*This is the seventh post in a series on Michael Livermore and Richard Revesz’s new book, Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health. For other posts in the series, click here.
When I was invited to review an early draft of Michael Livermore and Ricky Revesz’s book Reviving Rationality a couple years ago, I was so excited to hear that they were writing a sequel to their 2008 book on regulatory review and cost-benefit analysis, Retaking Rationality. As a junior scholar, Retaking Rationality played a formative role in shaping my views on centralized review of regulations. Retaking Rationality was published at the end of the George W. Bush administration to take stock of the current state of centralized review and to encourage progressives to embrace and improve regulatory review. The subtitle of that book puts that objective nicely: How Cost-Benefit Analysis Can Better Protect the Environment and Our Health.
The sequel, Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health, takes aim at the quality of economic analysis and regulatory review in the Trump administration. Livermore and Revesz’s review is scathing. Here’s a taste from the introduction (pp. 4-5):
The message in this book is that, in abandoning these decades-long bipartisan practices, the Trump administration and its supporters risk undermining a fundamental set of norms in the American system of governance that have constrained and informed agency decision making for decades. In the process, they have promoted incoherent and harmful policies, demoralized the federal workforce, and provoked a backlash from courts. This experiment in abandoning the norms of good governance has been a disaster. There are legitimate debates to be had about regulatory policy. But the approach adopted by the Trump administration has been to ignore, without justification, norms and practices that were constructed through a slow and deliberative process by good-faith actors in both parties for decades. This unwise and frequently dishonest approach is at odds with the views of thinkers and politicians across the entire political spectrum and should be roundly rejected.
After Part I of the book reviews how cost-benefit analysis further developed during the Obama administration (to bridge the temporal gap between Retaking Rationality and their focus on the Trump administration in Reviving Rationality), Part II presents case studies from the Trump administration to detail their take on how the Trump administration departed from longstanding norms and practices for regulatory review and cost benefit analysis—how public health science was erased (ch. 6), how discredited models were resurrected (ch. 7), how indirect benefits were ignored (ch. 8), how climate change was trivialized (ch. 9), and how transfers were manipulated (ch. 10).
Part III concludes the book with recommendations to revive rationality. In particular, the final chapter (ch. 12) focuses on four means for improving the “guardrails” of regulatory policymaking: (1) “rewind” the Trump administration’s regulatory policymaking memoranda and practices; (2) reorient retrospective review; (3) improve quantification; and (4) account for distribution. (On this last recommendation, it seems like the Biden administration is already exploring how to do that, as evidenced by its memorandum Modernizing Regulatory Review.)
This is an important, must-read book and intervention into current debates about the role of cost-benefit analysis and centralized review of regulations. It is particularly timely, as we are nearing the end of the first year of the Biden administration and the president has yet to nominate someone to head the Office of Information and Regulatory Affairs (or secure a Senate-confirmed head of the Office of Management and Budget, for that matter). I will leave to the other contributors to this book symposium to explore the specific case studies, as well as to examine their recommendations for a path forward.
Instead, I’ll focus on the role of courts in regulatory review and reviving rationality. Especially as I’m currently writing a book that argues that the field of administrative law fixates too much on courts and should instead pay more attention to ways to constrain bureaucracy beyond judicial review, it may seem off brand for me to focus here on judicial guardrails. But the judicial guardrails seem like an important part of the story during the Trump administration, and provide yet one more reason why progressives should care about cost-benefit analysis in the Biden administration.
Throughout Reviving Rationality, Livermore and Revesz chronicle the role that the courts played in the various case studies in the Trump administration, and they dedicate a section of Part III to “The Judicial Refuge” (pp. 188-190). They observe that “the reality of judicial review will be an important limiting constraint” on attempts to “move away from cost-benefit analysis—either by formally abandoning the practice or continuing some version of the cost-benefit analysis charade initiated under Trump.” They document how the Supreme Court from 2001 through 2015 in a trilogy of cases (Whitman v. American Trucking (2001), EPA v. EME Homer City Generation (2014), and Michigan v. EPA (2015)) transitioned “from skepticism to embrace” when it comes to cost-benefit analysis in regulatory policymaking.
Reviving Rationality‘s focus is not on courts, so Livermore and Revesz understandably do not explore how lower courts have also built up judicial guardrails when it comes to regulatory review or how the Supreme Court did the same during the Trump administration. I’ll explore both a bit here.
First, when it comes to lower courts, the D.C. Circuit has arguably led the way. For example, in the early 2000s, the D.C. Circuit issued a trilogy of decisions reversing rulemakings in the financial regulation context, concluding with its much-criticized decision in Business Roundtable v. SEC (2011). As my colleague Paul Rose and I observed shortly after Business Roundtable was decided, “the D.C. Circuit has aggressively examined the SEC’s rulemaking in a way that departs from the court’s traditionally more deferential approach to review of agency rulemaking in other administrative law contexts.”
In so doing, however, the D.C. Circuit also provided a roadmap for how courts can construct judicial guardrails to ensure that agencies engage in cost-benefit analysis. In particular, as Rose and I documented, the D.C. Circuit recognized five agency analytical errors that could be grounds for setting aside an agency’s rule per the Supreme Court’s State Farm decision articulating the scope of judicial review under the Administrative Procedure Act (APA):
- Failure to consider certain costs—quantitatively or qualitatively—based on the rationale that the costs are difficult to quantify (Chamber of Commerce v. SEC (2005));
- Failure to provide a reasoned basis for rejecting a nonfrivolous alternative to the proposed rule (Chamber of Commerce);
- Failure to provide a reasoned basis for the agency’s consideration of a factor set fort by Congress in the agency’s organic statute (American Equity Investment Life Insurance Co. v. SEC, 2010);
- Failure to attempt to define the baseline as a comparison to the proposed rule as well as its alternatives (American Equity Investment); and
- Failure to take into account the benefits of the status quo yet take into account the costs of the status quo (Business Roundtable).
Second, the Supreme Court during the Trump administration continued to develop the judicial guardrails. Two cases come immediately to mind: Department of Commerce v. New York (2019) (the census citizenship question case); and Department of Homeland Security v. Regents of University of California (2020) (the DACA immigration relief rescission case).
In the census citizenship question case, the Court made two substantial and contrasting moves. On the one hand, the Court, citing Baltimore Gas & Electric Co. v. NRDC, emphasized “the choice between reasonable policy alternatives in the face of uncertainty was the Secretary’s to make” and the importance of “[w]eighing that uncertainty against the value of obtaining more complete and accurate citizenship data.” Jacob Gersen and Adrian Vermeule have coined this Baltimore Gas standard as thin-rationality review:
Baltimore Gas made clear (1) that it is generally sufficient that an agency states the nature of its uncertainty—not that it resolve it; (2) that agencies are entitled to adopt any rational assumptions to cope with uncertainty, including highly optimistic assumptions, which are just as rational as highly pessimistic ones; and (3) that courts may not demand the impossible by requiring agencies to explain why they have chosen the assumptions they have, as opposed to other assumptions.
On the other, the Court held that under the APA’s “reasoned explanation requirement,” an agency must “offer genuine justifications for important decisions, reasons that can be scrutinized by courts and the interested public.” In other words, reasons that are pretextual are not sufficient.
In the DACA immigration relief rescission case, the Supreme Court held that arbitrary-and-capricious review under the APA requires the agency to consider reasonable regulatory alternatives and to demonstrate that it has adequately considered the reliance interests at stake in changing the regulatory baseline. This decision is reminiscent of the D.C. Circuit’s approach to reviewing financial regulation under the APA, discussed above.
These decisions appear to be aimed at reviving rationality in regulatory policymaking. Some wondered, myself included, whether both decisions were “a ticket good for one day only.” But that may not to be the case. Earlier this year, the Supreme Court relied on its DACA immigration relief rescission decision in denying a stay of a lower-court preliminary injunction of the Biden administration’s attempt to rescind the Trump administration’s “Remain in Mexico” policy. (For contrasting takes on that decision, see thoughtful posts by Zach Price and Benjamin Eidelson on this blog.)
So what can we learn from the judicial guardrails that have developed over the last couple decades? Livermore and Revesz are certainly right to suggest (p. 189) that “perhaps courts can drag along agencies and the White House, even if both political parties decide that they would prefer to do away with cost-benefit analysis.” They are also right to point out, however, that these judicial guardrails are not necessarily permanent (p. 190):
[I]f both parties decide that they would prefer not to be bound by cost-benefit analysis, then they will eventually find jurists who share that opinion. And so, although the judiciary may serve as a final bastion of support for cost-benefit analysis, once the parties have moved on, it may be only a matter of time before the courts follow.
I agree that judicial guardrails can shift and erode. One need look no further than the decades-long debates between judicial deference and hard look review. Plus, of course, Congress could always modernize the APA to remove such judicial guardrails.
That said, I doubt we will see judicial or legislative reform in that direction any time soon. Such judicial reform would take decades, and I don’t see sufficient congressional support for reform in the near term. Instead, I would expect courts and Congress to at least maintain the status quo. And I wouldn’t be surprised to see courts develop even more judicial guardrails that relate to certain aspects of cost-benefit analysis and OMB Circular A-4‘s best practices for regulatory analysis.
If I’m right, Democratic and Republican administrations would be wise to read—and apply the lessons learned from—both Retaking Rationality and Reviving Rationality. Even if an administration doesn’t agree with Livermore and Revesz that some form of economic analysis is the best approach to regulatory policymaking as a normative matter, the federal courts’ current approach to judicial review of agency action should counsel that agencies engage in such analysis. And the White House should structure centralized regulatory review to revive rationality and minimize rulemaking mistakes that could open regulatory policymaking to judicial invalidation.
In the Biden administration, among the first steps would be to nominate expert regulatory czars to head the White House’s Office of Management and Budget (OMB) and the Office of Information and Regulatory Affairs (OIRA). This is critical for the administration to implement its regulatory agenda and to ensure such agenda survives judicial review. There is no doubt a deep bench, but I hope the authors of this book are under serious consideration!
Christopher J. Walker is the John W. Bricker Professor of Law at The Ohio State University Moritz College of Law.