It's Time To Regulate The State

It's Time To Regulate The State

November 02, 2010
Originally published in Forbes

Think about what's about to happen, if we don't stop it. Crushing regulations loom thanks to unpopular health care and financial reform legislation. An ambitious Environmental Protection Agency remains devoted to regulating carbon dioxide, and an elitist Federal Communications Commission thinks "net neutrality" is something to impose by force on today's flourishing Internet, with no congressional authorization.

Somebody has to be the grownup here. The new Congress surely could be the adult, and one thing it could do would be for it to enact a simple new tool to limit the ability of agencies to run wild.

These new rules imposed by unrestrained government agencies come in the wake of myriad pollution controls, workplace and manufacturing mandates, and countless other regulations already costing well over $1.7 trillion every year, according to a new Small Business Administration report. Agencies spew these regulations at the rate of over 3,000 each year, and they often undermine the competitive process's superior ability to lessen risk.

In any event, once established, federal regulatory agencies face overwhelming incentives to expand turf (consider again the FCC, an agency that's largely obsolete apart from the role it should be playing in privatizing spectrum). Apart from budget growth and number of employees, the only gauge of an agency's "productivity" is the regulations it issues, as Cato Institute Chairman Emeritus William Niskanen's work on bureaucratic incentives best explained. They could make a reality show about all this pandemonium, but it would be too scary for most to watch.

In order for the economy to recover, businesses--both small and large--need to end rampant "regulation without representation," as in the over-delegation of power to unelected federal agency employees. The problem is that the political apparatus has shirked its duties when it comes to providing the necessary--adult--oversight. It's like the kids are home alone with P. J. O'Rourke's "whiskey and car keys."

Whether Congress delegates excessive power or whether agencies simply assume it, blaming or scolding agencies for emphasizing the very regulating they were set up to do by Congress in won't help. If Congress is the ultimate source of over-regulation, then regulatory reform must be seen as congressional reform, just as Congress has been the target of other popular reforms aimed at reining in government over-reach, such as term limits, committee reform and subjecting Congress to its own laws.

A proposed, fundamental solution is the REINS Act ("Regulations from the Executive In Need of Scrutiny"), from Rep. Geoff Davis (R-KY) and Sen. Jim DeMint (R-SC). REINS would require congressional approval of "major" ($100 million-plus) rules and regulations before they are binding.

This requirement, that elected representatives affirm significantly costly new agency rules, would change rulemaking dynamics entirely, creating incentives that would drive agencies to ensure that their rules meet plausible cost-benefit benchmarks before sending them back to a newly answerable Congress.

In regulatory policy, as with the tax code, it's properly Congress' job to make the grand judgments about where benefits lie and to take responsibility for the priorities and results that emerge. One wrinkle is that agencies often don't own up to the costs of their rules, so REINS should also hold for rules that a member designates as particularly controversial, not just "major" ones.