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Rewards and Risks of a Federal Regulatory Budget (Part 2)

Yesterday in this space, I advocated the idea of a regulatory cost budget but noted looming pitfalls and political traps that could derail it or easily make it not worth supporting, or even render it something I'd actively oppose. Let’s get started with the first pitfall today, with more to come later.

Hazard 1: The Perverse Expansion of Government

The most elemental risk of a regulatory budget was submitted by Christopher DeMuth during the era when the idea was being framed (that is, the 70s disco era and then the early 80s before hair metal). DeMuth wrote a lengthy defense of cost budgeting concepts, but cautioned that a regulatory budget could potentially bring more of the economy’s private expenditures under purview of government by incorporating them into the workings of a public budget, advising “It is worth pondering at length before we invest too much effort in the details of implementation.”

This is crucial: There is a risk, in both perception and reality, of effectively conceding legitimacy of government oversight of vast swaths of GDP at a time when the federal government already dominates 20 percent of the economy via taxing, borrowing, and spending power.

Philosophies of limited government reject federal management of the economy. But when government is large and unconstrained, the opposite mindset holds, not being subject to regulation becomes regarded as government favor. We know this for certain given a direct analogy to federal taxation today, wherein the federal government implicitly regards all income as belonging to it. Amounts that individuals and businesses are allowed to deduct from taxable income are referred to officially, not jokingly, as “tax expenditures,” such that tax breaks get classified as losses to the federal Treasury. Official policy is that the primary owner of the money is government rather than the earner or creator, and that not confiscating earnings is a favor, an “expenditure” as far as the federal budget is concerned.

Therefore, the risk that exemption from regulation could somehow come to be perceived in future policy debates as a government favor may be enough to warrant opposing a regulatory cost budget.

Regulation is already a poor replacement for passage of a law by Congress and a presidential signature. Therefore a regulatory budget must expose and control government’s intervention in the economy, not perversely escalate regulation. This is elemental.  

Next time we’ll look at the problem of utilitarianism in regulatory budgeting.


Also in this series:

Rewards and Risks of a Federal Regulatory Budget (Part 1)