The eventual federal regulatory budget has bipartisan roots

With apologies to Margaret Thatcher, I’ll often joke that when the federal government runs out of other people’s money, it keeps spending anyway. The Congressional Budget Office reports $2 trillion annual deficits as far as the eye can see.

The federal government’s yearly expenditures exceeding $6 trillion are influential not only in the taxes that must be paid, but in their inherent influence over the private sector and local governance through sheer heft and displacement, and through unfunded mandates and regulations they generate.

Chronic debt finance is objectionable, but one can at least look it up, and grasp its extent. That transparency does not apply to the vast body of regulations intertwined with fiscal concerns.

That interconnectedness has, at times, prompted bipartisan calls for fundamental changes in how regulations get managed and budgeted. The concern dates back a half-century, with figures like Texas Senator Lloyd Bentsen in 1979 advocating for coordination between regulatory and fiscal budgets and caps on agency compliance costs. Bentsen, who later served as Treasury Secretary in the Clinton administration, introduced legislation called the “Regulatory Budget Act” and proposed “an annual cap on the compliance costs each agency could impose on the private sector” and “coordinat[ing] the regulatory and fiscal budgets.”

Even President Jimmy Carter’s 1980 Economic Report of the President highlighted the inadequacy of the federal budget in measuring the full complement of resources directed towards federal government objectives. While noting a regulatory budget is not problem-free, Carter’s Report recognized factors even more relevant in today’s public policy landscape, so is worth quoting at length:

Until recently efforts by the Federal Government to promote social goals relied principally on direct expenditures. Since 1921 the Congress has required that these expenditures appear in the Federal budget. The budget process allows explicit tradeoffs to be made and the appropriate level of government action to be debated. But as more goals are pursued through rules and regulations mandating private outlays rather than through direct governmental expenditures, the Federal budget is an increasingly inadequate measure of the resources directed by government toward social ends.

As a result, proposals have been made that the Federal Government develop a “regulatory budget,” similar to the expenditure budget, as a framework for looking at the total financial burden imposed by regulations, for setting some limits to this burden, and for making tradeoffs within those limits.

The use of regulation for social, economic and environmental ends has only accelerated in recent years, and is not captured in the fiscal display. The latest vehicle for regulatory budgeting is the Renewing Efficiency in Government by Budgeting Act marked up in the House Committee on Oversight and Accountability on April 10. (See CEI’s letter of support for the REG Budgeting Act and description of the legislation here)

Agencies issuing thousands of rules annually is nothing new of course, but concerns over disclosure norms are increasingly urgent given legislation entailing trillions in new spending in COVID’s wake. Meanwhile chronically late oversight tools like the White House Office of Management and Budget’s Report to Congress on the Benefit and Costs of Federal Regulation fail to capture the full scope of regulatory interventions (such as omitting independent agency rules).

In addition, as evidenced by the Fall 2023 Unified Agenda of Regulatory and Deregulatory Actions, the proliferation of rules affecting small businesses and localities echoes the conditions that prompted the enactment of Unfunded Mandates Reform Act of 1995 (UMRA) three decades ago, and highlights the pressing need for regulatory restraint.

As it happens, the REG Budgeting Act builds upon that bipartisan UMRA, by capping incremental government-wide unfunded regulatory costs under the guidance of the Director of the Office of Management and Budget in coordination with agencies. Congress would approve increases in overall total regulatory costs. This approach incentivizes cost containment and more rational decision-making.  

Given its kinship with modest budgeting procedures observed in other nations and with recent bipartisan precedents including Executive Order 13,771 on “Reducing Regulation and Controlling Regulatory Costs” and Sen. Mark Warner’s (D-VA) one-in, one-out regulatory freeze proposal, the REG Budgeting Act underscores the potential cross-spectrum support for curbing regulatory burdens.

The REG Budgeting Act represents a timely response to the growing regulatory complexities facing the nation. In advancing it and related reforms, Congress can reaffirm a commitment to accountability, transparency and responsible governance of an administrative state whose unwieldy character only grows more apparent.

For further reading:

Economic Report of the President, Transmitted to the Congress, together with the Annual Report of the Council of Economic Advisers, Washington, DC, January 1980, https://www.presidency.ucsb.edu/sites/default/files/books/presidential-documents-archive-guidebook/the-economic-report-of-the-president-truman-1947-obama-2017/1980.pdf.

Sen. Lloyd Bentsen, Congressional Record, Vol. 125, March 5, 1979, p. S2024; also quoted in Julius Allen, “The Proposal for a Federal Regulatory Budget: An Overview,” Congressional Research Service, Report No. 79-197E, September 12, 1979. https://catalog.library.tamu.edu/Record/in00001373707.

Mark R. Warner, “To Revive the Economy, Pull Back the Red Tape,” Washington Post, December 13, 2010, https://www.washingtonpost.com/wp-dyn/content/article/2010/12/12/AR2010121202639.html.