How does Biden’s Modernizing Regulatory Review initiative affect your business?

Just hours after being sworn into office, U.S. President Joe Biden signed a presidential memorandum called Modernizing Regulatory Review that aims to change how the White House reviews regulations. The modernizing memo calls for the director of the Office of Management and Budget to work with federal agencies for developing recommendations for changing how OMB’s Office of Information and Regulatory Affairs reviews regulations from executive agencies.

Biden’s memo first affirms the principles from former President Bill Clinton’s Executive Order 12866, which has been in place since 1993. It sets out principles of regulation, asks agencies to put their regulatory proposals through various analytical steps including cost-benefit analysis and tasks OIRA with regulatory review of draft agency rules. 

The memo also affirms former President Barack Obama’s Executive Order 13563, which sought to modernize the regulatory process by encouraging interagency coordination of regulatory activities and requiring consideration of anticipated costs as well as benefits — including those difficult to quantify, such as human dignity — of proposed rulemakings using best available methods supported by objective data. 

The modernizing memo seeks to ensure that “the regulatory review process can promote public health and safety, economic growth, social welfare, racial justice, environmental stewardship, human dignity, equity, and the interests of future generations” by directing OMB to develop a list of recommendations to improve the process.

It prioritizes four major challenges: “a massive global pandemic; a major economic downturn; systemic racial inequality; and the undeniable reality and accelerating threat of climate change.” 

For businesses it means considering adjusting their risk assessments to factor in this integrated approach. According to the memo, it is no longer enough to barely track compliance. As agency cooperation escalates, compliance obligations could originate with new sources that have not traditionally been on an industry’s radar.

The conservative take on the memorandum

Biden’s Modernizing Regulatory Review changes OMB’s regulatory analysis guidelines to ensure that the regulatory review process “fully accounts for regulatory benefits that are difficult or impossible to quantify, and does not have harmful anti-regulatory or deregulatory effects.” However, critics believe that this EO has the potential to make it easier to add regulations. 

The memo’s net effects could be even more labor, environmental, safety and health regulations, which will further burden small businesses and possibly boost consumer prices and increase lay-offs. And while deregulation usually encourages entrepreneurship and innovation, it is sound actions that can protect employees and the environment and revamp some economic sectors.

According to The Brookings Institution, “The disproportionately high compliance costs faced by small businesses can put them at a competitive disadvantage to their larger competitors. Over time, this could have the effect of increasing market concentration in heavily regulated industries, driving out smaller competitors and reducing the number of market participants.”