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Department of Homeland Security and Regulatory Analysis

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  • 1. Are We Safe Yet? Homeland Security and Regulatory Analysis Jamie Belcore and Jerry Ellig
  • 2. It’s Security – Why Bother with Analysis?
    • Effectiveness is a matter of life and death
    • Resources are finite; we choose which risks to accept
    • “ High-impact” citizen interfaces with govt. (airport security, border crossing, IDs, etc.)
    • Cost
      • $4-5 billion annual cost of major regs issued since DHS was created thru end of 2007
    • Other values: liberty, privacy
  • 3. Key Steps in Regulatory Analysis
    • Identify the desired outcomes
    • Assess evidence of market failure or other systemic problem
    • Identify federal government’s unique role
    • Assess effectiveness of alternative approaches
    • Identify costs
    • Compare costs with outcomes
  • 4. … Or, in Plain English:
    • Figure out what you’re trying to do and how you’ll know you did it
    • Figure out why government needs to do it
    • Figure out what level of government needs to do it
    • Think about different ways to do it and find the most effective one
    • Figure out what you have to give up to do whatever you’re trying to do
    • Weigh the pros and cons
  • 5. DHS Must do Regulatory Analysis
    • Unfunded Mandates Reform Act
      • Requires cost-benefit analysis of any mandate on other levels of govt. or the private sector exceeding $100 million
    • Regulatory Flexibility Act
    • Requires analysis of effects on small entities
    • Executive Order 12866
      • Regulatory Planning and Review
    • Circular A-4
      • Regulatory Analysis
  • 6. Scoring the Regulatory Analyses (6 elements, max. 30 possible points)
    • 0: No discussion of the element
    • 1: Perfunctory statement
    • 2: Some discussion and documentation
    • 3: Reasonably thorough analysis of some aspects
    • 4: Reasonably thorough analysis of most aspects
    • 5: Complete analysis, 1 or more best practices
    • Note: We evaluated the completeness and quality of analysis,
    • NOT the policy choice DHS made
  • 7. 13 economically significant regulations $61-190 million 2007 Passenger Manifests $1.36 billion 2007 Chemical Facilities $1.1 billion 2007 Immigration Benefit Application $250 million 2007 Transportation Worker ID Credential $206 million 2006 Travel Documents $206 million 2006 Air Cargo $100 million 2005 Automated Passenger Info. System $125 million 2005 H1-B Visa Allocation Unclear 2005 Community Disaster Loans Unclear 2004 Biometric Data $540 million 2003 Maritime Facility Security $137 million 2003 Vessel Security $47.7 million 2003 Area Maritime Security Annual Cost Year Final Regulation
  • 8. How they scored … 3 2005 Community Disaster Loans 4 2005 H1-B Visa Allocation 5 2006 Air Cargo 5 2003 Area Maritime Security 6 2007 Transportation Worker ID Credential 6 2003 Maritime Facility 6 2003 Vessel Security 8 2007 Immigration Benefit Application 8 2004 Biometric Data 9 2005 Automated Passenger Info. System 10 2007 Chemical Facilities 12 2007 Passenger Manifests 15 2006 Travel Documents Total Score Year Final Regulation
  • 9. Uneven improvement over time
  • 10. Do some agencies do better analysis? 3 FEMA 2005 Community Disaster Loans 4 Citizenship/Immigration 2005 H1-B Visa Allocation 5 TSA 2006 Air Cargo 5 Coast Guard 2003 Area Maritime Security 6 Coast Guard 2007 Transportation Worker ID Credential 6 Coast Guard 2003 Maritime Facility 6 Coast Guard 2003 Vessel Security 8 Citizenship/Immigration 2007 Immigration Benefit Application 8 Border/Transp. Security 2004 Biometric Data 9 Customs & Border Prot. 2005 Automated Passenger Info. System 10 DHS 2007 Chemical Facilities 12 Customs & Border Prot. 2007 Passenger Manifests 15 Customs & Border Prot., State 2006 Travel Documents Total Score Agency Year Final Regulation
  • 11. Average scores by element 6 0.54 Unique Federal Role 7 0.77 Identify Systemic Problem 5 1.15 Analyze Alternatives 1 1.38 Compare Costs & Outcomes 0 1.46 Identify/Measure Outcome 0 2.15 Analyze Costs # of 0’s Avg. Score
  • 12. 5 Cost Analysis: Travel Documents (2006) $104 million maximum Examined forgone opportunities $601-717 million highly likely Included analysis of uncertainty $147-733 million first year cost Included sensitivity analysis 652,000 forego travel Estimated behavioral changes $149 monetary and time cost of obtaining passport Estimated effects on prices $206 million annually Identified most major monetary costs
  • 13. 3 Outcomes: Passenger Manifests Reasons for assumption of 90% effectiveness not explained Acknowledges rule won’t be 100% effective Arbitrary assumption for airlines not using automated query system Coherent theory: automated query prevents issue of boarding pass Safety outcome not measured Avoided costs measured ($10 million annually) Intermediate outcomes; risk reduction not measured 2 outcomes: Keep risky people off planes, and avoid costs of flight delay/diversion Weaknesses Strengths
  • 14. 3 Systemic Problem: Immigration Benefit Application (2007) Takes current costs of activities as given and unchangeable Activity-based costing demonstrates costs of specific services exceed fees Could have presented actual numerical evidence Cites historical experience that increased funding (appropriations) reduces backlogs Does not assess how much of backlog stems from $ shortfall Theorizes insufficient funding causes backlogs Narrow definition of problem presumes rest of policy and operations are optimal Identifies systemic problem: costs exceed fees, leading to processing backlogs Weaknesses Strengths
  • 15. In summary …
    • None are complete
    • Some recent ones are better
    • Cost-benefit analysis is strongest
    • Discussion of alternatives, systemic problem, and federal role are weakest
  • 16. Why?
    • Circular A-4 issued Sept. 2003
    • Shortage of regulatory economists at DHS to complete adequate analysis for each rule
    • Statutory deadlines impose unrealistic timelines for such a small staff (7 began as interim final rules with statutory deadlines)
    • Little discretion delegated from Congress to DHS
    • (Better analysis of alternatives where DHS has more discretion)
  • 17. A note on analytical capabilities… 15,900:1 10 159,000 DHS 15:1 70 1,074 FTC 32:1 60 1,926 FCC 44:1 9 400 CPSC 468:1 220 103,000 USDA 500:1 20 10,000 FDA 90:1 200 18,000 EPA Ratio Economists Employees
  • 18. Haste makes waste? 9.17 3.50 Final Rules 6.00 2.86 Interim Final Rules Reg. Analysis Score Transparency Score
  • 19. What can DHS do?
    • Hire more economists
    • Make objective analysis their job
    • Get ahead of the curve
      • Research solutions which can be used by DHS to inform debate prior to legislation.
      • Precedents: USDA Economic Research Service, FTC Bureau of Economics
    • As a policy, examine regulatory alternatives that fall outside of the scope of specific mandates
  • 20. What can OMB do?
    • Critique analysis of alternatives, market failure, and analysis of federal role
    • Revise EO 12,866 to emphasize analysis of alternatives outside the scope of legislation
  • 21. What can Congress do?
    • Legislate goals, not means
      • (“Steer, don’t row!”)
    • If DHS discretion is limited, Congress should arrange for analysis
    • Set realistic deadlines