How a New President Can Roll Back Bureaucracy, Part 9: Improve Classification of Major Rules

This is the ninth entry in a series on how the next president can reduce bureaucracy. Earlier installments have addressed a freeze on rulemaking, the role of law and economics staff in policymaking, rule review and repeal, stricter cost analysis, dissecting regulatory dark matter, boosting Unified Agenda disclosure, tracking rule accumulation, and issuing a “regulatory report card.”

Part 9:  Improve the Classification of Major Rules

In an earlier installment of this series we stressed the need to reduce the cost thresholds that trigger regulatory review.

For decades, regulations have been loosely divided into those that are major, or “economically significant” (over $100 million in annual impacts) and those that are not. But this gives just a rough idea of minimum costs, of a lower bound. For example, given the definition of an economically significant rule, we can infer that the 218 economically significant rules in the 2015 year-end Unified Agenda pipeline, when fully implemented someday, will have economic impacts of around $22 billion annually ($100 million times 218 rules), minus any rules among that 218 that reduce costs.

A Regulatory Transparency Report like that described in the previous installment clearly should include the number of economically significant (or major) rules. But a new president (or Congress) can expand upon this designation to disclose more than a minimum level of costs. The Office of Management and Budget could develop guidelines, for example, recommending that agencies separate economically significant rules into categories representing increasing costs and present them in the Regulatory Transparency Report. Here is one suggested breakdown:

A Proposed Breakdown of “Economically Significant” Rules

Category 1                              > $100 million, <$500 million

Category 2                              > $500 million, < $1 billion

Category 3                              > $1 billion

Category 4                              > $5 billion

Category 5                              >$10 billion

This particular itemization is only one of many options for better classifying major rules, and it happens to be the one that was incorporated into the “Restoring Tax and Regulatory Certainty to Small Businesses Act” (S. 3572) and the ALERRT Act (H.R. 2804) in the 113rd Congress. But a  new president and his or her executive branch machinery could initiate such reporting on their own. Appreciating when executive and independent agencies are imposing rules on the scale of “Category 2” and above can help determine where attention should be focused better than simply knowing whether or not a rule is economically significant. Better appreciating the scale of modern regulations could be especially useful as Congress explores formal hearing requirements for mega-rules, such as the House of Representatives passed in January 2015 as part of the Regulatory Accountability Act. 


Also in this Series:

How A New President Can Roll Back Bureaucracy, Part 1: Freeze Regulations Temporarily

How A New President Can Roll Back Bureaucracy, Part 2: Boost Regulatory Review Resources and Free Market Law and Economics Staff at Agencies

How A New President Can Roll Back Bureaucracy, Part 3: Professionalize Review, Revision, Repeal and Sunsetting of Regulations

How A New President Can Roll Back Bureaucracy, Part 4: Expand Number of Rules Receiving Cost Analysis

How A New President Can Roll Back Bureaucracy, Part 5: Scrutinize All Agency Decrees That Affect the Public, Not Just Formal “Rules”

How A New President Can Roll Back Bureaucracy, Part 6: Enhance Rule Disclosure In the Unified Agenda of Federal Regulations

How A New President Can Roll Back Bureaucracy, Part 7: Track the Accumulation of Federal Regulations as Businesses Sectors Grow

How A New President Can Roll Back Bureaucracy, Part 8: Compile an Annual Regulatory Transparency Report Card 

This series builds upon recommendations in One Nation Ungovernable? Confronting the Modern Regulatory State,” in Donald J. Boudreaux, ed., What America’s Decline In Economic Freedom Means for Entrepreneurship and Prosperity, Fraser Institute and Mercatus Center at George Mason University (2015), pp. 117-181.