New CEI study: Zero-based regulations

A new CEI study by Alex Adams looks at a regulatory reform approach that succeeded in Idaho: zero-based regulation. The idea is similar to automatic sunsets, where individual regulations expire after a certain amount of time unless specifically renewed. In Idaho’s case, the entire state regulatory code expired on June 30, 2019. Necessary rules were then restored, while unneeded rules remained scrapped.

As a result, by 2024, Idaho cut 38 percent of its regulatory code, yet has retained an effective regulatory system.

This zero-based regulations approach has roots in fiscal policy. Most government budgets use the previous year’s spending as a base. Then, rather than assessing whether programs are working, policymakers tinker at the margins by a few percent each year. The usual net result is that both spending and complexity grow over time. New programs are added, but old ones rarely go away.

Zero-based budgeting removes this status-quo bias. Every program is assumed to be zeroed out unless it proves that it is worth the money.

Starting in 2019, Idaho legislators applied that zero-based approach to regulation. This is how they removed decades of accumulated regulatory sludge. Idaho’s spring cleaning tossed more than 3,200 pages of regulations that were doing more harm than good. This is a healthy thing for every government to do every now and then.

Regulatory housecleaning rarely happens on its own because of incentive problems. Government agencies rarely want to reduce their own powers. In the private sector, even the most obsolete or harmful regulations typically have their defenders. A company might support a rule that acts as a barrier to entry for potential competitors, for example. Such regulations harm consumers and entrepreneurs, but they can guarantee a cushy existence for existing businesses, which then lobby to keep it.

That type of rent-seeking is a lot harder under zero-based regulating. Incumbent businesses have gamed occupational licensing, zoning codes, labeling and ingredient standards, labor and environmental rules, import restrictions, and other regulations in exactly this way. These rules would likely be among the first to go under a zero-based regulatory system, because they benefit the few at the expense of the many.

Other states should copy Idaho’s success. Those that do would attract entrepreneurs, along with the jobs and tax revenue they create. The federal government’s 188,000-page Code of Federal Regulations could easily shed tens of thousands of useless pages by adopting a zero-based framework for regulations. Where DOGE failed and Congress refuses to act, a zero-based regulatory framework would have a much better chance of success.

Read Adams’s whole study here.