Limiting regulation would be the best stimulus
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).