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How a New President Can Roll Back Bureaucracy, Part 11: Analyze “Transfer” Costs

This is the 11th 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, issuing a “regulatory report card,” improving “major rule” classification, and analyzing economic regulations separately from other varieties.

Part 11:  Improve “Transfer” Cost Assessments

Paralleling important distinct categories of rulemaking like “economic” and “social” regulation, “process” or “transfer” agency rulemakings appear in Office of Management and Budget (OMB) Reports to Congress, and in some cases in the federal Information Collection Budget.

These include rules affecting beneficiary programs, leasing requirements for federal lands, revenue collection standards, or service-oriented administrative paperwork (such as that for business loans, passports and obtaining government benefits).

Many of these myriad administrative costs represent not regulation as such, but “services” secured from government by the public.

But that status does not make it appropriate not to actively disclose and question them, or to fail to anticipate their entailing future costs or having displacement or deadweight effects. OMB has recognized this issue. In the 2015 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities, OMB said (p. 23):

Thirty-four of the 53 major rules examined for FY 2014 were “transfer rules”—rules that primarily caused income transfers, usually from taxpayers to program beneficiaries. Most of these implement Federal budgetary programs as required or authorized by Congress. …. Although rules that affect Federal budget programs are subject to Executive Orders 12866 and 13563 and OMB Circular A-4, and are reviewed by OMB, past Reports have focused primarily on regulations that have effects largely through private sector mandates. (For transfer rules, agencies typically report the estimated budgetary impacts.)

We recognize that markets embed distortions and that the transfers are not lump-sum, thereby changing relative prices of goods and services. Hence, transfer rules may create social benefits or costs. For example, they may impose real costs on society to the extent that they cause people to change behavior, either by directly prohibiting or mandating certain activities, or, more often, by altering prices. The costs resulting from these behavior changes are referred to as the “deadweight losses” associated with the transfer. The Regulatory Right-to-Know Act requires OMB to report the social costs and benefits of these rules, and OMB encourages agencies to report these costs and benefits for transfer rules; OMB will consider incorporating any such estimates into future Reports. [Emphasis added]

The incoming president will assume command of an executive branch that needs to do more to recognize the broader economic and social effects of transfer, service, and other programs.

As a matter of stronger disclosure, it is advisable to begin expanding disclosure of service-related and process paperwork, just as we should wish to better disclose tax compliance burdens and other involuntary, non-service-related process costs such as workplace reporting requirements. All these are hardly minimal and should be tallied and reduced where possible. 

There is another more fundamental reason to escalate the study of transfer or process costs, and associated deadweight losses. As more of the economy—such as health care, energy programs, and vast federal lands and resource management—comes under federal supervision, there is less inclination for subsequent generations of desensitized Americans to even recognize that what government does is regulation or interference; it just “is.” Addressing such quasi-regulation will become an increasingly important task for a new president, and even more importantly, Congress.

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 

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

How a New President Can Roll Back Bureaucracy, Part 10: Account Separately for Economic, Health & Safety, and Environmental Regulations

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.