive order and under the 
        purview of the Office of Information and Regulatory Affairs 
        (OIRA), which takes direction from the President. No peer 
        review is required of analyses by either set of agencies.
            (6) There are no statutory standards for cost-benefit 
        analysis in Federal rulemaking and there are no consistent, 
        material consequences when rules are based on faulty or 
        inadequate analysis.
            (7) Agencies conduct their own regulatory impact analyses 
        largely by methods of their own choosing and only on a small 
        fraction of the rules they issue. Agencies use regulatory cost-
        benefit analysis mainly in support of favored, preconceived 
        rules rather than as a decision tool. Common deficiencies 
        include--
                    (A) lack of a coherent theory by which to define a 
                problem, determine why it occurs, and guide the agency 
                to the most efficient response;
                    (B) lack of objective evidence that an actionable 
                problem actually exists, what its dimensions are, and 
                how they differ from acceptable norms;
                    (C) lack of comprehensive analysis to determine 
                whether a market malfunction exists and orient 
                rulemaking to its causes, not its symptoms;
                    (D) failure to set clear and realistic objectives 
                whose benefits justify the cost of achieving them;
                    (E) objectives that are set disconnected from costs 
                and may be expansive and vague so that any regulation 
                can be made to appear beneficial;
                    (F) agencies increasingly claiming incidental 
                benefits (so-called co-benefits) that are not in 
                furtherance of the stated objective and even private 
                (as opposed to public) benefits for their rules;
                    (G) failure to develop regulatory options in light 
                of market analysis and rank them by how efficiently 
                they will improve the market process;
                    (H) inconsistent assumptions and methodologies 
                across agencies;
                    (I) invalid baselines for gauging regulatory 
                effects;
                    (J) omissions of important impacts, such as on 
                employment and international competitiveness of U.S. 
                firms;
                    (K) failure to reevaluate regulations after 
                implementation; and
                    (L) failure to consider the cumulative costs of 
                regulation by the various Federal, State, local, and 
                tribal agencies.
            (8) Despite continually changing market conditions, 
        agencies do not regularly review their existing regulations and 
        regulatory regimes. They also do not review the division of 
        functions among different Federal agencies or among Federal, 
        State, local, and tribal agencies. Regulations lose their 
        purpose, yet linger and accumulate, imposing unnecessary costs 
        and slowing economic growth to the detriment of material living 
        standards and, to some extent, the very social conditions that 
        are the objects of regulation.
            (9) Agencies typically do not conduct regulatory cost 
        studies proactively and report to Congress unnecessary costs 
        that are not under the agencies' control because of the way 
        laws are written. Agency recommendations on how to improve the 
        efficiency of regulation by modifying an existing statute could 
        be helpful to Congress.

SEC. 3. UNIFORM USE OF COST-BENEFIT ANALYSIS.

    Section 553 of title 5, United States Code, is amended by adding at 
the end the following:
    ``(f)(1) Prior to any rulemaking under this section, an agency 
shall comply with the following:
                    ``(A) The agency shall identify, in the context of 
                a coherent conceptual framework and supported with 
                objective data--
                            ``(i) the nature and significance of the 
                        market failure, regulatory failure, or other 
                        problem that necessitates regulatory action;
                            ``(ii) the reasons why national economic 
                        and income growth, advancing technology, and 
                        other market developments will not obviate the 
                        need for the rulemaking;
                            ``(iii) the reasons why regulation at the 
                        State, local, or tribal level could not address 
                        the problem better than at the Federal level;
                            ``(iv) the reasons why reducing rather than 
                        increasing the extent or stringency of existing 
                        Federal regulation would not address the 
                        problem better; and
                            ``(v) the particular authority by which the 
                        agency may take action.
                    ``(B) Before the agency increases the extent or 
                stringency of regulation based on its determinations 
                pursuant to subparagraph (A), it shall--
                            ``(i) set an achievable objective for its 
                        regulatory action and identify the metrics by 
                        which the agency will measure progress toward 
                        the objective;
                            ``(ii) issue a notice of inquiry seeking 
                        public comment on the identification of a new 
                        objective under clause (i); and
                            ``(iii) give notice to the committees of 
                        Congress with jurisdiction over the subject 
                        matter of the rule.
                    ``(C) The agency, if the agency is not seeking to 
                repeal a rule, shall develop at least 3 distinct 
                regulatory options, in addition to not regulating, that 
                the agency estimates will provide the greatest benefits 
                for the least cost in meeting the regulatory objective 
                set under subparagraph (B) and, in developing such 
                regulatory options, shall apply the following 
                principles:
                            ``(i) The agency shall assume that 
                        individuals are rational and not qualify that 
                        assumption unless the agency--
                                    ``(I) has conclusive evidence of a 
                                detrimental systematic behavioral bias; 
                                and
                                    ``(II) can devise behavioral 
                                regulatory options that do not preclude 
                                any choices of market participants.
                            ``(ii) The agency shall, to the extent 
                        practicable, attempt to engage private 
                        incentives to solve a problem and not supplant 
                        private incentives any more than necessary.
                            ``(iii) The agency shall consider the 
                        adverse effects that mandates and prohibitions 
                        may have on innovation, economic growth, and 
                        employment.
                            ``(iv) An agency's risk assessment shall be 
                        confined to its jurisdiction, subject to 
                        specific regulatory authority. Agency 
                        assessments of the risks of adverse health and 
                        environmental effects shall follow standardized 
                        parameters, assumptions, and methodologies. An 
                        agency also shall provide analyses of increases 
                        in risks, whatever their nature, produced by 
                        the regulatory options under consideration.
                            ``(v) The agency shall avoid incongruities 
                        and duplication in regulation at the Federal, 
                        State, local, and tribal levels.
                            ``(vi) The agency shall compare and 
                        contrast the regulatory options developed and 
                        explain how each would meet the regulatory 
                        objective set pursuant to subparagraph (B).
                    ``(D) The agency shall estimate the costs and 
                benefits of each regulatory option developed, 
                notwithstanding any provision of law that prohibits the 
                agency from using costs in rulemaking, at least to the 
                extent that the agency is able to--
                            ``(i) exclude options whose costs exceed 
                        their benefits;
                            ``(ii) rank the options by cost from lowest 
                        to highest;
                            ``(iii) estimate the monetary cost of any 
                        adverse effects on private property rights, 
                        identify the categories of persons who 
                        experience a net loss from a regulatory option, 
                        and explain why the negative effects cannot be 
                        lessened or avoided;
                            ``(iv) establish whether the cost of an 
                        option exceeds $50,000,000 for any 12-month 
                        period, except that the dollar amount shall be 
                        adjusted annually for inflation based on the 
                        GDP deflator, and the President may order that 
                        a lower dollar amount be used for a particular 
                        period; and
                            ``(v) identify the key uncertainties and 
                        assumptions that drive the results and provide 
                        an analysis of how the ranking of the options 
                        and the threshold determination under clause 
                        (iv) may change if key assumptions are changed.
                    ``(E) The estimates pursuant to subparagraph (D) 
                shall--
                            ``(i) follow the methodology established 
                        pursuant to paragraph (2)(A);
                            ``(ii) to the maximum extent practicable, 
                        comply with any guidelines issued by the 
                        Administrator of the Office of Information and 
                        Regulatory Affairs pertaining to cost-benefit 
                        analysis; and
                            ``(iii) include, at a minimum--
                                    ``(I) agency administrative costs;
                                    ``(II) United States private sector 
                                compliance costs;
                                    ``(III) Federal, State, local, and 
                                tribal compliance costs;
                                    ``(IV) Federal, State, local, and 
                                tribal revenue impacts;
                                    ``(V) impacts from the regulatory 
                                options developed on United States 
                                industries in the role of suppliers and 
                                consumers to each industry 
                                substantially affected, especially in 
                                terms of employment, costs, volume and 
                                quality of output, and prices;
                                    ``(VI) nationwide impacts on 
                                overall economic output, productivity, 
                                consumer and producer prices;
                                    ``(VII) international 
                                competitiveness of United States 
                                companies; and
                                    ``(VIII) distortions in incentives 
                                and markets, including an estimate of 
                                the resulting loss to the United States 
                                economy.
                    ``(F) The agency shall publish for public comment 
                all analyses, documentation, and data under 
                subparagraphs (A) through (D) for a public comment 
                period of at least 30 days (subject to applicable 
                limitations under law, including laws protecting 
                privacy, trade secrets, and intellectual property) and 
                correct deficiencies or omissions that the agency 
                becomes aware of before choosing a rule to propose.
            ``(2)(A) Beginning not later than the date that is 180 days 
        after the effective date of this section--
                            ``(i) each agency shall, by rule, establish 
                        and maintain the specific cost-benefit analysis 
                        methodology appropriate to the functions and 
                        responsibilities of that agency and establish 
                        an appropriate period for review of new rules 
                        to assess the cost effectiveness of each such 
                        new rule at achieving the objective identified 
                        under paragraph (1)(B)(i) the new rule was 
                        intended to address;
                            ``(ii) the methodology so established 
                        shall--
                                    ``(I) include the standardized 
                                parameters, assumptions, and 
                                methodologies for agency assessments of 
                                risk under paragraph (1)(C)(iv);
                                    ``(II) comply, to the maximum 
                                extent practicable, with technical 
                                standards for methodologies and 
                                assumptions issued by the Administrator 
                                for the Office of Information and 
                                Regulatory Affairs;
                                    ``(III) include the scope of 
                                benefits and costs consistent with the 
                                framework used and the metrics 
                                identified in the establishment of the 
                                regulatory objective under paragraph 
                                (1);
                                    ``(IV) not include consideration of 
                                incidental benefits but only those 
                                benefits that were considered in the 
                                establishment of the regulatory 
                                objective;
                                    ``(V) limit consideration of costs 
                                and benefits to costs and benefits that 
                                accrue to the population of the United 
                                States;
                                    ``(VI) constrain the agency from 
                                presuming that continued augmentation 
                                or tightening of mandates and 
                                additional prohibitions cause benefits 
                                and costs to change linearly but 
                                determine at what point benefits will 
                                rise less than, and costs will rise 
                                more than, proportionally;
                                    ``(VII) include comparison of 
                                incremental benefits to incremental 
                                costs from any action the agency 
                                considers taking and refrain from 
                                actions whose incremental benefits do 
                                not exceed their incremental costs; and
                                    ``(VIII) include analysis of 
                                effects on private incentives and 
                                possible unintended consequences; and
                            ``(iii) the agency shall adhere to the 
                        methodology so established in all rulemakings.
                    ``(B) If the agency does not select the least-cost 
                regulatory option as its proposed rule, the agency 
                shall justify its selection, explaining--
                            ``(i) how that selection furthers other 
                        goals or requirements relevant to regulating 
                        matters within the agency's jurisdiction and 
                        why these should override cost savings; and
                            ``(ii) why each of the other regulatory 
                        options not chosen would not sufficiently 
                        further such other goals or requirements.
                    ``(C) If the agency makes a determination under 
                paragraph (1)(D) that the monetized cost of a rule 
                exceeds the applicable monetary limit under clause (iv) 
                of such paragraph for any 12-month period, the agency 
                head shall--
                            ``(i) first issue an advanced notice of 
                        proposed rulemaking;
                            ``(ii) provide notice to the appropriate 
                        Congressional committees and keep such 
                        committees informed of the status of the 
                        rulemaking; and
                            ``(iii) ensure that--
                                    ``(I) the agency shall notify the 
                                Administrator of the Small Business 
                                Administration, the Director of the 
                                Office of Management and Budget, and 
                                affected parties, and provide each such 
                                person with information on the 
                                potential effects of the proposed rule 
                                on affected parties and the type of 
                                affected parties that might be 
                                affected;
                                    ``(II) not later than 15 days after 
                                the date of receipt of the materials 
                                described in subclause (I), the 
                                Director, in consultation with the 
                                Administrator, shall identify 
                                representatives of affected parties, 25 
                                percent of which shall represent small 
                                business concerns (as such term is 
                                defined in section 3(a) of the Small 
                                Business Act), when possible, and all 
                                the major stakeholders shall have the 
                                opportunity to obtain advice and 
                                recommendations about the potential 
                                effects of the proposed rule;
                                    ``(III) the agency shall convene a 
                                review panel consisting wholly of full-
                                time Federal officers, employees, and 
                                contractors in the agency responsible 
                                for the proposed rule, the Director, 
                                the Administrator, and the 
                                representatives of affected parties 
                                identified pursuant to subclause (II);
                                    ``(IV) the agency shall conduct a 
                                detailed analysis of the costs and 
                                benefits of the regulatory option it is 
                                advancing, and, in doing so--
                                            ``(aa) the agency shall 
                                        consider the cumulative and 
                                        interactive costs of regulatory 
                                        requirements of Federal, State, 
                                        local, tribal, and (where 
                                        applicable) international 
                                        regulations; and
                                            ``(bb) the agency shall 
                                        identify the key uncertainties 
                                        and assumptions that drive the 
                                        results and provide an analysis 
                                        of how the ranking of the 
                                        regulatory options changes if 
                                        the key assumptions are 
                                        changed;
                                    ``(V) the panel shall review agency 
                                material prepared in connection with 
                                this subsection, including any draft 
                                proposed rule, and review the advice 
                                and recommendations of each affected 
                                party representative identified;
                                    ``(VI) not later than 60 days after 
                                the date the agency convenes a review 
                                panel pursuant to subclause (III), the 
                                review panel shall report on the 
                                comments of the affected party 
                                representatives and its findings as to 
                                issues related to the provisions of 
                                this subsection, and such report shall 
                                be made public as part of the 
                                rulemaking record;
                                    ``(VII) where appropriate, the 
                                agency shall modify the proposed rule 
                                or the cost-benefit analysis under 
                                subclause (IV) based on the report 
                                under subclause (VI);
                                    ``(VIII) subject to applicable 
                                limitations under law, including laws 
                                protecting privacy, trade secrets, and 
                                intellectual property, the agency shall 
                                publish for comment all analyses, 
                                documentation, and data under this 
                                paragraph for a public comment period 
                                of at least 30 days and correct 
                                deficiencies or omissions that the 
                                agency becomes aware of before adopting 
                                a proposed rule; and
                                    ``(IX) affected parties, including 
                                State, local, or tribal governments, 
                                and other stakeholders may participate 
                                in the rulemaking by means such as--
                                            ``(aa) the publication of 
                                        advanced and general notices of 
                                        proposed rulemaking in 
                                        publications likely to be 
                                        obtained by affected parties;
                                            ``(bb) the direct 
                                        notification of interested 
                                        affected parties;
                                            ``(cc) the conduct of open 
                                        conferences or public hearings 
                                        including soliciting and 
                                        receiving comments over 
                                        computer networks; and
                                            ``(dd) reducing the cost or 
                                        complexity of procedural rules 
                                        to ease participation in the 
                                        rulemaking.
                    ``(D) Every 4 years the agency shall conduct a 
                review of all rules of the agency in effect and 
                determine based on objective data whether its rules are 
                working as intended, furthering their objectives, 
                imposing unanticipated costs, and generating a net 
                benefit or not, and shall amend such rules if 
                appropriate. The agency shall report to Congress the 
                findings of each such review.
                    ``(E) Any person may petition an agency to amend an 
                existing rule made prior to the establishment of 
                methodology under this paragraph, and, if the agency 
                denies such a petition, that denial shall be subject to 
                review under chapter 7 of this title.
                    ``(F) Notwithstanding any other provision of law, 
                including any provision of law that explicitly 
                prohibits the use of cost-benefit analysis in 
                rulemaking, an agency shall conduct cost-benefit 
                analyses and report to Congress the findings with 
                specific recommendations for how to lower regulatory 
                costs by amending the statutes prohibiting the use 
                thereof.
            ``(3) For purposes of this subsection--
                    ``(A) the term `regulatory options' means any 
                action an agency may take to address an objective 
                identified under paragraph (1)(B)(i), including the 
                option not to act;
                    ``(B) the term `private incentives' means financial 
                gains or losses that motivate actions by private 
                individuals and businesses, and does not include any 
                law or regulation that prescribes private actions or 
                outcomes; and
                    ``(C) the term `incidental benefit' means a claimed 
                benefit outside the specific regulatory objective or 
                objectives identified under paragraph (1)(B)(i) a rule 
                is intended to address as identified in paragraph 
                (1)(A).
            ``(4) All determinations made under this subsection shall 
        be subject to review under chapter 7.''.

SEC. 4. CONGRESSIONAL REVIEW.

    Section 801(a)(2) of title 5, United States Code, is amended by 
adding at the end the following:
                    ``(C) The Comptroller General shall examine the 
                cost-benefit analysis for compliance with the 
                requirements of section 553(f), including the agency 
                methodology established under section 553(f)(2)(A).
                    ``(D) The Comptroller General shall examine any 
                risk analysis under section 553(f)(1)(C)(iv) pertaining 
                to the cost-benefit analysis for compliance with the 
                requirements of section 553(f).
                    ``(E) The Comptroller General also shall examine 
                the agencies' quadrennial regulatory reviews for 
                consistency with the requirements of section 553(f) and 
                report to Congress on the results.''.
                                 <all>