Centralized Oversight of the Regulatory State

Abstract

Born out of a Reagan-era desire to minimize regulatory costs, and not fundamentally reconsidered since its inception, the centralized review of agency rulemakings has arguably become the most important institutional feature of the regulatory state. Yet it is a puzzling feature: Although centralized review is sometimes justified on the ground it could harmonize the uncoordinated sprawl of the federal bureaucracy, the agency tasked with regulatory review, the Office of Management and Budget (OMB), has never embraced that role. It has instead doggedly clung to its original cost-reduction mission, justifying its function as a check on the federal bureaucracy with reference to the pervasive belief that agencies will systematically overregulate.

This Article shows why that belief is wrong. The claim that agencies are systematically biased in favor of regulation finds little support in public choice theory, the political science literature, or elsewhere. In any event, theories predicting rampant overregulation are no more plausible than alternative theories suggesting that agencies will routinely underregulate. Even if zealous agencies captured by powerful interest groups did characterize the regulatory state, OMB review is a curious and poorly designed counterweight. There is no reason to believe that OMB’s location in the Executive Office of the President will inoculate OMB from the pathologies that afflict other agencies, and some reason to think that it will exacerbate them. As a response to these problems, we urge a reconsideration of the foundational role that centralized review should play in our regulatory state, and a revival and reconceptualization of the neglected principles of harmonization that once ostensibly animated the call for centralized review of administrative action.