Economic Report of the President

Agency (EPA) from considering prospective costs in setting ambientair quality standards.Even when consideration of costs is permitted or required by statute,agencies and courts must still decide whether this has been donein an appropriate manner. Agency procedures and court opinions onthis subject vary. There is no universal test of economic feasibilityand no agreed-upon "best" relationship between the economic costsof a proposed regulation and its expected benefits.For these reasons, any sustained effort to ensure formal considerationof costs in regulatory decisions must involve the Congress, thecourts, the White House, and the agencies charged with implementingregulatory statutes. Without such broad involvement, the matterwill only be resolved on a case-by-case basis over many years. Thatslow process would provide no guarantee of uniformity, but it mightwell produce a regulatory paralysis arising from delay and uncertainty.One suggested device for reconciling regulatory priorities withinand between programs is the "regulatory budget." Most of its proponentsenvision this device as analogous to the Federal fiscal budget,with specific amounts of "permissible regulatory expenditures" assignedto each program and each agency. Some even envision a processof formal congressional authorization.Although economists have made considerable progress in estimatingthe direct costs of complying with regulation, it is not likely thatthe techniques for a full-scale regulatory budget will exist soon. Butit is feasible—and necessary—to incorporate budgetary principles, especiallythe establishment of priorities, into regulatory programs.This has been the aim of the Administration's regulatory oversightactivities.EFFORTS AT "SMARTER" REGULATIONWith the direct encouragement of the President and the RegulatoryCouncil, regulatory agencies have been experimenting with differentways to reduce the cost burden of regulation.A good example is EPA's "bubble concept." This concept is basedon the fact that it is often possible to reduce emissions of a givenpollutant from one source far less expensively than from anothersource. Thus, instead of compelling each source to meet a standard,EPA figuratively places a "bubble" over an area (a large industrialplant, or, in some cases, an even larger geographic area) and lets privatedecisionmakers decide how to meet the standard for the area atthe lowest cost. EPA initially intended to apply the concept quite narrowly,but during 1980 it gradually found ways to broaden its application.Means were found to eliminate many time-consuming procedures.The ability to develop acceptable "bubbles" for sulfur oxides105