Congress delegates some of its power to federal agencies, allowing them to exert authority through regulations or rules that implement laws and general agency objectives. This is no light delegation of responsibility as federal agencies must accomplish significant public objectives, such as protecting people from financial fraud, keeping the air clean, and preventing terrorist attacks.
Regulation, however, is one, but not the only, option for addressing problems. Pursuing regulation without carefully examining the range of options available risks the implementation of a second-rate solution that does not achieve the desired significant public objective. As such, federal agencies must act first and foremost as effective problem-solvers. An agency needs to define the outcome the agency seeks to achieve, understand the root causes of the problem that stands in the way of achieving the desired outcome, identify a wide variety of options to solve the problem, and assess the pros and cons of each option before making a decision on a course of action.
Thus, both the legislative branch, through the Unfunded Mandates Reform Act, and the executive branch, through Executive Order 12866, direct agencies to perform regulatory impact analysis (RIA) on many proposed regulations. Executive agencies must produce an RIA for any regulation the Office of Management and Budget designates as “significant.” Analytical requirements are especially rigorous for “economically significant” regulations, defined as regulations that “have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local or tribal government or communities.” RIAs should provide agency policy makers with evaluations of the size and nature of the problems, possible solutions, and assessments of the solutions that identify the relationship between benefits and costs.
RIAs provide members of Congress the same information. Since the RIA serves as the agency’s most rigorous assessment of a regulation’s intended effects, congressional oversight committees can use the RIA as a starting point for investigating whether the regulation achieved its intended outcomes and at what cost. Members also can use that information to assess whether a regulation should be challenged under the Congressional Review Act.