About

The late 1960s and early 1970s marked the advent of a new wave of regulations for the U.S. economy.  While the promotion of certain social goals like a cleaner environment, safer products and a healthier workplace was common during the time, the expansion of the federal government’s regulatory roles was not.1 Congress created a series of new agencies with broad responsibilities, including the Environmental Protection Agency, the Occupational Safety and Health Administration, the National Highway Traffic Safety Administration, the Consumer Product Safety Commission and the Nuclear Regulatory Commission.  The sweeping legislative mandates given to these agencies marked a dramatic increase in the level of regulation of the American economy.  Congress directed these agencies to promote health, safety and environmental quality almost without compromise.  Expectations were high.2

Still, this initial optimism was coupled with substantial resistance on the part of firms since these government regulations represented an intrusion into previously unregulated decisions.  Further, there were also widespread suggestions that the regulations were ineffective in promoting their intended objectives.3 To make matters worse, the rate of growth and all-pervading nature of regulation raised another serious concern:  that “the stubborn flames of inflation may have a new source of fuel.”  In fact, there was a growing awareness of a linkage between regulation and inflationary pressures at this time.  For these reasons it quickly became clear that these regulatory efforts were costly and that economic impacts had to be monitored.  These concerns provided the impetus for establishing White House regulatory oversight efforts.4

To address the costs imposed by regulations, President Nixon introduced the “Quality of Life Review” program, which focused exclusively on environmental regulations to minimize burdens on business.  However, the program’s implementation brought controversy because these reviews utilized no analyses of the benefits and costs conferred onto society.5 To combat inflation, Nixon also established the Economic Stabilization Program in August of 1971, which entailed a comprehensive 90-day wage and price freeze, the initial step of a four-phase program to contain inflation that ran through 1974.6 Nixon’s oversight framework took on more structure within the Ford administration when, in 1974, Congress created the Council on Wage and Price Stability7 and President Ford initiated the Inflation Impact Statement Program, whereby regulatory agencies were required to assess the effect of major regulations.8

The Council on Wage and Price Stability, or COWPS, was an organization created within the Executive Office of the President on August 20, 1974 by the Council on Wage and Price Stability Act (P.L. 93- 387) to monitor and analyze inflationary developments in the economy.9 More specifically, the Council’s legislation enabled it to “intervene and otherwise participate on its own behalf in rulemaking, ratemaking, licensing, and other proceedings before any of the departments and agencies of the United States, in order to present its views as to the inflationary impact that might result from the possible outcomes of such proceedings.”  In the words of President Ford:

“This new Council on Wage and Price Stability will provide us with one means of identifying and exposing some of the causes of inflation. It will bring into sharper focus the critical developments of industrial performance, wage and productivity performance, and the effect on inflation of actions taken by the Federal Government.  I must reemphasize that the Council should not be a steppingstone back to mandatory wage and price controls. We have learned from experience that in today’s economy, controls lead to disruptions and new troubles…”10

The Council’s responsibility to identify and analyze inflationary influences in the economy extended to both the private and the public sectors.  The Council adopted the alternative view that the major policy instruments determining the rate of inflation are fiscal and monetary policy instead of conventional price indices like the CPI, meaning that any policy action that increased the aggregate supply of goods and services would lower the rate of inflation and vice versa.  This meant that a government regulation that generated benefits greater than costs was in a real sense anti – inflationary and a regulatory initiative generating costs in excess of benefits was inflationary.  On the other hand, COWPS labeled a regulatory initiative generating costs in excess of benefits as inflationary.11 By doing so, COWPS effectively transformed an inflation impact statement into a benefit-cost analysis.12

The Council’s Office of Wage and Price Monitoring evaluated inflationary influences on the private sector whereas the Council’s Office of Government Operations and Research was concerned with examining the inflationary potential of federal regulatory policies.  In its pricing studies, the Council’s Office of Wage and Price Monitoring investigated “capacity, profit, price, demand, and supply conditions in individual industries or sectors.”  It also analyzed structural features and changes in the general economic environment, “industrial concentration, noncompetitive practices, comparative price behavior, and other factors,” that may affect the performance of the economy with respect to prices.  These studies were used, where appropriate, to urge firms to exercise price restraint.  In monitoring wages, COWPS also cooperated with labor and management to improve the structure of collective bargaining. It also conducted general wage studies and strived to improve wage databases in both the public and private sectors of the economy.13

Since COWPS interpreted its mandate as requiring cost benefit analyses of important regulatory actions from the start, Carter established a regulatory council in January of 1978 called the Regulatory Advisory Review Group, or RARG, to track how agencies’ upcoming regulatory agendas affected inflation in its regulatory calendar.14 The review group was made up of every cabinet department except Defense, State and Treasury, together with leaders from Office of Management and Budget (OMB), Council of Economic Advisers (CEA) and the Environmental Protection Agency (EPA).  RARG consisted of representatives from the Council of Economic Advisers, various branches of the White House (domestic policy staff, COWPS, and OMB), and various executive branch agencies that served on a rotating basis.

COWPS was staffed primarily by academic economics who had little authority “beyond the influence of public criticism.”15 The organization started with just 40 people split evenly between wage and price monitoring and regulatory reviews and expanded to 200 members at its peak.  From this group, an executive committee was also selected on a rotating basis.  Most of the work was done by the CEA and by the staff of COWPS.   This interagency group prepared assessments of selected major regulatory activities that were then filed in the rule-making proceedings by COWPS.  These advisory efforts laid substantive groundwork for lobbying by leading White House officials like the Chairman of the Council of Economic Advisers and the inflation advisor to the president, Alfred E. Kahn.16

President Carter also bolstered the structure of the COWPS review process on March 24, 1978 by issuing EO 12044, which required all federal agencies to conduct economic impact studies of proposed regulations whenever their impact on the economy was significant.  These studies were tantamount to cost-effectiveness tests.  COWPS remained the main oversight group responsible for overseeing this effort.  The order made OMB responsible for compliance, but in practice RARG took on the responsibility.  Finally in October of 1978 the President created the Regulatory Council, which was charged with creating a government-wide calendar of proposed regulations.  This entire process was supposed to improve the regulatory system.17

COWPS formed the institutional base for this new advocacy group within the government to represent the general public interest.  With a staff large enough and expert enough to develop independent information and analysis, this group was able to challenge departmental views and, with presidential backing, to change many decisions.  Despite their influence, it would be naïve to believe that all or even most regulatory battles could be won, because the political forces which produced the restrictive measures in the first place were usually alert and powerful.  According to President Ford himself:

“It would also be unrealistic to expect this Council to bring any immediate relief from inflation. Establishment of the Council is but one step along a difficult road that all of us must travel in the months ahead… We face an uphill road, and we will make it through only if we all pull together.”

Nevertheless, some battles were won, and the fact that a confrontation might develop undoubtedly has a healthy restraining influence on new measures to restrict supply and, thus, inflation.18

The Carter administration’s regulatory process was regarded as significant and innovative.  In fact, President Reagan adopted a similar procedure, just as Carter built on the initiatives of the Ford administration.  Still, the Reagan regulatory oversight program differed from the Carter Program in a number of respects.  Mainly, the Reagan initiative required that agencies only issue regulations that maximize net benefits and mandated reviews of existing regulations to see which could be withdrawn or scaled back.  Further, the Council’s regulatory oversight staff moved to the Office of Management and Budget (OMB), which replaced COWPS “as the agency responsible for centralized review.”  These and other changes “established a more formal and comprehensive centralized regulatory oversight program.”19

From an institutional standpoint this change enhanced the leverage that the regulatory oversight process could exert since it was more closely involved with budgetary and staffing decisions. Unfortunately, however, the abolition of COWPS also eliminated the legislative authority to intervene in the rule-making proceedings of independent agencies such as FTC and CPSC.

The leading economic participants in the development of the initial oversight effort were CEA Chairman Murray Weidenbaum and James C. Miller III, the administrator of the Office of Information and Regulatory Affairs (OIRA) at the OMB.  Miller was an experienced regulatory reformer, having served as an official at COWPS during the Ford administration.  The day after his inauguration, President Reagan established the Presidential Task Force on Regulatory Relief chaired by Vice President Bush, with Miller as Executive Director.  Shortly thereafter, on February 17, 1981, Reagan promulgated EO 12291, which established the major ingredients of the new regulatory oversight structure.20

Though COWPS effectively prevented many “unsupportable regulations” from becoming law, the organization had little success in thwarting the issuance of poorly thought out regulations that had “strong interest group support.”21 Still, their insights endure.  “Aping the antiregulation critique from business academics in the late 1970s…” the Council defined federal regulation as a major source of inflation and began reviewing new rules and arguing with agencies over whether they needed to be so stringent.22 Further, since the “value and legitimacy” of cost- benefit analysis became evident as time went on, COWPS helped to build “an economic case against poorly conceived regulations.”23 In fact, due to the timelessness of regulatory issues investigated by COWPS, many suggest that this highly worthwhile investigatory effort, once the responsibility of COWPS, should be made a permanent feature of the government.24

This website contains documents that are taken directly from the work of economists who served on the COWPS staff.  The topics presented are almost as diverse as the contents of the Federal Register.  The literature produced takes several forms.  COWPS used the “formal comment process” outlined in the Administrative Procedure Act to file critiques of agencies’ economic analyses of the benefits and costs of proposed regulations.25 In most cases the Council’s views were therefore expressed through official written comments or “filings,” which became part of the formal record in regulatory proceeding.  COWPS also issued a press release summarizing its filing in non-technical terms.   At other times, the views of the staff were expressed in public testimony at the agency.  In still other instances, detailed analyses were provided to agencies as a part of an “internal review” procedure.  Sometimes the staff initiated studies of significant regulatory issues not related to any official regulatory proceeding.  In most cases proposed Inflationary Impact Statements accompanied proposed regulations and these were often relied upon by the Council’s staff in developing an analysis of the potential inflationary impact of the regulatory proposal.26


1 James C. Miller III and Bruce Yandle, Eds, Benefit- Cost Analyses of Social Regulation: Case Studies from the Council on Wage and Price Stability, (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1979)

2 W. Kip Viscusi, “The Misspecified Agenda: The 1980s Reforms of Health, Safety and Environmental Regulation” in Martin Feldstein Ed., American Economic Policy in the 1980s, (University of Chicago Press, 1995) 453- 465

3 supra note 2

4 supra note 1

5 John F. Morrall, “Report to Congress on the Costs and Benefits of Federal Regulations: Chapter I. The Role of Economic Analysis in Regulatory Reform,” (Office of Management and Budget Office of Information and Regulatory Affairs, September 30, 1997), http://www.whitehouse.gov/omb/inforeg/chap1.aspx#dusrap

6 Amarjit Singh Sethi and Stuart J. Dimmock, Industrial Relations and Health Services, (Taylor & Francis, 1982) 347- 368

7 “Oversight on the Activities of the Council on Wage and Price Stability: Hearings before the Committee on Banking, Housing and Urban Affairs United States Senate Ninety-Fourth Congress Second Session on The Efficacy of the Council on Wage and Price Stability’s Operation in Helping Reduce the Rate of Inflation: December 14- 15, 1976,” (Printed for the use of the Committee on Banking, Housing and Urban Affairs, U.S. Government Printing Office Washington: 1977)

8 supra note 1

9 180101, in COWPS Binder No. 18

10 John T. Woolley and Gerhard Peters, “The American Presidency Project.” Gerald Ford, “33- Statement on the Council on Wage and Price Stability Act,” (August 24, 1974), available at: http://www.presidency.ucsb.edu/ws/index.php?pid=4665

11 supra note 1

12 supra note 5

13 Council on Wage and Price Stability, “Council on Wage and Price Stability Quarterly Report July 1977,” (Washington, D.C.: Executive Office of the President, 1977), available at: http://www.archive.org/details/councilonwageand003632mbp

14 Anthony S. Campagna, Economic Policy in the Carter Administration, (Westport, Connecticut: Greenwood Press, 1995)

15 supra note 5

16 supra note 2

17 supra note 14

18 supra note 2

19 supra note 5

20 supra note 2

21 supra note 5

22 William Greider, “Who Will Tell the People: The Betrayal of American Democracy,” (Simon and Schuster, 1993), 144-45, available at: http://books.google.com/books?id=-7JU3Xk3NTgC

23supra note 5

24 George P. Shultz and Kenneth W. Dam, Economic Policy Beyond the Headlines, (New York, NY: Norton & Company, Inc. 1977)

25 supra note 5

26 supra note 1

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