On March 24 the NYU Law Forum, moderated by Dean Richard Revesz, discussed “How Much Regulation is Too Much? Has the Pendulum Shifted Too Far in the Obama Administration?” The panelists were Sally Katzen, managing director of the Podesta Group and a former administrator of the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA), and C. Boyden Gray, currently a partner at Gray & Schmitz and a former U.S. ambassador to the European Union and White House counsel to President George H. W. Bush.

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To answer the questions posed by the Forum's title, Katzen said, required a baseline: too much regulation compared to what? In the eight years of the George W. Bush administration, she said, agencies had been told to do more analysis, consultation, and review in creating regulations, but received fewer resources and little support to do so. As a member of the Obama transition team’s agency review working group, Katzen said, she had observed the results of that dilemma: “In many of the agencies the staff was completely depleted. What was left was totally demoralized. Every time the agency teams came into a regulatory agency, some of the career staff that were there would either literally embrace them or burst into tears with relief that their position would be changed.”

The centralized review process, said Gray, was missing an essential planning function, both among agencies and among countries. One result, he argued, was an imbalance between regulations in the U.S. and in foreign nations: “We have to coordinate with them because what Europe can do, given the multinational world we live in, the free-trade world we live in, is regulate us. Indeed, in several areas Europe has outflanked us with more stringent regulation. That regulation becomes the regulatory basis, because if you’re a multinational you can’t make four or five separate products; you’re going to manufacture to the toughest regulator.”

One especial flaw, Gray said, was that OIRA reviews regulations one at a time rather than systemically. “OMB and the White House itself should be thinking about the larger context of what they’re doing, and not simply looking at this one regulation at a time.”

Katzen agreed that a la carte review was a problem. She also pointed out that OIRA scrutinizes only the regulations of executive branch agencies, and not those of independent regulatory commissions (IRCs). In light of the recent financial crisis, which involved not only executive branch agencies like the Treasury Department but also IRCs such as the Securities and Exchange Commission and the Federal Reserve, it would be wise, she said, to attempt to extend OIRA’s reach to both types of entities. In fact, she said, the Justice Department’s Office of Legal Counsel had advised both the Reagan and Clinton administrations that regulating IRCs would be constitutional: “In both instances it was a political decision not to extend it to independent regulatory agencies. With hindsight I would rethink that decision, particularly after the financial meltdown.”

Watch the full discussion (1 hr 15 min):

Posted on March 29, 2010