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2.1. Inflation Impact Statements

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President Ford's 1974 Executive Order 11281 required an evaluation of the inflationary impact of "major" federal regulatory proposals issued through calendar year 1976. In Circular A-107 the Office of Management and Budget (OMB) established criteria for classifying regulations as meeting the reporting threshold and procedures for determining inflationary impacts. Among the criteria OMB used to decide if a rule were "major" were the cost to consumers, businesses and government; effects on productivity; competitive effects; impacts on the supplies of strategic materials; employment effects; and impacts on energy supply and demand. President Ford's executive order called for: (1) a review of alternatives to the proposed regulation, including costs, benefits, risks, and inflationary impacts of the proposal and the alternatives; (2) the effects of the proposed action on business, consumers and markets; and (3) a comparison of benefits and costs for the proposed action.

Responding to the executive order, the Environmental Protection Agency adopted interim guidelines in February 1975 that set a threshold for performing Inflationary Impact Statements (IIS) of $100 million in capital costs of $50 million in annualized costs for performing a cost analysis. In April 1975 EPA submitted for OMB approval guidelines that raised the threshold to $500 million in capital cost and $250 million in annualized cost. EPA also proposed that rules would be subject to IIS requirements if they would result in production cost increases of more than 5 percent or increase net national energy consumption by 25,000 barrels of oil a day. EPA's guidance closely paralleled the requirements of OMB Circular A-107. EPA stated that benefits would be expressed quantitatively or in terms of physical improvements to the environment, then to the extent feasible expressed in economic terms. EPA noted its limited ability to express benefits in economic terms, pointing out severe limitations in the methodologies of benefits analysis.

On December 31, 1976, President Ford issued Executive Order 11949 extending Executive Order 11281 for an additional year and modifying the name of the required analyses to "Economic Impact Statements." On January 31, 1977, EPA issued revised guidelines that lowered the reporting threshold to $100 million, recommended the statements be called "Economic Impact Analyses" to avoid confusion with Environmental Impact Statements, and set a new criteria for treatment as a major rule of an impact causing an increase in demand or decrease in supply in excess of 3 percent for any of seventeen listed commodities.

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