Case Study 2. OMB and the Centralization of Executive Authority

What this case study is about

Of the many things the Office of Management and Budget does, the one that matters most for understanding the modern American executive branch is regulatory review: the process by which a small office inside the EOP sees, comments on, and often shapes essentially every economically significant federal regulation before it is finalized.

This is one of the most consequential institutional functions in American government, and it is one of the least known. Most Americans have never heard of the Office of Information and Regulatory Affairs (OIRA), the OMB unit that conducts regulatory review. Yet major regulations affecting healthcare, environmental quality, workplace safety, financial markets, and food and drug safety route through OIRA before they take effect. The OIRA Administrator, in many ways, is the most powerful federal regulator most Americans cannot name.

This case study traces the history of regulatory review, explains how it works, and examines how the institution has functioned across administrations of both parties. It is a case in how a single executive order, sustained across administrations of both parties, has shaped the modern administrative state more deeply than most legislation.

Origins: the regulatory state and its critics

The expansion of federal regulation in the 1960s and 1970s — the Clean Air Act (1970), the Clean Water Act (1972), the Occupational Safety and Health Act (1970), the Endangered Species Act (1973), the Safe Drinking Water Act (1974), and many others — produced a federal regulatory apparatus larger than anything the country had previously seen. The new regulations, considered in detail, often imposed significant compliance costs on regulated industries, and the costs varied enormously by regulation.

Critics of the regulatory expansion argued, on a broadly conservative or business-aligned premise, that regulations were imposed without adequate consideration of costs and benefits, that agencies were captured by their constituencies (environmental agencies by environmental advocacy groups; safety agencies by labor unions; etc.), and that the cumulative cost of regulation was substantial and largely invisible. Defenders of the regulatory expansion argued, on a broadly progressive premise, that regulations addressed real harms (air pollution killing tens of thousands of people annually; workplace deaths and injuries; environmental degradation), that the social benefits often substantially exceeded the costs, and that critics underweighted the value of life and health that regulations protected.

Both arguments had substantial empirical and normative weight, and the question of how to balance them was genuinely contested. President Carter, late in his administration, had begun a regulatory review process intended to apply cost-benefit analysis to major rules; this was a precursor to what came next.

EO 12291 and the establishment of OIRA

In February 1981, weeks into his administration, President Reagan issued Executive Order 12291, the founding document of modern regulatory review. The order required executive-branch agencies to (a) conduct cost-benefit analysis for "major rules" (those with annual economic impact above a threshold), (b) submit those analyses, along with the proposed and final rules, to OMB for review before publication, and (c) generally not impose regulations whose costs exceeded their benefits.

EO 12291 was paired with Executive Order 12498 (1985), which extended OMB review to agencies' regulatory planning processes earlier in the cycle. Together, the two orders established the basic architecture: OMB sees what agencies plan to do, comments on it, and reviews the final products.

Implementation of EO 12291 was located in OIRA, which had been created the year before (1980) by the Paperwork Reduction Act. OIRA's original mission was to reduce paperwork burden on regulated entities; the Reagan executive orders gave it the much larger function of regulatory review. The Administrator of OIRA — a Senate-confirmed position — became the central node in regulatory review.

Critics of EO 12291 from the political left argued that the order substituted OMB economists' judgments for the substantive expertise of the agencies, that cost-benefit analysis systematically undervalued health and environmental benefits, and that the review process was a tool for slowing or weakening regulations. Defenders argued that requiring serious cost-benefit analysis was a discipline on regulatory excess and made for better-designed regulations even when they were retained.

Continuity across administrations

Here is what is institutionally striking about regulatory review: every president since Reagan has continued it.

George H.W. Bush (1989–1993) continued EO 12291 with the addition of the Council on Competitiveness, which functioned as an additional review layer.

Bill Clinton (1993–2001) issued Executive Order 12866 in September 1993, replacing EO 12291. EO 12866 retained centralized review at OMB but adjusted several features that had been criticized: it applied cost-benefit analysis to "significant" (rather than "major") regulations with somewhat broader categories of significance; it explicitly recognized non-monetizable benefits (life, health, environmental quality) as legitimate; it provided more transparency around the OIRA review process; and it acknowledged regulatory benefits, not just costs, as legitimate goals. EO 12866 has remained the foundational document of regulatory review through every subsequent administration, with adjustments by executive order rather than full replacement.

George W. Bush (2001–2009) added EO 13422 in 2007, which strengthened OMB's role in agency guidance documents (not just regulations) and required formal agency analysis of "market failures" justifying new regulations. This was framed by the administration as bringing more rigor; framed by critics as further slowing regulation.

Barack Obama (2009–2017) rescinded EO 13422 in his first weeks in office and issued Executive Order 13563 in 2011, which retained the EO 12866 framework but added explicit requirements for retrospective review (looking at existing regulations to identify those that had become outdated or excessively burdensome), promoted public participation in rulemaking, and emphasized "non-quantifiable" values such as "human dignity, fairness, and distributive impacts." The Obama OIRA, under Cass Sunstein and his successors, was active and visible.

Donald Trump (2017–2021) issued Executive Order 13771 in January 2017, requiring agencies to identify two existing regulations to repeal for every new significant regulation issued and to ensure that the total incremental regulatory cost of new rules was zero or negative — sometimes called the "two-for-one" order. Trump 1.0 OIRA continued to operate within the EO 12866 framework but with the added budgetary discipline of EO 13771. Critics argued the two-for-one rule was arbitrary and inflicted costs by removing valuable regulations to accommodate new ones; defenders argued it imposed needed discipline on regulatory growth.

Joe Biden (2021–2025) rescinded EO 13771 in his first weeks and issued Memorandum on Modernizing Regulatory Review in 2021, asking OMB to update circular A-4 (the formal cost-benefit guidance) and to develop approaches to incorporating racial and distributional equity into regulatory analysis. The Biden OIRA, under Richard Revesz and his successors, updated A-4 in 2023 — the first major revision in decades — adjusting discount rates, the value of statistical life calculation, and other technical parameters in ways that generally raised the calculated benefits of regulations.

Donald Trump (2025–) has rescinded the Biden modifications, restored variants of the EO 13771 approach with adjustments, and pursued aggressive regulatory rollback through OIRA. The Trump 2.0 OIRA is operating in a framework that continues EO 12866's core review architecture while pursuing different substantive priorities.

The bipartisan consolidation

Step back. From 1981 to 2026, presidents of both parties have used OIRA to centrally review essentially every major federal regulation before it is finalized. The mechanism has survived eight presidential transitions across four parties of government. Each administration has adjusted the substantive framework — what kinds of benefits to count, what discount rates to use, what kinds of distributional analysis to require — but none has abolished the institution.

This is, in itself, a remarkable institutional consolidation. It reflects a bipartisan recognition that the executive branch needs centralized review of the regulations its component agencies produce, even though the parties disagree about what that review should accomplish substantively. The institution itself — centralized review at OMB — is bipartisan; the substance of what the institution does in any given administration is partisan.

The institutional consequence of this consolidation is sometimes called "the OIRA-ization of the regulatory state." Agencies that once operated with substantial autonomy (the EPA, the FDA, OSHA, the FCC, etc.) now operate, on every major regulation, in dialogue with OIRA. The OIRA review process can take months. It can produce changes to the substantive rule. It can result in the rule being withdrawn or substantially weakened (or strengthened, in some administrations). It is not, in any meaningful sense, optional.

How OIRA review actually works

The mechanics of OIRA review are worth understanding for any citizen who wants to understand how federal regulation gets made.

Step 1: Agency drafting. An agency (say, EPA) decides to develop a new rule (say, a particulate matter standard under the Clean Air Act). It assembles a rulemaking team, gathers data, consults with stakeholders, and drafts proposed regulatory text and a regulatory impact analysis (RIA) examining costs and benefits.

Step 2: OIRA pre-review. Before the proposed rule is published, the agency submits it to OIRA. OIRA staff (about 50 economists and analysts) review the substance, the cost-benefit analysis, the legal authority, and the consistency with administration policy. Other EOP offices (NEC, DPC, CEQ, OMB budget staff) often participate. The interagency review can include other affected departments.

Step 3: Inter-agency comment. Through the OIRA process, other federal agencies that may be affected (for example, the Department of Energy, in an EPA energy-related rule) provide comments. This is part of how the executive branch coordinates internally.

Step 4: OIRA changes and clearance. OIRA may request changes to the rule or to the RIA. Negotiations between the agency and OIRA can be substantial. Once OIRA clears the rule (sometimes after months of back-and-forth), the agency can publish the proposed rule in the Federal Register.

Step 5: Public comment. Once published, the proposed rule receives public comments under the Administrative Procedure Act (1946). Comments can run from a handful to over a million on contentious rules.

Step 6: Final rule and second OIRA review. After public comment, the agency drafts the final rule, addressing comments. The final rule and updated RIA go back to OIRA for a second review. Again, changes can be requested.

Step 7: Publication and effective date. Once OIRA clears the final rule, it is published in the Federal Register and takes effect.

A regulation that started in early 2024 might not be final until 2026, with two or more rounds of OIRA review and intervening political changes potentially affecting the outcome. This is one reason regulations move slowly. It is also one reason that regulations, once finalized, tend to reflect substantial deliberation and have generally been thought through more carefully than legislation passed under similar timelines.

Consequences and contestation

OIRA review has consequences that are debated.

On the positive side (defenders argue): OIRA review imposes a discipline on agency rulemaking. It requires agencies to defend their analysis. It identifies poor cost-benefit analysis before it becomes public. It coordinates across agencies that might otherwise impose conflicting requirements. It produces, over time, a regulatory portfolio whose rules have generally survived analytical scrutiny.

On the negative side (critics argue): OIRA review slows regulation, sometimes substantially. It introduces a political layer between agency expertise and final rules, where political appointees can override technical judgment. It tends to favor regulated industries (which have resources to engage in OIRA review) over diffuse beneficiaries (consumers, workers, environmental beneficiaries). It can become a chokepoint where rules are weakened or stalled out of administrative preference rather than analytical necessity.

Empirical studies have produced mixed evidence on these claims. Some show that OIRA review meaningfully changes the content of rules; others show that the marginal effect is smaller than rhetoric suggests. The honest summary: OIRA matters, but not as the dominant force in regulatory outcomes; the underlying agency expertise, the public-comment process, the political environment, and the substantive policies of the administration all matter as well.

The institutional point

Three takeaways from this case.

First, OIRA is an example of an institution most citizens cannot name that nevertheless shapes the regulatory framework all citizens live under. The accountability gap is real: the OIRA Administrator is Senate-confirmed but operates with relatively little public attention. Citizens who care about specific regulatory outcomes are generally better off engaging with the public-comment process at the agency level than trying to engage with OIRA directly, but the OIRA review is often where the substantive shaping happens.

Second, OIRA is an example of an institution that has been bipartisan in form and partisan in substance for over four decades. The form — centralized review, cost-benefit analysis, structured agency-OMB dialogue — has been preserved by every administration since Reagan. The substance — what cost-benefit analysis weights, what counts as a benefit, how aggressive review is — has shifted with each administration. This pattern is common in American institutions: durable form, contested substance.

Third, OIRA is an example of how the EOP's centralization of authority described in the chapter affects ordinary policy outcomes. A function (regulatory drafting) that is statutorily located in agencies has, in operational practice, partly migrated to the EOP. The Cabinet department whose name is on a regulation is, for major rules, in significant dialogue with OMB throughout the rule's development. White House government, as we discussed, runs through OMB review.

Discussion questions

1. The OIRA review process gives substantial influence over federal regulation to a small office that few Americans can name. Is this a feature, a bug, or both? What would alternative arrangements look like, and what would their costs be?
2. Cost-benefit analysis treats benefits and costs as commensurable in dollars. Some critics argue this is technically problematic (how do you put a price on a human life?) and normatively troubling (the methodology may systematically undervalue protections for vulnerable populations). Others argue it is the only way to make rational regulatory choices when resources are limited. Steel-man both positions.
3. The continuity of OIRA across administrations of both parties is institutional evidence that something about the function — centralized regulatory review — is bipartisan. What other functions in American government have a similar pattern of bipartisan form and partisan substance? Identify two and explain.