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Federal rules cost $10,000 per employee
Federal rules cost $10,000 per employee
December 18, 2012
Originally published in The Washington Times
What do the Progressive Policy Institute, former Sen. Phil Gramm of Texas, former presidential candidate Herman Cain and the Competitive Enterprise Institute have in common? An idea for rolling back overregulation.
After President Obama issued executive orders in 2011 directing agencies to trim a small amount of regulatory fat, the Progressive Policy Institute’s Michael Mandel issued a report proposing a bipartisan Regulatory Improvement Commission to aid the process. It would be tasked with finding obsolete or harmful regulations worthy of repeal. It then would send its recommendations to Congress, which would vote on them as a package, up or down, without amendment.
It’s a good idea, with roots going back nearly 20 years. The first formal proposal for creating such a commission was Mr. Gramm's Commission on Regulatory Relief and Rollback legislation in 1995.
Of course, the various plans differ in their finer mechanics, but their basic concepts are the same. Both spending and regulations are almost impossible to cut using conventional political means. Yet one approach was tried in the 1990s that had some success: the Base Closure and Realignment Commission (BRAC).
When the Cold War ended, America no longer needed such a large military. Because no member of Congress would vote to close an unneeded military base in his own district or state, the independent BRAC commission’s job was to give Congress an omnibus package of bases to vote on closing, without amendment. This approach was able to overcome the usual vote-trading and back-scratching, and the package passed. The Pentagon (and taxpayers) saved piles of money.
Since then, Mr. Mandel, Mr. Gramm and analysts across the political spectrum all have had the same thought: Using BRAC as a model with a proven track record for cutting unnecessary spending, can a similar mechanism be extended to repealing unneeded regulations?
We deserve to know the answer. The total federal regulatory burden is at least $1.8 trillion per year and growing. More than 3,500 new rules have come into effect each year of both George W. Bush’s and Barack Obama’s presidencies. The Code of Federal Regulations, where all these rules are stored, is more than 169,000 pages long. Small businesses spend more than $10,000 per employee per year to comply with federal rules. With the economy still in bad shape, something has to give.
As Mr. Mandel’s report points out, even if rules make sense individually, they can be harmful when taken as a whole, “in the same way that a big enough pile of small stones can dam up a stream.”
Rolling back overregulation is a huge task, so an all-of-the-above approach is needed. Virginia Democratic Sen. Mark R. Warner has a “pay-as-you-go” proposal that would require agencies to remove a similar dollar amount’s worth of rules to offset the cost of each new one they add. Republicans and Democrats both have kind words for Mr. Warner’s idea. Another idea is a regulatory budget. Congress is supposed to issue a detailed annual budget for how much money it wants to spend and how it will spend it. Regulations deserve something similar.
The trouble with these two proposals is that in order to work, they require much more transparency about regulatory costs than we have now. The administration still has not released the spring 2012 (let alone the now-due fall) edition of the Unified Agenda of Federal Regulatory and Deregulatory Actions, the final Report to Congress on Benefits and Costs of Regulations or the Information Collection Budget. Between that and the absence of cost estimates for many rules, these reforms cannot work.
Fortunately, those transparency shortcomings don’t spell doom for a BRAC-style commission. Congress, at its first opportunity, should appoint a bipartisan Regulatory Reduction Commission to assess agency regulations and hold hearings. From that survey, a yearly package of proposed regulatory reductions should be assembled for Congress to vote on, without amendment. Any commission recommendation that doesn’t require legislation could be implemented directly by the president.
The commission could be kept active for as many years as Congress deems necessary, and it potentially could shave off large chunks of ineffective regulations over a number of years. The country is going on five years of economic malaise. All the fiscal and monetary fixes Washington has enacted have failed. It’s time to lighten regulatory burdens so companies can innovate, grow and hire more easily. A BRAC-style commission with bipartisan support is one way to accomplish that.