Some policy makers have expressed an interest in measuring total regulatory costs and benefits. For example, the Congressional Office of Regulatory Analysis Creation and Sunset and Review Act of 2011 ( H.R. However, measuring total regulatory costs and benefits is inherently difficult. The Crain and Crain Report

In September 2010, the Office of Advocacy within the Small Business Administration (SBA) released a report prepared for the office by Nicole V. Crain and W. Mark Crain entitled "The Impact of Regulatory Costs on Small Firms." How Crain and Crain Developed the $1.75 Trillion Estimate of Regulatory Costs

Crain and Crain developed their $1.75 trillion estimate of total regulatory costs by adding together cost estimates for each of four categories or types of regulation: economic regulations ($1.236 trillion); environmental regulations ($281 billion); tax compliance ($160 billion); and regulations involving occupational safety and health, and homeland security ($75 billion). Comments Regarding the Estimate of the Cost of Economic Regulations

The validity and accuracy of Crain and Crain's estimate of the cost of economic regulations depends on at least two factors: (1) whether the WGI index of "regulatory quality" can be used as part of a formula to measure the cost of economic regulations, and (2) whether the authors interpreted the regulatory quality index in the way it was intended. OMB does not include tax paperwork in its annual reports to Congress on the costs and benefits of federal regulations. Other commenters (including one of the peer reviewers of the Crain and Crain study) raised similar concerns about whether the regulatory quality index could be used to measure the cost of economic regulations, and about the regression analysis used to produce the cost estimate. Crain and Crain's estimates for environmental, occupational safety and health, and homeland security regulations were developed by mixing together academic studies (some of which were more than 30 years old) with agencies' estimates of regulatory costs that were developed before the rules were issued (some of which are now 20 years old). The agency estimates that Crain and Crain used were drawn from OMB reports to Congress on the estimated costs and benefits of regulations, which were typically presented as low-to-high ranges. However, Crain and Crain used only the highest cost estimates from these reports, stating that they did so because the OMB estimates did not cover all regulations, and because they believe "government agencies tend to be conservative in estimating regulatory costs." Also, OMB has concluded that estimates of the costs and benefits of regulations issued more than 10 years earlier are of "questionable relevance." Crain and Crain's estimate for the cost of tax paperwork was reportedly based on data from the IRS and the Tax Foundation, but data in OMB's annual Information Collection Budget suggests that the number of hours of tax paperwork may be much higher than the authors used in their report. However, a threshold question is whether tax paperwork should be considered in the same category as regulatory costs. However, Crain and Crain told CRS that their report was "not meant to be a decision-making tool for lawmakers or federal regulatory agencies to use in choosing the 'right' level of regulation.
Some policy makers have expressed an interest in measuring total regulatory costs and benefits (e.g., the Congressional Office of Regulatory Analysis Creation and Sunset and Review Act of 2011, H.R. 214, 112th Congress), and estimates of total regulatory costs have been cited in support of regulatory reform legislation (e.g., H.R. 10, the Regulations from the Executive In Need of Scrutiny (REINS) Act, H.R. 10, 112th Congress). However, measuring total costs and benefits is inherently difficult. This report examines one such study to illustrate the complexities of this type of analysis.
A September 2010 report prepared by Nicole V. Crain and W. Mark Crain for the Office of Advocacy within the Small Business Administration (SBA) stated that the annual cost of federal regulations was about $1.75 trillion in 2008. This cost estimate was developed by adding together the estimated costs of four categories or types of regulation: economic regulations (estimated at $1.236 trillion); environmental regulations ($281 billion); tax compliance ($160 billion); and regulations involving occupational safety and health, and homeland security ($75 billion). Some commenters have raised questions about the validity and reliability of this estimate.
For example, Crain and Crain's estimate for economic regulations (which comprises more than 70% of the $1.75 trillion estimate) was developed by using an index of "regulatory quality." One of the authors of the regulatory quality index said that Crain and Crain misinterpreted and misused the index, resulting in an erroneous and overstated cost estimate. Other commenters have also raised concerns about using the index to estimate regulatory costs, and about the regression analysis that the authors used to produce the cost estimate. Crain and Crain said that they believe they interpreted and used the regulatory quality index correctly.
Crain and Crain's estimates for environmental, occupational safety and health, and homeland security regulations were developed by blending together academic studies (some of which are now more than 30 years old) with agencies' estimates of regulatory costs that were developed before the rules were issued (some of which are now 20 years old). Although the agency estimates were typically presented as low-to-high ranges, Crain and Crain used only the highest cost estimates in their report. The Office of Management and Budget has said that estimates of the costs and benefits of regulations issued more than 10 years earlier are of "questionable relevance."
Crain and Crain's estimate for the cost of tax paperwork was based on data from the Internal Revenue Service and the Tax Foundation, but OMB data indicate that the number of hours of tax paperwork may be much higher than Crain and Crain's estimate. On the other hand, the authors' assumptions regarding the cost of completing the paperwork may be too high. A threshold question, however, is whether tax paperwork should be considered in the same category as regulatory costs. OMB does not include tax paperwork in its annual reports to Congress.
Crain and Crain said they did not provide estimates of the benefits of regulations, even when the information was readily available, because the SBA Office of Advocacy did not ask them to do so. OMB's reports to Congress have generally indicated that regulatory benefits exceed costs. Crain and Crain said their report was not meant to be a decision-making tool for lawmakers or federal regulatory agencies to use in choosing the "right" level of regulation. This report will not be updated.