Regulatory Reform in 2017: How Much Do Existing Regulations Cost?

By law, regulatory agencies are required to guess how much some of their proposed future regulations will cost people. But once those rules come into effect, and real-world data on their real-world costs are available, the public hears nothing. That needs to change.

The Regulatory Responsibility for our Economy Act (RREA), sponsored by Sen. Pat Roberts (R-KS), would help fix that basic transparency problem. Federal agencies have issued nearly 90,000 new regulations since 1994. How much do they cost? Nobody knows for sure, but the best available estimate, from my colleague Wayne Crews, is almost $1.9 trillion, which is more than Canada’s entire GDP.

The RREA’s most important reform involves major regulations, defined as costing more than $100 million per year. Examples from recent years range from cap-and-trading of carbon emissions to net neutrality to health insurance. All have sparked major lawsuits. The RREA would prevent such rules from taking effect until such lawsuits are resolved.

For new and existing rules which cost more than $100 million per year, agencies would be required to do such radical things as use plain language, compare costs and benefits, and at least look at alternative approaches. This is right in line with Executive Order requirements from both the Reagan and Clinton administrations.

Another approach the bill takes is to encourage agencies to specify performance standards, rather than specify how people should achieve them. For example, there are a lot of ways for a light bulb to achieve a certain level of energy efficiency. Engineers know a heck of a lot more about how to do that than regulators do.

If regulators did know, they’d put their own skin in the game and likely make much more money than a GS-9 salary. But they don’t, so they don’t. That is why they regulate instead of engineer.

New LED bulbs and, surprisingly, new incandescent technologies are emerging right now. Light bulb regulators’ most important task right now is to resist incumbent CFL manufacturers’ lobbyists’ pleas to shut out the new competition.

Are regulators up to the task, or are the possible free dinners at fancy restaurants too enticing? Similar arguments apply to nearly every sector of the economy, from taxis to hotel reservations to electricity.

Whether necessary regulatory reforms are implemented through the RREA or through other legislation doesn’t matter so much. What does matter is that the reforms actually happen; the project is vast.

A final point. It’s nice for consumers and entrepreneurs to be rid of this or that burdensome regulation. It is more important to change the broken rulemaking process that makes those regulations possible in the first place. That is the only place where true reform will happen.

Now is as good a time as any to make that happen. The RREA would make a fine first step on that journey of a thousand miles.