Reining in the Executive Branch Bureaucracy, Part 11: Sunset Regulations and Implement a “One In, One Out” Procedure

Since the Federalist Papers, America has debated “Energy in the Executive.” But President Obama’s 2014 agenda framed by his State of the Union address heralds a class warfare agenda, one fusing an “income inequality” theme with federal industrial policy and other activism.

“When I can act on my own without Congress, I’m going to do so,” Obama promises. This spend-and-transfer fixation makes Americans poorer and dependent except for the lucky few running things.

Others have argued for federal budget rationality as essential to any anti-poverty agenda. This series proposes a greater prosperity enhancing opportunity, streamlining the nearly $2 trillion regulatory state and ending the uncertainty, wealth destruction and job loss it creates.

What if regulations went away occasionally?

Review and sunsetting requirements built into laws and regulations might be used to incentivize agencies to repeal outdated rules.

Sunsetting clauses essentially put an expiration date on new regulations such that they phase out unless their extension is justified through a review process (yes, most will call for continuation, which is a massive problem with the idea). Such procedures could encourage efficiency, boost accountability and foster more productive versions of reports like the Office of Management and Budget’s Reports to Congress on Regulatory Benefits and Costs.

The United Kingdom, which, among other nations, is experimenting with bulk regulatory reduction commission mechanisms and other “Better Regulation” programs, has created sunsetting and review options to apply to new regulations.

Whether sunsetting is to be applied to specific regulations, or more aggressively to legislation and agencies and bureaus themselves, sunsetting efforts worthy of the name require a hammer to actually impose the sunset.

Agencies exist to regulate; the objectivity of their reviews and recommendations to extend a rule is suspect (The Federal Communications Commission seeks to expand its turf to “net neutrality,” for one example). Only self-annihilating behavior would induce an agency to continually urge that rules and regulations within its ambit be aggressively eliminated. So agencies can’t review themselves.

Therefore, sunsetting would be enhanced by operating alongside a more general requirement for congressional approval of agencies’ major regulations, something that has never been required. The continuation of regulation ought not to depend merely on successful passage through a federal agency’s own “review”; Congress should have to approve recommendations to maintain or extend power. There should be no perpetual authority any more than initial power should be exercised without congressional stamp of approval. Someone needs to directly answer to the public.

Sunsetting would complement other regulatory process reforms. It could be used in conjunction with a regulatory reduction commission, which could potentially take a meat-axe to the regulatory state well before distant sunsetting deadlines force the issue.

A reduction commission could make sunsetting more tractable, and in turn, sunsetting could make the job of future regulatory reduction commissions more manageable.

It’s worth being prepared for the fact that, since regulation typically emerges to benefit the regulated groups (contrary to popular wisdom, but a familiar concept among economists), the real opposition to sunsetting can be expected to come not so much from generalized congressional opposition, but from politically connected producer groups who have the most to fear from losing their “custom-made,” “protectionist” regulation.

Generalized sunsetting, across government, could lessen the impact of the interest-group mobilization that one must expect from an impending sunsetting deadline affecting a single agency. Government-wide sunsetting is one means of forcing agencies (or rules, or statutes) to compete with one another for a congressionally ordained “right” to persist. Some process must force Congress to be cognizant of the aggregate burden imposed by regulation on the whole. It is important to change the impression that regulation is primarily caused by agency excess and somehow is out of Congress’s hands. Congress allows what prevails now.

While one must be highly skeptical of sunsetting in the current big government and mixed-economy environment, one can look for the half-full glass. The deeper premise underlying congressional affirmation for extending the life of regulations is that the regulatory state is primarily Congress’s own creation, rather than that of the agencies Congress loves to blame.

Even seemingly modest institutional reforms can create transparency and accountability, lay groundwork, and possibly spawn more effective future reforms than are possible now. Procedures biased against the endless continuation of regulations, such as reasonably well-designed sunsetting, beat the status quo, and they compromise nothing.

I want to quantify the non-quantified, and sunsetting and review aids that. If sunsetting fails as a control mechanism, then I want to know how many regulations come up for review that don’t get reviewed and to report that number as a formal statistic, for example.

Another method Congress could copy from the UK is a “one in, one out” procedure. (and more recently, a more ambitious “one in, two out” procedure.)

Like the reduction commission, this idea holds bipartisan appeal; proposals exist from the left and right. In the United States, Sen. Mark Warner (D-Virginia) suggested a one-in, one-out reform in the Washington Post, recommending the offsetting of every new rule via the elimination of one somewhere else within an agency itself or elsewhere.

“One in, one out” effectively amounts to a regulatory budget at a status quo level; a pause in the size of the regulatory enterprise. If OMB’s annual Report to Congress helps inform the process by recommending rules to repeal, the document would become substantially more useful.

Regulations are often called a hidden tax, and their reach and cost go well beyond what OMB reports. The larger story can and should be told.

By stressing costs rather than benefits, preparing summary Regulatory Transparency Reports paralleling the annual presentation of the fiscal budget, by creating multiple classes of major rules, and by implementing numerous other reforms that maximize disclosure, steps toward rationality and economic prosperity besides may be advanced.

Cost disclosure and congressional accountability are needed to certify that the regulatory enterprise does more good than harm. OMB and the executive branch can make inroads with respect to disclosure, but only so much. Congress must play the ultimate oversight role and address the culture of “regulation without representation.”

Also in The “Reining in the Executive Branch Bureaucracy” Series:
Part 1: Measure Regulatory Costs
Part 2: Regulatory Benefits? Maybe Not
Part 3: Make Regulations Transparent Like the Budget
Part 4: Put a Spotlight on Economically Significant Rules
Part 5: Categorize Regulations by Impact
Part 6: Deal With The Deadweight Cost Of Regulation
Part 7: Recognize and Reduce Indirect Costs of Regulation
Part 8: Create a Culture of Repealing Regulations
Part 9: Congress Must Affirm Final Agency Rules before They Are Law
Part 10: Congress Should Create an Annual Regulatory Reduction Commission