2.4. Executive Order 12866
On September 30 1993, President Clinton issued Executive Order 12866 on "Regulatory Planning and Review." Like its predecessor, the order calls for agencies to issue only regulations whose benefits exceed costs; however, considerations of equity and the cumulative impact of regulations also should be considered. Agencies are instructed to principles that elaborate upon and extend the directives of earlier executive orders.
An overall philosophy dictates that federal agencies promulgate only regulations required by law or made necessary by compelling need. In determining the extent of regulation, including the alternative of not regulating, agencies should quantify to the extent possible the costs and benefits of available regulatory alternatives. Unless a statute requires another approach, agencies should select the alternative that maximizes net benefits (taking into account economic, environmental, and public health effects, as well as distributive effects and equity). The threshold for regulatory review remained at $100 million in cost or significant adverse effects on a sector of the economy, employment, competition, governments, or local communities.
The Executive Order has specific instructions for federal agencies:
- Agencies should identify the problem to be addressed.
- Agencies should determine whether existing regulations have caused or contributed to the problem.
- Agencies are to evaluate alternatives to direct regulation, including market-based approaches.
- Regulations should be designed in the most cost-effective manner, taking into account incentives for innovation, costs of enforcement, distributive effects and equity.
- Agencies should set performance objectives rather than specifying in detail the manner of compliance for regulated entities.
- Agencies should seek the views of appropriate state, local and tribal officials.
- Agencies should prepare regulations that are easy to understand with the objectives of minimizing uncertainty and the potential for subsequent litigation.
The order sets out responsibilities of the key actors and organizations. Federal agencies are responsible for developing regulations; the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) has responsibility for the coordinated review of proposed regulations; and the Vice President as the principal advisor to the president coordinates the development and presentation of recommendations concerning policy, planning and review.
The studies conducted in response to Executive Order 12866 were initially termed "Economic Assessments" but have usually been called Economic Analyses or simply EAs, since the issuance of the 1996 OMB guidance document.