Biden’s regulatory takeover puts ideology over economics

Federal regulations cost the economy trillions of dollars a year in lost production. Now, President Joe Biden’s administration has made changes behind the scenes that will burden companies with billions of dollars more in compliance costs, forcing them to cut jobs and investments. Energy prices will rise, and ordinary people will see their choices limited and their standard of living reduced.

The problems began when the Biden administration overhauled the regulatory analysis guidelines in 2023, changing the rules for assessing the costs and benefits of new regulations.

For years, regulations have been evaluated using cost-benefit analysis, which is sometimes touted as an objective, scientific tool for assessing the impact of proposed regulations. In fact, it has long been plagued by disagreements among economists.

For example, economists have not settled important questions such as what cost-benefit analysis should measure. A reasonable approach would be to focus solely on objective, measurable economic criteria, calculating dollar values ​​for all costs and benefits. But liberals want cost-benefit analysis to measure “social welfare,” a subjective standard that requires adding up changes in unobservable phenomena such as people’s “well-being.”

The lack of consensus on these very different theoretical foundations of cost-benefit analysis has made this tool susceptible to manipulation by administrations seeking to pursue their own goals.

The Biden administration has used this uncertainty to push for a “welfare” approach. Last year, it overhauled Circular A-4, a key document that sets standards for federal agencies’ regulatory analysis. The administration has effectively rigged the process to favor its preferred outcomes. By tweaking opaque analysis parameters like shadow prices, discount rates, and weighting factors, the administration has made even the most costly, burdensome regulations seem reasonable on paper.

But make no mistake: these changes have nothing to do with a healthy economy or the public interest.

The administration sees regulation as a tool for achieving political and policy goals and wants to be free to operate unimpeded, regardless of the real-world consequences. This politicized approach to cost-benefit analysis will grease the wheels of everything from job-killing climate policies and costly electric vehicle mandates to energy efficiency regulations that destroy consumers.

Meanwhile, the benefits of these regulations are largely fictions invented by analysts at federal agencies. So the administration must manipulate the analytical process to show any benefits while downplaying the costs.

Fortunately, resistance to this erosion of regulatory integrity is growing. House appropriators recently attempted to include a provision in the government funding bill that would block implementation of the administration’s controversial Circular A-4 revisions. Congress could use such funding restrictions, along with oversight hearings, to ensure that agencies do not abuse cost-benefit analysis to justify biased, ideologically driven regulations. A new administration could also repeal the new guidance with a stroke of a pen.

Regulation should be evidence-based, not ideological. To restore sanity to the rulemaking process, this ideological grab for power must be stopped.

James Broughel is a Senior Research Fellow at the Competitive Enterprise Institute.