Rewards and Risks of a Federal Regulatory Budget (Part 3)

Monday in this space, I advocated the idea of a regulatory cost budget but noted there exist looming pitfalls and political traps that could derail it or easily make it not worth supporting, or even rendering it something to actively oppose. Yesterday I noted how, in the way the federal government treats tax breaks as an “expenditure,” budgeting could inadvertently lead to government expansion. Here’s the second potential pitfall, with more to come later.

Hazard 2: The Elevation of Utilitarianism Over Individual Rights

Although critics contend cost‑benefit analysis trades lives for dollars, tradeoffs in the public sphere have long been known as “a necessity logically compelled by the decision‑making process.” (Malcolm E. Wheeler, “Cost‑Benefit Analysis on Trial: A Case of Delusion and Reality,” National Law Journal. Oct. 20, 1980, p. 28) 

Implicit cost‑benefit inferences are inherent in the act of choice, of deciding what to regulate or to not regulate. The solution is to acknowledge that not everything, indeed most things, are not public policy questions at all, but we are well beyond that limited government view today until reforms other than steps like regulatory budgeting prevail. Regulatory advocates wish to leave everything open to central control, and obviously the federal government heavily steers sectors such as energy and environmental policy, transportation, health care, finance and communications and privacy.

While cost‑benefit tradeoffs are manifest, its deeper problems rarely acknowledged in the policy debate. Pretending to “balance” societal costs with societal benefits as progressive rule of experts routinely declares, is a utilitarian “greatest good for the greatest number” endeavor that dispenses with protection of individual rights and property rights, particularly in the absence of compensation which can be unfair to those expected to pay the costs.

Costs consist of more than dollars: they involve time lost and roads not taken, and the loss of liberties. Such variables are discernable only to the individual experiencing them, and even then are most likely not quantifiable. When utility gets determined by those with a vested interest in expanding the state, regulation will always expand.  That is why a regulatory budget that incorporated net-benefits rather than solely costs would embrace unbounded government growth, since every agency argues nearly every rule they produce confers net benefits.

The utilitarianism concern is resolved by a regulatory budget that imposes only cost calculation duties on agencies (or better, a CBO-like body outside the agencies), relieving them of the need to conduct benefit assessments altogether. That doesn’t mean benefits are ignored, rather that such questions were and are the domain of Congress, which—presumably—surrveyed the benefits landscape before making regulatory law in the first place. If not, then we’ve got bigger problems.

If treated properly as only an information gathering and reporting device to record the activities of an already limited government, a regulatory budget does not overstep its bounds. In fact, a regulatory cost budget could greatly improve upon already existing cost‑benefit practices by making Congress answerable to a greater degree. The underlying solution to regulatory overreach is to limit government power to constitutional bounds rather that to attempt to balance either individual or societal utilities in every conceivable walk of life. An unfortunate problem is that constitutional bounds are not accepted today even by individuals doing the voting.   

Many are inclined to take for granted that regulation as a phenomenon serves the public interest. However, when unaccountable regulators and the inevitable cronyism of a mixed economy prevail, we get greatest good for a few, further underscoring the need for accountability.

Next time we’ll look at the problem of accurate regulatory cost calculation; Spoiler: it’s impossible. But one must try anyway.  


Also in this series:

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

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