In a bold move to protect American taxpayers, small businesses, and free-market principles, the CPAC Foundation's Center for Regulatory Freedom (CRF) has formally petitioned the Office of Management and Budget (OMB) to reopen the 2023 revisions to Circular A-4. This petition underscores the critical need for transparency, objective methodologies, and a commitment to American interests in regulatory cost-benefit analysis.
Circular A-4, originally issued in 2003, serves as the federal government’s blueprint for evaluating the costs and benefits of proposed regulations. It has long been recognized for its rigorous, quantitative standards. However, the 2023 revisions, finalized by the Biden administration, have raised serious concerns about the objectivity, fairness, and national focus of the regulatory review process. The CRF’s petition is a clarion call to restore balance and accountability in federal policymaking.
The Significance of Circular A-4
At its core, Circular A-4 provides guidance to federal agencies on conducting cost-benefit analyses (CBAs) for major regulations. The process requires policymakers to evaluate whether the benefits of a proposed regulation justify its costs, ensuring an efficient allocation of resources and a transparent decision-making framework. This methodology has been instrumental in curbing unnecessary regulatory burdens and fostering economic growth.
Historically, Circular A-4 has demanded rigorous, evidence-based analyses that weigh both qualitative and quantitative costs and benefits. Such an approach ensures that regulations address real problems without imposing disproportionate economic impacts. Under President Reagan’s administration, cost-benefit analysis took center stage, with Executive Order 12291 requiring federal agencies to demonstrate that regulatory benefits outweigh costs. This commitment to accountability and efficiency became a cornerstone of U.S. regulatory policy.
What’s Changed in the 2023 Circular A-4?
The 2023 revisions to Circular A-4 have sparked widespread criticism for abandoning its long-standing objectivity. The updated guidance incorporates subjective metrics, such as Environmental, Social, and Governance (ESG) criteria, and emphasizes “distributional effects.” While these changes purport to address equity concerns, they deviate from the foundational principles of rigorous and transparent analysis.
Among the most troubling aspects are:
Subjective Weighting of Benefits and Costs: The revisions allow for demographic-based “distributional weights,” prioritizing certain groups over others. Critics argue this politicizes the regulatory process and could lead to economically inefficient policies.
Exclusion of Opportunity Costs: The new framework omits the indirect costs of regulations, including lost opportunities for innovation, entrepreneurship, and economic growth. Research by Professors John Dawson and John Seater highlights that indirect regulatory costs are often 19 times higher than direct costs.
Shift Toward International Benefits: Alarmingly, the 2023 revisions allow regulators to factor in global benefits when assessing regulations. This undermines the principle that U.S. policies should prioritize American interests and forces taxpayers to subsidize international objectives.
Why Reopening the Process Matters
The CRF’s petition outlines several critical reasons for reopening the Circular A-4 reform process:
1. Restoring Objectivity
By allowing subjective metrics to dominate regulatory analysis, the 2023 revisions compromise the objectivity of cost-benefit analysis. Regulations should be based on measurable, evidence-based data, not politicized criteria. Objective analysis ensures that regulations serve the public good rather than advancing narrow ideological agendas.
2. Protecting Small Businesses
The revisions undermine the protections afforded by the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement Fairness Act (SBREFA). These laws were designed to shield small businesses—the backbone of the U.S. economy—from disproportionate regulatory burdens. By prioritizing distributional effects, the updated Circular A-4 risks imposing costly mandates on small enterprises, stifling innovation and job creation.
3. Emphasizing America First
The CRF calls for regulatory reviews to prioritize the interests of U.S. taxpayers and businesses. Under the 2023 guidance, supposed global benefits can be included in cost-benefit analyses, even as American taxpayers bear the entire cost of these regulations. This approach contradicts the America First policy framework, which emphasizes national sovereignty and economic fairness.
4. Incorporating Opportunity Costs
The omission of opportunity costs in regulatory assessments creates a skewed picture of economic impacts. The Dawson-Seater study demonstrates the devastating multiplier effect of excessive regulation on economic growth. Reintroducing opportunity costs into regulatory analyses would provide a more accurate understanding of the trade-offs involved in policy decisions.
CRF’s Recommendations for Reform
To address the flaws in the 2023 revisions, the CRF proposes the following:
Revert to Pre-2023 Standards: Reinstate the objective, quantitative framework of the original Circular A-4, which prioritized transparency and economic efficiency.
Exclude Global Benefits: Prohibit the inclusion of international benefits in cost-benefit analyses to ensure U.S. taxpayers are not subsidizing global agendas.
Mandate Opportunity Costs: Require all regulatory analyses to account for indirect and opportunity costs, fostering innovation and entrepreneurship.
Protect Small Businesses: Ensure that new metrics do not erode the protections of RFA and SBREFA, safeguarding small businesses from disproportionate regulatory burdens.
These reforms would restore the credibility of Circular A-4 and ensure that regulatory policies reflect sound economic principles and serve the American public.
The Broader Implications of Regulatory Overreach
The stakes are high. The federal regulatory state imposes an estimated $3 trillion in direct costs annually—a burden borne by businesses, consumers, and taxpayers alike. Excessive regulation stifles economic growth, discourages investment, and reduces competitiveness on the global stage.
Moreover, the lack of transparency in the 2023 Circular A-4 revisions risks eroding public trust in government. By prioritizing subjective metrics and international benefits, the revisions fuel perceptions of regulatory overreach and unaccountability.
The CRF’s petition is not just about revisiting one document—it’s about restoring balance, fairness, and common sense to the regulatory process. It’s about ensuring that federal agencies remain accountable to the American people and that regulations serve their intended purpose without imposing unnecessary costs.
Call to Action
The Center for Regulatory Freedom urges policymakers, businesses, and concerned citizens to support the petition to reopen the Circular A-4 reform process. Regulatory decisions have profound implications for economic growth, national sovereignty, and individual freedoms. By demanding transparency, objectivity, and accountability, we can safeguard the principles that underpin a thriving free-market economy.
The text of the petition is below. Together, we can ensure that regulatory policies are guided by evidence, not ideology, and that they serve the best interests of the American people.
