The Section 508 disconnect

During the last months of Bill Clinton's presidency, agencies issued regulations on many controversial topics. Among those were the final Electronic and Information Technology Standards — also known as the Section 508 rules — intended to improve the accessibility of information technology to government employees and members of the public with disabilities.

While important in themselves, these regulations provide a more important lesson in measuring the true costs of government regulations.

Those costs have interested economists and politicians for years, but heated up with the election of Ronald Reagan as a populist, "anti-government" president.

One of Reagan's first official acts was issuing an executive order that required agencies to consider the costs and benefits of all new rules and to withhold action unless the "potential benefits to society for the regulation outweigh the potential costs to society." At about the same time, Congress passed the Regulatory Flexibility Act to require agencies to address the cost of new rules for small businesses in particular.

Reagan's order remained in place until Clinton replaced it with his own, which nominally retained the requirement for a cost/benefit analysis. But it also placed new emphasis on selecting "approaches that maximize net benefits," including perceived societal benefits.

Although differences in the two orders seem subtle, the impact of the change was large, as seen in adopting the Section 508 rules. Release of Section 508 was accompanied by an economic assessment that declared the total cost to society in adopting the accessibility standards could reach $1.1 billion. The government's portion could reach $691 million, with the American public paying the rest.

By contrast, benefits deriving from the accessibility standards were estimated at between zero and $466 million. Thus, as the Clinton administration declared, "it is not possible to conclude that the benefits are greater than the costs."

The economic analysis for Section 508 included no alternatives, let alone one that involved the least net cost to society. Furthermore, the analysis lacked a determination that the approach taken would "maximize net benefits." And even more egregious, despite stating that about half the cost of implementation would likely fall on the public, the analysis didn't even attempt to analyze those costs.

Clinton officials refused to consider whether such costs might fall differently on small and large businesses, even though this is precisely what the Regulatory Flexibility Act requires agencies to address. According to the Clinton administration, there was no need to comply with that law because "this final rule imposes requirements only on the federal government and the [administrative board] certifies that it does not impose any requirements on small entities."

It's difficult to reconcile that statement against the Clinton administration's admission that Section 508 rules could cost private entities up to half a billion dollars per year. Small businesses are paying some of that cost, and it isn't cheap.

Peckinpaugh is corporate counsel for DynCorp, Reston, Va.


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