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After months of saying it wanted a “clean” hike in borrowing authority, the Obama administration now proclaims it wants to do something “big” in a debt-ceiling package just as its self-imposed deadline is approaching. On NBC’s Meet the Press this Sunday, Treasury Secretary Tim Geithner said  the president wanted to do the “biggest, most substantial deal possible, the deal that’s going to be best for the economy.”
GOP leaders should take up this challenge and put on the bargaining table something big that would also be a boost the economy: curbing overregulation that’s crushing economic growth.
With the economy teetering, leaders of both parties realize that long-term issues must be addressed in a debt-ceiling package. The American people agree and so, seemingly, do the markets. While the bond market has registered barely a hiccup to news about the debt-ceiling talks, stocks and other financial instruments continue to drop after the release of dismal growth and employment statistics.
Yet when it comes to the foundations of the U.S. economy, neither party is using the debt-ceiling talks to address the proverbial elephant in the room. In this case, it’s a trillion-dollar elephant that is stomping all over new business formation and job growth.
Taxes and spending are of course very important. House Speaker John Boehner is right to insist that debt reduction come from spending cuts rather than net tax hikes. It is more than reasonable for congressional leaders to shape most of the package to their liking, because the Constitution explicitly makes approval of new borrowing a prerogative of Congress , not the presidency.
But the problem here is that GOP leaders aren’t exercising this prerogative to deal with the vital issue of overregulation. Even if the GOP got all the spending cuts it is asking for, with no increase in taxes, Americans would still face the hidden tax of overregulation.
Even the Obama administration itself has pledged — in its rhetoric — to rein in regulation. “If they are not providing the kind of benefits in terms of the public health, and clean air and clean water, and worker safety that have been promised, then we should get rid of some of those regulations,” Obama said  in his press conference on Monday following up on his calls earlier this year for repealing “outdated regulations that stifle job creation.”
This language sounds strikingly similar to language in the House GOP’s “Plan for America’s Job Creators” unveiled in May, which states : “We must remove onerous federal regulations that are redundant, harmful to small businesses, and impede private sector investment and job creation.”
Yet, amazingly, even though both parties now want the debt-ceiling package to address issues of economic growth — all the more so, in the wake of Friday’s dismal employment numbers — no one has put measures to rein in regulation on the table. Since both Obama and GOP leaders are saying that overregulation is a barrier to job creation, it’s time to make regulatory curbs part of the debt-ceiling negotiations. As Sen. Olympia Snowe (R., Maine), not generally known as an anti-government Tea Party stalwart, wrote  recently in Politico, “One of the most effective ways government can spur job creation is to pass substantial regulatory reforms — immediately.”
A debt-ceiling deal to spur growth without adding to our fiscal woes must contain measures to halt and reverse the mounting regulatory burden. The Competitive Enterprise Institute’s annual study “Ten Thousand Commandments ” found that the Federal Register, which spells out all the new regulation the government has issued, stands — as of the end of 2010 — at an all-time-record high of 81,405 pages. Meanwhile, the sheer number of regulations in the pipeline at the end of 2010 stood at 2,439, a 19 percent increase from 2009.
In 2010, the Obama administration issued more than 90 rules that regulatory agencies figure will cost the economy at least $100 million apiece. A single provision of the 2010 Dodd-Frank financial overhaul — the pending rule on new collateral requirements for derivatives — could cost  U.S. manufacturers and other firms as much as $1 trillion in lost capital and liquidity, according to an estimate by the International Swaps and Derivatives Association. The Atlantic magazine finance columnist Daniel Indiviglio largely agrees with ISDA’s calculation, arguing  that the cost “would certainly be in the hundreds of billions.”
This and other pending regulations have attracted bipartisan criticism. Democrats have joined Republicans in expressing objections to the Federal Communications Commission’s “net neutrality” mandates on Internet providers, the Department of Education’s “gainful employment ” regulations on for-profit colleges, and the Environmental Protection Agency’s plans to regulate carbon dioxide as a pollutant under the Clean Air Act — a backdoor cap-and-trade scheme that Time has called  “the most far-reaching environmental regulatory scheme in American history.”
The ideological gulf between Obama and the GOP on many of these regulations is indeed wide, and it may be unrealistic to address all these edicts in a debt-ceiling deal. Still, since both Obama and the GOP recognize that regulation can be a barrier to growth, the debt-ceiling package can set a framework to put constraints on regulatory agencies and hold them more accountable to Congress and the courts. At the very least, any hike in borrowing authority should be conditioned on passage of major elements of bills pending in Congress to reform the regulatory process. The GOP should give the Obama administration the chance to back up at least some of its rhetoric on overregulation.
First, a debt-ceiling deal should include passage of the Freedom Act  sponsored by Senator Snowe. This bill received the support of 53 senators — including six Democrats — when voted on in June. The act would, among other things, give small business more access to the courts to challenge rules.
Current rules requiring agencies to minimize costs for smaller firms lack teeth, because firms are required to “exhaust” time- and money-consuming challenges before agencies before they can get judicial review. This can be next to impossible for firms that have trouble securing money for day-to-day operations, let alone a costly lawsuit. The Freedom Act would make this process easier for smaller entrepreneurs by allowing suits to be filed as soon as a rule is proposed.
And where Snowe’s bill would give the courts more oversight over regulations, the REINS Act  would do the same for Congress. It would require that major rules scored as costing the economy $100 million or more be affirmatively approved by both houses of Congress.
The bill, a part of the House GOP’s job-creation plan, has been praised by such respected scholars as New York Law School professor David Schoenbrod  and Case Western Reserve University professor Jonathan Adler. Adler writes  in the current issue of the policy journal Regulation that “requiring congressional approval before economically significant rules may take effect ensures that Congress takes responsibility for major regulatory policy decisions.” Noting that the REINS Act designs a streamlined procedure for approval of regulations that is not subject to filibuster, Adler compares the bill to legislation creating “fast-track trade authority or base closing” procedures and argues that it will likely not delay “needed regulatory initiatives.”
Meanwhile, Sen. Mark Warner’s (D., Va.) “one-in, one-out” proposal  for balancing new regulations by getting rid of old ones at least helps put a “ceiling” on today’s regulatory enterprise. It belongs on the table too.
Sober reflection indicates that ours is an age in which we need, not politicians who come to Washington merely to “get things done,” but leaders who recognize when it’s time to get things “undone.” Balancing the budget may address our fiscal woes. But to resolve the current “ceiling” we suffer on job creation, we must reduce the “regulatory budget” of costly mandates faced by entrepreneurs.