Lim­it­ing reg­u­la­tion would be the best stim­u­lus

The Washington Times Weekly - - Commentary -

Even be­fore count­ing Pres­i­dent Obama’s am­bi­tious “stim­u­lus” agenda, spending by the U.S. gov­ern­ment — the largest on planet Earth — is now higher than ever. That’s right. Amer­ica to­day has the big­gest gov­ern­ment in his­tory. We’re now looking at $3.55 tril­lion in di­rect gov­ern­ment ex­pen­di­tures.

But that’s not all. Be­fore mak­ing en­ergy re­new­able, car­bon capped, the Net neu­tral and health care “avail­able” to all, we need to know what hid­den reg­u­la­tory costs th­ese and other pro­pos­als will im­pose on Amer­i­can busi­nesses large and small.

The Of­fice of Man­age­ment and Bud­get (OMB) was seek­ing pub­lic com­ments on de­vel­op­ing rec­om­men­da­tions for a new “Fed­eral Reg­u­la­tory Re­view” in­tended “to im­prove the process and prin­ci­ples gov­ern­ing reg­u­la­tion.” We’re glad they asked!

Few Amer­i­cans are aware of the mas­sive scope of the fed­eral reg­u­la­tory en­ter­prise. It is hardly com­mon knowl­edge that 4,004 rules from nearly 70 de­part­ments and agen­cies filled the reg­u­la­tory pipe­line in 2008, or that the Fed­eral Reg­is­ter now skirts 80,000 an­nual pages. Th­ese busi­ness, health, safety and en­vi­ron­men­tal reg­u­la­tions (plus pa­per- work) cost $1.2 tril­lion an­nu­ally — on top of the $3.55 tril­lion in di­rect gov­ern­ment spending.

In the present eco­nomic en­vi­ron­ment, pol­i­cy­mak­ers can ill af­ford to ig­nore the need to dereg­u­late to stim­u­late.

Un­for­tu­nately, dereg­u­la­tory stim­u­lus will in­evitably chafe against fed­eral agen­cies’ in­cen­tives to ad­mit when rules are poorly tar­geted or their ben­e­fits do not jus­tify the costs. No mat­ter how costly or in­con­ve­nient, a na­tion­wide 15-mile-per-hour speed limit and manda­tory 15-foot bumpers would save lives. A net ben­e­fit could be claimed. Undis­ci­plined agency reg­u­lat­ing isn’t af­ford­able any­more.

The Con­sti­tu­tion grants Congress to power to make law. But when Congress del­e­gates that power to agen­cies, voter con­trol over gov­ern­ment is sev­ered. For Congress, this is a po­lit­i­cal win­win — it can take credit for pop­u­lar reg­u­la­tory ini­tia­tives but blame agen­cies for ones that turn out un­pop­u­lar or too costly.

Elected rep­re­sen­ta­tives should be re­quired to ap­prove sig­nif­i­cant agency rules be­fore they be­come bind­ing. Along with con­gres­sional ac­count­abil­ity, bet­ter reg­u­la­tory cost dis­clo­sure is needed, since no one knows whether any given reg­u­la­tion does more good than harm. An an­nual Fed­eral Reg­u­la­tory Re­view, prop­erly de­signed, would pro­vide clar­ity.

The Re­view Card, which may be pub­lished as an ad­den­dum to the fis­cal bud­get or the Eco­nomic Re­port of the Pres­i­dent ev­ery year, should in­clude num­bers for the fol­low­ing:

To­tal ma­jor (cost­ing $100 mil­lion-plus) rules and mi­nor rules by reg­u­la­tory agency.

Num­ber and per­cent­age of rules im­pact­ing small busi­ness.

Cost es­ti­mates, with subto­tals by agen­cies and grand to­tal.

Num­ber and per­cent­age of agen­cies fail­ing to pro­vide cost es­ti­mates.

Fed­eral Reg­is­ter anal­y­sis: Num­ber of pages, pro­posed rules and fi­nal rules by agency.

The most ac­tive rule­mak­ing agen­cies.

Rules that are dereg­u­la­tory rather than reg­u­la­tory.

Num­ber and per­cent­age of rules re­quired by statute vs. agency dis­cre­tionary rules.

Rules for which weigh­ing costs and ben­e­fits is statu­to­rily pro­hib­ited.

De­tail on rules re­viewed by the OMB, and action taken.

The ab­sence of cost es­ti­mates should raise red flags. Agen­cies should con­cen­trate on fully pre­sent­ing the costs of their ini­tia­tives — much like the fed­eral bud­get fo­cuses on out­lays, not ben­e­fits. Em­pha­siz­ing costs doesn’t mean ig­nor­ing ben­e­fits, which pre­sum­ably pro­pelled Congress’ leg­is­la­tion in the first place.

Ben­e­fit as­sess­ment must hap­pen while Congress con­sid­ers leg­is­la­tion that agen­cies later trans­late into reg­u­la­tions. It should not be car­ried out by reg­u­la­tory agen­cies, which have an in­cen­tive to in­crease their au­thor­ity — and thus to over­state ben­e­fits and un­der­state costs.

More­over, OMB could cre­ate bench­marks to cri­tique high-cost, low-ben­e­fit rules by com­par­ing the al­leged ben­e­fits of new reg­u­la­tions to those of hir­ing po­lice­men and fire­men, buy­ing smoke de­tec­tors, or paint­ing stripes down the mid­dle of un­marked roads. Congress and OMB could de­mand that agen­cies pro­pose an­nual rule roll­backs, off­set new rules’ costs by elim­i­nat­ing older ones, and put an ex­pi­ra­tion date on rules to sun­set them un­less Congress — not the agency — ex­tends them. The in­ter­a­gency com­pe­ti­tion gen­er­ated by a dis­clo­sure-and-purge cul­ture may re­veal that reg­u­la­tions do not al- ways yield the ben­e­fits their pro­po­nents claim.

Fur­ther­more, a con­gres­sion­ally ap­pointed, bi­par­ti­san Reg­u­la­tory Re­duc­tion Com­mis­sion could as­sem­ble a yearly pack­age of cuts. Sim­i­lar in struc­ture to the De­fense Base Clo­sure and Re­align­ment Com­mis­sion, it could help over­come the oth­er­wise po­lit­i­cally in­sur­mount­able task of tackling rules one at a time by in­stead assem­bling a bun­dle of roll­backs to vote up or down. Since ev­ery­body stands a chance of get­ting hit, bundling pro­vides some po­lit­i­cal cover. The Fed­eral Agency Pro­gram Re­align­ment and Clo­sure Act (H.R. 1023), re­cently in­tro­duced by Rep John Sul­li­van, Ok­la­homa Repub­li­can, is on the right track.

To­day’s mount­ing spending and deficits in­crease in­cen­tives to reg­u­late. The Obama ad­min­is­tra­tion seeks in­put by to­day on reg­u­la­tory pro­ce­dures. It needs to ab­sorb the mes­sage that wealth-cre­at­ing, small busi­ness­friendly al­ter­na­tives to “spen­du­lus” de­serve top con­sid­er­a­tion. Dereg­u­late to stim­u­late.

Wayne Crews is vice pres­i­dent for pol­icy at the Com­pet­i­tive En­ter­prise In­sti­tute (www.cei.org).

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