You are here

OpenMarket: Regulatory Reform

  • The Improvisational Fed, and Unpredictable Regulations

    February 11, 2016 4:40 PM

    Improvisation can be a wonderful thing when performed by talented hands—Charlie Parker, Miles Davis, and the like. The Federal Reserve, especially for the past several weeks, has fancied itself an improvisational talent on that level. But like most humans, Janet Yellen is no Charlie Parker. They should consider a return to the Paul Volcker/early Alan Greenspan adherence to a defined rule. But that isn’t the end of the story—any substantive Fed reforms will fail unless they are coupled with a thorough program of regulatory reform reaching through the entire executive branch. This post will examine a few worthwhile Federal Reserve reforms, then some regulatory reforms, most of which have already passed the House.

    The rest of the executive branch has a similar lesson to learn—more complexity and an ever-increasing stock of rules means less predictability and more uncertainty for businesses, investors, and consumers. Agencies’ increasing tendency to regulating through non-transparent “dark matter” means only makes the problem worse.

    As far as the Fed goes, the point is not so much which rule a central bank should adopt, but that it must have a rule in the first place, and follow it consistently. Here are three possibilities. 

    One is a Taylor rule, which the U.S. Federal Reserve followed for the better part of the 1980s and 1990s, with good results. A Taylor rule raises interest rates when growth and inflation are high, and lowers interest rates when growth and inflation are low. In other words, if the economy looks like it might be overheating, the Fed automatically touches the brakes a little bit. And if it looks sluggish, the Fed pushes the gas pedal a little bit, by predictable, predefined amounts.

  • CEI's Battered Business Bureau: The Week in Regulation

    February 8, 2016 9:24 AM

    Back to business as usual this week, with new regulations covering everything from Taiwanese orchids to student pilots.

    On to the data:

    • Last week, 58 new final regulations were published in the Federal Register, after 56 the previous week.
    • That’s the equivalent of a new regulation every two hours and 54 minutes.
    • With 275 final regulations published so far in 2016, the federal government is on pace to issue 2,855 regulations in 2016. Last year’s total was 3,406 regulations.
    • Last week, 1,371 new pages were added to the Federal Register, after 1,096 pages the previous week.
    • Currently at 6,400 pages, the 2016 Federal Register is on pace for 66,666.66 pages. The 2015 Federal Register had an adjusted page count of 81,611.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Four such rules have been published so far in 2016, one in the last week.
    • The running compliance cost tally for 2016’s economically significant regulations ranges from $402 million to $1.24 billion.
    • 32 final rules meeting the broader definition of “significant” have been published this year.
    • So far in 2016, 62 new rules affect small businesses; 14 of them are classified as significant. 
  • How to Get Rid of Obsolete Regulations

    February 3, 2016 1:15 PM

    The House this week is considering H.R. 1675, the Encouraging Employee Ownership Act, sponsored by Rep. Randy Hultgren (R-Ill.). I’ll leave it to my colleague John Berlau to comment on the bill’s impact on employment and financial regulation. But I do want to point out an important regulatory reform it contains for getting rid of old or obsolete rules. The idea is similar to something CEI has been promoting for years: retrospective review. While this particular bill would only affect the Securities Exchange Commission (SEC), the model can easily be applied to other agencies.

    Typically, benefit-cost analysis for regulations is done only before they come into effect. Once a rule goes live and we actually have real-world data on it, nothing is done to measure it. This is a problem, especially since complicated rules are prone to unintended consequences. Even the most diligent analyst cannot foresee everything. That’s why regulations should also be subject to cost analysis after coming into effect, not just before.

    There are lots of ways to do retrospective review. The way the Encouraging Employee Ownership Act goes about it is to require the SEC to, at least once per decade, look at each of its “significant” regulations (for which there is a special definition) and have the Commissioners vote on whether to keep them, scrap them, or update them. This review doesn’t necessarily involve benefit-cost analysis, just the SEC Commissioners’ judgment. This sort of periodic review is a regulatory best-practice that all agencies should engage in periodically.

  • CEI's Battered Business Bureau: The Week in Regulation

    February 1, 2016 6:58 AM

    The big Snowzilla storm came and went, but still made its presence known in the Federal Register. For many documents, there is a lag of a few days between submission and publication. So while the first three days of the week it was business as usual despite a government slowdown, Thursday’s edition was only 69 pages, and Friday’s was 92 pages. A normal day is around 300 pages. Despite the temporary slowdown, regulators still issued rules covering everything from spray valves to alien medical exams.

    On to the data:

    • Last week, 56 new final regulations were published in the Federal Register, after 59 the previous week.
    • That’s the equivalent of a new regulation precisely every three hours.
    • With 217 final regulations published so far in 2016, the federal government is on pace to issue 2,855 regulations in 2016. Last year’s total was 3,406 regulations.
    • Last week, 1,096 new pages were added to the Federal Register, after 1,213 pages the previous week.
    • Currently at 5,029 pages, the 2016 Federal Register is on pace for 66,172 pages. To give some context, the 2015 Federal Register had an adjusted page count of 81,611.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Three such rules have been published so far in 2016, one in the last week.
    • The running compliance cost tally for 2016’s economically significant regulations ranges from $402 million to $1.24 billion.
    • 27 final rules meeting the broader definition of “significant” have been published this year.
    • So far in 2016, 55 new rules affect small businesses; 13 of them are classified as significant. 
  • CEI's Battered Business Bureau: The Week in Regulation

    January 25, 2016 10:56 AM

    It was a short week due to both MLK Day and a large snowstorm in the DC area, but regulators still issued new rules covering everything from potato proteins to Wisconsin air.

    On to the data:

    • Last week, 59 new final regulations were published in the Federal Register, after 70 the previous week.
    • That’s the equivalent of a new regulation every two hours and 51 minutes.
    • With 153 final regulations published so far in 2016, the federal government is on pace to issue 2,875 regulations in 2016.
    • Last week, 1,213 new pages were added to the Federal Register, after 1,617 pages the previous week.
    • Currently at 3,933 pages, the 2016 Federal Register is on pace for 70,233 pages.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Two such rules have been published so far in 2016, none in the last week.
    • The running compliance cost tally for 2016’s economically significant regulations ranges from $321 million to $1.118 billion.
    • 17 final rules meeting the broader definition of “significant” have been published this year.
    • So far in 2016, 39 new rules affect small businesses; 7 of them are classified as significant. 
  • Market Dominance Doesn't Last; Regulation Shouldn't Either

    January 22, 2016 10:51 AM

    One of the justifications for heavy regulation of large companies is that they use market power to crush competition and maintain market dominance. Yet the history of America’s most successful companies—those that make it on to the Dow Jones Industrial Average (DJIA)—doesn’t support that theory. Sustainable competitive advantage is very hard to achieve, even for these titans of industry.

    If we look at the history of the DJIA, we can immediately identify several significant changes in its sectoral composition over the years.

    The DIJA was first published in 1884. It consisted of 11 companies, eight of which were railroad companies. The index was later expanded to 12 companies, before being expanded to 20 in 1916. The present Dow Jones Industrial Average began in 1928, when the list was lengthened once more from 20 to 30, consisting mostly of manufacturing companies and resource extraction companies such as Bethlehem Steel and Atlantic Petroleum (who?).

  • CEI's Battered Business Bureau: The Week in Regulation

    January 18, 2016 11:41 AM

    Things sped up last week after 2016’s slow start. The Energy Department issued the year’s first two economically significant regulations, and other new regulations cover everything from responsible people to injurious slamanders.

    On to the data:

    • Last week, 70 new final regulations were published in the Federal Register, after 32 the previous week.
    • That’s the equivalent of a new regulation every two hours and 24 minutes.
    • With 102 final regulations published so far in 2016, the federal government is on pace to issue 2,550 regulations in 2016.
    • Last week, 1,607 new pages were added to the Federal Register, after 1,113 pages the previous week.
    • Currently at 2,720 pages, the 2016 Federal Register is on pace for exactly 68,000 pages.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Two such rules have been published so far in 2016.
    • The running compliance cost tally for 2016’s economically significant regulations ranges from $321 million to $1.118 billion.
    • 13 final rules meeting the broader definition of “significant” have been published this year.
    • So far in 2016, 25 new rules affect small businesses; 5 of them is classified as significant. 
  • CEI's Battered Business Bureau: The Week in Regulation

    January 11, 2016 8:21 AM

    After a record-setting 2015, 2016 got off to a slow start, with new rules covering everything from vending machines to Nebraskan sludge. Even so, it may be a busy few months until May 17 or so, when a soft deadline for Congressional Review Act enforcement comes into effect. Congress could potentially block most rules issued after that date, so agencies are likely to hurry as many of this year’s rules as possible. Think of it as an early midnight rush.

    On to the data:

    • Last week, 32 new final regulations were published in the Federal Register, after 67 the previous week.
    • That’s the equivalent of a new regulation every five hours and 3 minutes.
    • With 32 final regulations published so far in 2016, the federal government is on pace to issue 1,600 regulations in 2016.
    • Last week, 1,113 new pages were added to the Federal Register, after 1,401 pages the previous week.
    • Currently at 1,113 pages, the 2016 Federal Register is on pace for 27,825 pages.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. No such rules have been published so far in 2016.
    • That means this year’s running compliance cost tally stands at zero. 2015’s estimated tally ranges from $6.18 billion to $8.69 billion.
    • 3 final rules meeting the broader definition of “significant” have been published this year.
    • So far in 2016, 6 new rules affect small businesses; 1 of them is classified as significant. 
  • Regulatory Reform in 2016 Starts Now

    January 7, 2016 12:13 PM

    The House is voting on two pieces of regulatory reform legislation today, the Sunshine Act and the SCRUB Act. Both will likely pass, then it’s on to the Senate, though veto threats to both bills complicate matters. Over at RealClearPolicy, I break down both bills. The Sunshine Act would reform a regulatory practice called sue-and-settle:

    In a typical sue-and-settle situation, an environmental-activist group sues the Environmental Protection Agency for not meeting deadlines or not enforcing certain regulations thoroughly enough. EPA officials, who may have been working with the plaintiffs behind the scenes, happily admit guilt and agree to a settlement that expands the agency's power and scope. 

    See also my colleague William Yeatman’s work on sue-and-settle reform. Meanwhile, the SCRUB Act would:

    [E]stablish an independent commission to comb through the 175,000-page Code of Federal Regulations for old, obsolete, redundant, and harmful rules. Its goal is to "achieve a reduction of at least 15 percent" in cumulative regulatory costs. With that goal in mind, and given that federal regulations now cost nearly $1.9 trillion per year, a successful commission could save the American people around $285 billion per year.

    Read the whole thing here.

  • The 2016 Unconstitutionality Index: 39 Federal Rules for Every Law Congress Passes

    January 4, 2016 12:39 PM

    The New Year brought news of yet more executive action by President Obama, most prominently this time on tweaking the Second Amendment and access to guns.

    The President’s January 1 radio address outlined the plan. As the first order of business upon his return from Hawaii, the President and Attorney General Loretta Lynch will initiate a three-month review of options.

    The emboldened president, who even maintains a taunting website devoted to the refrain “We Can’t Wait,” clearly loves unilateral executive actions. He has often invoked his “pen and phone” by which he rather than Congress writes law.

    At an earlier than usual January 12 State of the Union Address, observers anticipate the president pushing such items as nutrition labeling, e-cigaratte regulation, controls on investment advisors, more energy efficiency controls and closing Guantanamo.

    But the “executive action agenda” will be more ambitious than that. While in his last year he’s not expected to do another Obamacare, one must expect the president to aggressively push an interventionist middle-class economics and income inequality agenda in support of the Democratic presidential nominee as the year proceeds.

    There’s this notion floating around about political gridlock, that a do-nothing Congress and the President can’t work together on anything.

    But if the past year has established anything, it is that the Republican Party as currently constituted accommodates President Obama, and isn't going to stand in the way of executive actions via the constitutional means at its disposal—that of withholding the purse.

    That lack of gridlock has made for the interesting primary season as the party unconvincingly acts bewildered at the non-appeal of its establishment candidates (at least according to the polls).

    Indeed, the dozens or hundreds of federal agencies—depending upon who’s counting—issue regulations that vastly outnumber each year’s laws legitimately passed by Congress.

    In 2015, Congress passed "only" 87 Public Laws before Obama’s Hawaii trip, as I’ve derived from the Government Publishing Office’s archive of Public Laws.

Pages

Subscribe to OpenMarket: Regulatory Reform