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Obama's Regulatory Reform: The Costs of Benefits

My colleagues commented above on the Cass Sunstein lecture at the American Enterprise Institute called "Regulatory Look-Back: A First Look," about agency's supposed eagerness to comply with President Obama's January Executive Order on regulatory review. Just moments ago, AEI released a summary of the event via email. Sunstein is head of OIRA, the Office of Information and Regulatory Affairs, the bureau within OMB that's tasked to some degree with keeping tabs on Washington's federal regulations and making sure benefits justify costs. Something that struck me was Sunstein's notion, paraphrased by AEI, that "We are no longer forced to evaluate rules in the abstract, using unreliable anecdotes and intuition. Instead, agencies are equipped with state-of-the-art research techniques for evaluating the costs and benefits of regulations." For starters, I think it's a philosophical mistake to accept the white-hat premise that because you call something a regulation that it's doing good things. Agency rules can undermine actual "regulation" or improvement and escalation of the things we want, like privacy, security, consumer safety, infrastructure roll out, and so forth. I don't know of any tainted meat that's not regulated by USDA, you might say. If "regulation" removes these values from the competitive realm required to advance them, then agencies are undermining the actual regulation that needs to take place. More on this elsewhere and later because it's a critical element of the regulatory reform debate. Be that as it may, the "state of the art techniques" for evaluating regulations aren't quite as apparent to me as they are to Sunstein and others. Apparent instead is a lack of benefit calculations altogether.  Over 3,500 rules are issued annually; In 2010, OMB reviewed 66 of 2009's rules; of these, only 20 had benefit estimate by my cursory reckoning. (We call for a Regulatory Report Card to make things less cursory, by the way.) We simply don’t know much about the state of the regulatory state. Rather than state of the art, it's non-cognitive. The Administration's efforts here are welcome, but instead of providing any comprehensive assurance, the underlying paucity of actionable information instead points even more insistently to the need for deep reforms like the REINS Act to strip agencies of their tendency to issue costly rules without congressional authority, and a host of other legislative proposals for economic liberalization. We need to cut spending, better believe it. But now, when we ignore the crushing impact and costs of the regulatory state, we're missing most of Washington's impact on the economy. Unfortunately, so do the Administration's reformers. To take just one example, the recent Dodd-Frank financial legislation is a busted fire hydrant spewing out new agency rules at the CFTC and SEC, with over 3,500 new Federal Register pages so far with thousands more to come. Walling off tomorrow's economy from today's regulatory and budgetary quagmire becomes increasingly urgent. "Benefits" have costs.