[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2099 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2099

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 SENATE OF THE UNITED STATES

                             March 10, 2014

   Mr. Coats introduced the following bill; which was read twice and 
referred to the Committee on Homeland Security and Governmental Affairs

_______________________________________________________________________

                                 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 and impairs the international competitiveness 
        of industry in the United States.
            (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 agencies from considering costs 
        and benefits in rulemaking, although no statutes prohibit 
        agencies from analyzing the costs and benefits of rules for 
        informative purposes.
            (5)(A) Cost-benefit analysis is not institutionalized for 
        independent regulatory agencies.
            (B) Executive agencies perform cost-benefit analysis 
        pursuant to Executive order and under the purview of the Office 
        of Information and Regulatory Affairs (commonly referred to as 
        ``OIRA''), which takes direction from the President.
            (C) Peer review is not required for cost-benefit analysis 
        by independent regulatory agencies or executive agencies.
            (6) There are no--
                    (A) statutory standards for cost-benefit analysis 
                in Federal rulemaking; or
                    (B) consistent, material consequences when rules 
                are based on faulty or inadequate analysis.
            (7) Agencies--
                    (A) conduct their own regulatory impact analysis--
                            (i) largely by methods of their own 
                        choosing; and
                            (ii) only on a small fraction of the rules 
                        they issue; and
                    (B) use regulatory cost-benefit analysis mainly in 
                support of favored, preconceived rules rather than as a 
                decision tool.
            (8) Common deficiencies in the regulatory analysis used by 
        agencies include--
                    (A) lack of a coherent theory by which to--
                            (i) define a problem;
                            (ii) determine why the problem occurs; and
                            (iii) 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--
                            (i) determine whether a market malfunction 
                        exists; and
                            (ii) orient rulemaking to the causes, not 
                        the symptoms, of the market malfunction;
                    (D) failure to set clear and realistic objectives 
                whose benefits justify the cost of achieving the 
                objectives;
                    (E) objectives that--
                            (i) are disconnected from costs; and
                            (ii) may be expansive and vague so that any 
                        regulation can be made to appear beneficial;
                    (F) agencies increasingly claiming--
                            (i) incidental benefits (also known as 
                        ``co-benefits'') that are not in furtherance of 
                        the stated objective; and
                            (ii) even private, as opposed to public, 
                        benefits for rules;
                    (G) failure to--
                            (i) develop regulatory options in light of 
                        market analysis; and
                            (ii) rank regulatory options by how 
                        efficiently they will improve the market 
                        process;
                    (H) inconsistent assumptions and methodologies 
                across agencies;
                    (I) invalid baselines for gauging regulatory 
                effects;
                    (J) the omission of important impacts, such as the 
                impact on employment and on the international 
                competitiveness of United States 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.
            (9)(A) Despite continually changing market conditions, 
        agencies do not--
                    (i) regularly review their existing regulations and 
                regulatory regimes; or
                    (ii) review the division of functions--
                            (I) among different Federal agencies; or
                            (II) among Federal, State, local, and 
                        tribal agencies.
            (B) Regulations lose their purpose, yet linger and 
        accumulate, imposing unnecessary costs and slowing economic 
        growth to the detriment of--
                    (i) material living standards; and
                    (ii) to some extent, the very social conditions 
                that are the objects of regulation.
            (10)(A) Agencies typically do not--
                    (i) proactively conduct regulatory cost studies; 
                and
                    (ii) report to Congress on unnecessary costs that 
                are not under the control of the agencies because of 
                the way laws are written.
            (B) 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) Before an agency publishes or otherwise provides notice of 
a notice of proposed rulemaking under this section, the agency shall 
comply with the following requirements with respect to the proposed 
rule:
            ``(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 under 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), the agency 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) If the agency is not seeking to repeal a rule, the 
        agency shall develop not less than 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, to the extent practicable--
                            ``(I) attempt to engage private incentives 
                        to solve a problem; and
                            ``(II) not supplant private incentives any 
                        more than necessary.
                    ``(ii) The agency shall consider the adverse 
                effects that mandates and prohibitions may have on 
                innovation, economic growth, and employment.
                    ``(iii)(I) The agency's risk assessment shall be 
                confined to the jurisdiction of the agency, subject to 
                specific regulatory authority.
                    ``(II) Agency assessments of the risks of adverse 
                health and environmental effects shall follow 
                standardized parameters, assumptions, and 
                methodologies.
                    ``(III) The agency shall provide analyses of 
                increases in risks, whatever their nature, produced by 
                the regulatory options under consideration.
                    ``(iv) The agency shall avoid incongruities and 
                duplication in regulation at the Federal, State, local, 
                and tribal levels.
                    ``(v) 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;
                    ``(v) identify the key uncertainties and 
                assumptions that drive the results of the analysis 
                under clause (iv); and
                    ``(vi) 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, and 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--
                    ``(i) publish for public comment all analyses, 
                documentation, and data under subparagraphs (A) through 
                (D) for a public comment period of not less than 30 
                days (subject to applicable limitations under law, 
                including laws protecting privacy, trade secrets, and 
                intellectual property); and
                    ``(ii) correct deficiencies or omissions that the 
                agency becomes aware of before choosing a rule to 
                propose.
    ``(2)(A)(i) Beginning not later than the date that is 180 days 
after the date of enactment of the Sound Regulation Act of 2014, each 
agency shall, by rule--
            ``(I) establish and maintain a specific cost-benefit 
        analysis methodology appropriate to the functions and 
        responsibilities of the agency; and
            ``(II) establish an appropriate period for review of new 
        rules to assess the cost effectiveness of each such new rule at 
        achieving the objective that the new rule was intended to 
        address, as identified under paragraph (1)(B)(i).
    ``(ii) The methodology established by an agency under clause (i) 
shall--
            ``(I) include the standardized parameters, assumptions, and 
        methodologies for agency assessments of risk under paragraph 
        (1)(C)(iii);
            ``(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 under paragraph (1);
            ``(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 
        instead 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.
    ``(iii) Each agency shall adhere to the methodology established by 
the agency under this subparagraph in all rulemakings.
    ``(B) If an 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 
        jurisdiction of the agency 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) 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.
    ``(3) If an 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--
            ``(A) the head of the agency shall--
                    ``(i) first issue an advanced notice of proposed 
                rulemaking;
                    ``(ii) provide notice to the appropriate 
                Congressional committees; and
                    ``(iii) keep the committees described in clause 
                (ii) informed of the status of the rulemaking;
            ``(B) the agency shall--
                    ``(i) notify--
                            ``(I) the Administrator of the Small 
                        Business Administration (referred to in this 
                        paragraph as the `Administrator');
                            ``(II) the Director of the Office of 
                        Management and Budget (referred to in this 
                        paragraph as the `Director'); and
                            ``(III) affected parties; and
                    ``(ii) provide each person described in clause (i) 
                with information on--
                            ``(I) the potential effects of the proposed 
                        rule on affected parties; and
                            ``(II) the type of affected parties that 
                        might be affected;
            ``(C) not later than 15 days after the date of receipt of 
        the information described in subparagraph (B)(ii), the 
        Director, in consultation with the Administrator, shall--
                    ``(i) identify representatives of affected parties, 
                not less than 25 percent of which shall, when possible, 
                represent small business concerns (as such term is 
                defined in section 3(a) of the Small Business Act (15 
                U.S.C. 623(a))); and
                    ``(ii) provide each major stakeholder with the 
                opportunity to obtain advice and recommendations about 
                the potential effects of the proposed rule;
            ``(D) the agency shall convene a review panel that consists 
        wholly of--
                    ``(i) full-time Federal officers, employees, and 
                contractors in the agency;
                    ``(ii) the Director;
                    ``(iii) the Administrator; and
                    ``(iv) the representatives of affected parties 
                identified under subparagraph (C)(i);
            ``(E) the agency shall--
                    ``(i) conduct a detailed analysis of the costs and 
                benefits of the regulatory option that the agency is 
                advancing; and
                    ``(ii) in conducting the detailed analysis under 
                clause (i)--
                            ``(I) consider the cumulative and 
                        interactive costs of regulatory requirements of 
                        Federal, State, local, tribal, and, where 
                        applicable, international regulations;
                            ``(II) identify the key uncertainties and 
                        assumptions that drive the results of the 
                        analysis; and
                            ``(III) provide an analysis of how the 
                        ranking of the regulatory options changes if 
                        the key assumptions identified under subclause 
                        (II) are changed;
            ``(F) the review panel convened under subparagraph (D) 
        shall review--
                    ``(i) all agency material prepared in connection 
                with this subsection, including any draft proposed 
                rule; and
                    ``(ii) the advice and recommendations of each 
                representative of an affected party identified under 
                subparagraph (C)(i);
            ``(G) not later than 60 days after the date on which the 
        agency convenes the review panel under subparagraph (D)--
                    ``(i) the review panel shall report on--
                            ``(I) the comments of each representative 
                        of an affected party identified under 
                        subparagraph (C)(i); and
                            ``(II) the findings of the review panel as 
                        to issues related to the provisions of this 
                        subsection; and
                    ``(ii) the report under clause (i) shall be made 
                public as part of the rulemaking record;
            ``(H) if appropriate, the agency shall modify the proposed 
        rule or the cost-benefit analysis under subparagraph (E) based 
        on the report under subparagraph (G);
            ``(I) subject to applicable limitations under law, 
        including laws protecting privacy, trade secrets, and 
        intellectual property, the agency shall--
                    ``(i) publish for comment all analyses, 
                documentation, and data under this subsection for a 
                public comment period of not less than 30 days; and
                    ``(ii) correct deficiencies or omissions that the 
                agency becomes aware of before adopting a proposed 
                rule; and
            ``(J) the agency shall ensure that affected parties, 
        including State, local, or tribal governments, and other 
        stakeholders, may participate in the rulemaking, by means such 
        as--
                    ``(i) the publication of advanced and general 
                notices of proposed rulemaking in publications likely 
                to be obtained by affected parties;
                    ``(ii) the direct notification of interested 
                affected parties;
                    ``(iii) the conduct of open conferences or public 
                hearings, including soliciting and receiving comments 
                over computer networks; and
                    ``(iv) reducing the cost or complexity of 
                procedural rules to ease participation in the 
                rulemaking.
    ``(4) Every 4 years, each agency shall--
            ``(A) conduct a review of all rules of the agency that are 
        in effect; and
            ``(B) determine based on objective data whether the rules 
        are--
                    ``(i) working as intended;
                    ``(ii) furthering their objectives;
                    ``(iii) imposing unanticipated costs; or
                    ``(iv) generating a net benefit or not;
            ``(C) amend the rules if appropriate; and
            ``(D) report to Congress the findings of the review 
        conducted under this paragraph.
    ``(5) 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.
    ``(6) 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'--
                    ``(i) means financial gains or losses that motivate 
                actions by private individuals and businesses; and
                    ``(ii) 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 that a 
        rule is intended to address, as identified under paragraph 
        (1)(B)(i).
    ``(7) 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--
            ``(i) 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);
            ``(ii) examine any risk analysis under section 
        553(f)(1)(C)(iii) pertaining to the cost-benefit analysis for 
        compliance with the requirements under section 553(f); and
            ``(iii)(I) examine the agencies' quadrennial regulatory 
        reviews conducted under section 553(f)(4) for consistency with 
        the requirements under section 553(f); and
            ``(II) report to Congress on the results of the examination 
        under subclause (I).''.
                                 <all>