Today, the Competitive Enterprise Institute hosted a Capitol Hill forum on How to Achieve Regulatory Reform in the 115th Congress.
Our guests were Adam J. White (Research Fellow at the Hoover Institution), Richard J. Pierce Jr. (Professor of Law at George Washington University), and Jerry Ellig (Senior Research Fellow at the Mercatus Center); my own remarks follow.
There’s also more advice for Congress on this topic, by the way, in CEI’s Free to Prosper: A Pro-Growth Agenda for the 115th Congress.
The federal government doesn’t merely spend $4 trillion a year, it directs the private sector to spend and otherwise re-purposes enormous resources.
So, $19 trillion federal debt aside, when policymakers neglect accumulated regulation, they ignore government’s primary influence in the economy. Politicians fret about a $350 billion corporate income tax, but regulation affects us far more.
Businessmen tell pollsters they wouldn’t do it again, that their companies couldn’t have been created in today’s regulatory environment; they give up on job creation. We need to pay attention to that.
I’ve heard it said that poverty doesn’t have causes; that it is the default state of mankind. Instead, only wealth and production have causes, and regulatory overreach can derail them.
There were 3,800 rules finalized in 2016, while Congress passed only 211 laws. These rules appeared in a Federal Register of 97,000 pages, 15,000 pages greater than the prior record.
So while we often hear of regulatory uncertainty, the certainty of regulation matters too.
Meanwhile the latest-ever 2016 Office of Management and Budget (OMB) Report to Congress on regulation showed that only 21 rules, out of thousands, got OMB-reviewed cost and benefit analysis. Less than one percent of the flow.
The 800-pound-gorilla independent agencies get no OMB scrutiny, for example.
So for most rules, we don’t have 3rd-party-vetted cost-benefit analysis, we have agency selfies.
And when government steers the economy while the market merely rows, it creates mounting costs even if no future rules get issued, such as Agencies’ delivery of the Internet, and, as of last summer, drones, into century-old public-utility models.
I do not believe Members, of either party, wish to go to the mat maintaining regulation that overreaches; and I hope Members and both Democratic and Republican staffers will think through some “North Star” goals together.
I understand partisanship and tribal intensity. I worked here! But if you’re a Democratic staffer skeptical of regulation of Uber; or of Airbnb; or of drones; or of privacy rules from the same federal government housing the NSA — then think about what you might have in common with Republican staffers concerned with environmental overreach or land-use restrictions.
There are several moving parts in the current landscape.
President Trump implemented a moratorium last week, and a two-for-one order with a regulatory budget, this week.
And this very moment, a handful of Obama rules are being subjected to Congressional Review Act Resolutions of Disapproval.
Meanwhile, the 115th Congress already passed three main bills.
- 1st, the REINS Act, to require Congress to approve the biggest rules;
- 2nd, the Midnight Rules Relief Act, to bundle resolutions of disapproval so we can do more than five;
- And finally the Regulatory Accountability Act.
Of these, the Regulatory Accountability Act looks as though it may emerge as the main negotiating vehicle. It recognizes that the Administrative Procedure Act poses no real barrier to regulatory growth anymore.
Along with regulations, there are thousands of sub-regulatory guidance documents, memoranda, notices, circulars, bulletins, and so forth that we’ve taken to calling “regulatory dark matter,” in the analogy to astronomy.
Your bosses, both Democrat and Republican, have come to see unbridled guidance as a concern, and so you have an opportunity to achieve something important here together.
For example, in hearings by Sens. Lankford and Heitkamp, members fretted that the internal process by which an agency decides to issue guidance on the one hand, or a normal regulation on the other, is a “black box.”
Guidance is especially worrisome when notice and comment procedures, or OMB review of even ordinary rules, are already lacking.
I’ve taken a partial inventory of at least 617 “economically significant” guidance documents in effect. But thousands of secondary guidances exist.
In the financial sector alone, the St. Louis Fed lists 136 pieces of “significant” guidance in play across financial agencies, while the Conference of State Bank Supervisors points to over 2,200 so-called “directives.”
Prominent examples of guidance include infamous Labor Department directives: one on independent contracting; another on joint employment. Another example is the “advisory opinions” promised by the Federal Communications Commission on net neutrality.
Similarly, Federal Aviation Administration’s 624-page, highly prescriptive Drone rule should have been a law from Congress, but in it I count at least six areas where the agency intends issuing new guidance in this frontier sector, rather than normal rulemakings.
So, while I may do the annual Ten Thousand Commandments compilation of countable trends in regulation, I suspect that unknown and unknowable aspects of the regulatory enterprise increasingly outweigh the known.
I know the two sides of the aisle will argue. Nobody sees the same rainbow (we all peer through different raindrops), and nobody sees the same cost and benefit of any given regulation or guidance.
I personally would go further than the bills in play now, preferring the Contract with America approach of eliminating certain sub-agencies and their controls.
Still, surely, some among us agree that sometimes so-called market failures might be rooted in longstanding political failures; or that coercive top-down regulation isn’t always the answer, especially if dark matter swamps normal rules or laws.
Most importantly, I hope we can agree that not everything under the sun has to be turned into a public policy question, or a regulatory agency; Think of it this way: the things we purport to regulate –safety, public health, financial stability, privacy and so on, are not just dependent variables subject to Washington’s manipulation; They are forms of wealth. And you need market disciplines, not just bureaucratic ones, to expand them rather than undermine them.
So talk to your bosses about vehicles like the Regulatory Accountability Act. If you have issues with it, recognize that it’s a compilation of several bills that can and probably will change. Look at things you can do together, as Republicans and Democrats did in the 1990s with the passage of Unfunded Mandates and small business relief. Indeed, the Congressional Review Act itself, as Heritage noted recently, was highly praised by Harry Reid and then-Sen. Carl Levin.
Legislatively, adopt things that have bipartisan pedigree. Trump’s moratorium echoes a memorandum from the Obama administration, but covers guidance besides.
Trump promised two rules out, for every one rule in. You may not realize that Democratic Sen. Mark Warner, in a 2010 Washington Post article, first proposed this idea, which in a sense amounts to a temporary cost freeze.
Other steps include implementing the bipartisan Regulatory Improvement Commission, and boosting resources at the OMB’s Office of Information and Regulatory Affairs to conduct review.
So you have lots of options. As we like to say, when it comes to prosperity, you don’t have to tell the grass to grow, but you do need to take the rocks off of it. My optimism stems from knowing there’ll always be an America — even if it’s not here!
But I want to keep it here. Thank you very much.