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6 Painless Ways to Cut Federal Red Tape

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6 Painless Ways to Cut Federal Red Tape

In this age of trillion-dollar budgets, deficits and stimulus packages, taxes and spending get all the press.

But while the $3.5 trillion federal budget and $1 trillion deficit are important, they don't tell the whole story of government's size and scope. To fill out the picture, we need to add another very important trillion: the $1.75 trillion cost of federal regulation.

President Barack Obama brought attention to that forgotten issue this week by signing an executive order, "Improving Regulation and Regulatory Review." It will initiate a "government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive," as he explained in The Wall Street Journal.

This is welcome news. But on closer inspection, Obama's reforms are left wanting. The growing federal regulatory burden is hampering economic recovery -- and the executive order will do little to stem its growth.

Today, the Code of Federal Regulations is more than 157,000 pages long and growing. More than 4,200 new rules are in the pipeline right now. Of those, 224 are deemed "economically significant," which means they cost $100 million or more.

While Obama will require agencies to weigh both safety and economic costs in their rulemaking, that's already been the case for years -- ever since President Bill Clinton's similar executive order -- with little to show for it.

Meanwhile, from the health care bill to the Federal Communications Commission's push for net neutrality to the Environmental Protection Agency's carbon emission regulations, businesses in almost every sector of the economy will see their compliance burdens go up, not down. It's unlikely that the administration and Congress will put much effort into repealing these rules, considering how hard they worked to implement them in the first place.

What's more, executive orders lack the force of law. Agencies are not bound to obey them. Career bureaucrats have little incentive to repeal rules that justify their continued employment.

If President Obama's order does any good, it will be to get people talking about regulation.

And in that spirit, we have a number of suggestions for reform that will reduce the burden of obsolete or harmful rules. Reducing the cost of federal regulation by just 10 percent would put nearly $180 billion to more productive uses. Among the ideas:

  • Appoint an annual bipartisan commission to comb through the books and suggest rules that deserve repeal. Congress would then vote up-or-down on the repeal package without amendment, to avoid behind-the-scenes deal-making.
  • Require all new regulations to have built-in five-year sunset provisions. If Congress decides a rule is worth keeping, it can vote to extend it for another five years.
  • Consider Sen. Mark Warner's, D-Va., "one in, one out" proposal, which holds that for every new rule that hits the books, an old one must be repealed.
  • Let states take the lead, allowing 50 laboratories of democracy to continually discover more effective approaches through trial and error, subject to interstate competition.

Hold agencies to higher standards when it comes to quantifying regulatory costs. To the extent that agencies do calculate costs, they tend to lowball them while highballing benefits.

Keep small businesses better informed about new rules. Few have the money to pay staff in Washington to keep an eye on the Federal Register, so new rules often come as a surprise. Regulations hit small businesses especially hard. Businesses with fewer than 20 employees pay $10,585 per employee per year in compliance costs. Firms with over 500 employees pay $7,755 per employee per year.

President Obama's executive order will accomplish little, but he has performed an important public service by pushing regulation into the national conversation. The regulatory status quo is too expensive and is slowing economic recovery. Many reforms would do much good with a minimum of political pain. The ones we list above would make a good start.