Regulation is not the only way the federal bureaucracy inhibits innovation.
President Donald Trump’s desire to shrink the regulatory state by significantly cutting the number of regulations and their impact is laudable. But it won’t be easy, and it won’t be sufficient, because the federal bureaucracy’s tentacles reach deep into private enterprise through a number of non-regulatory programs and actions that if left in place will continue to hinder economic growth.
Clyde Wayne Crews of the Competitive Enterprise Institute refers to this phenomenon as “regulatory dark matter.” Like the “dark matter” of the universe, which is difficult to detect and virtually invisible, regulatory dark matter consists of bureaucratic activities that fall outside the purview of the Administrative Procedures Act (APA), which specifies the formal process that must be followed to issue regulations. That process includes issuing public notice of a proposed rule, giving the public opportunity for input and comment before a final rule is published in the Federal Register, and observing a 30-day hiatus before the rule becomes effective.
However, those requirements do not apply to “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” And, as Crews puts it, “without Congress actually passing a law or an APA-compliant legislative rule or regulation being issued, the federal government increasingly injects itself into our states, our communities, and our personal lives” by exploiting these exceptions to the APA. In his 50-page 2015 report on the topic, Crews focuses on the impact of executive orders, agency-guidance documents, and regulatory notices. But the universe of agencies’ non-regulatory actions is even larger, including such things as government research programs or grants to favored researchers that may be tainted by political ideology.
The Environmental Protection Agency’s Integrated Risk Information System (IRIS) is one example. IRIS assesses chemicals to determine whether they are carcinogenic or pose other health risks, and then it catalogs its findings in a database. IRIS was created by the agency itself in 1985, and though there is no law that defines standards for its risk assessments, myriad other EPA offices use those assessments to implement and enforce laws regulating water, air, and land.
Although IRIS does employ a public-comment process, the program has been mired in controversy because it often fails to produce scientifically robust findings. In a 2011 review of IRIS’s formaldehyde assessment, for example, the National Research Council rebuked the agency, citing “recurring methodologic problems,” “problems with clarity and transparency,” and inadequate documentation of evidence, and noting that other NRC committees have reported the same issues in the past.
The NRC then detailed a series of reforms that IRIS needed to implement, but reform has been slow in coming, and IRIS continues to produce highly questionable assessments. Unfortunately, these assessments often provide the basis for costly regulations that provide little or no public-health benefit. For example, excessively stringent drinking-water rules raise local-government costs and eventually lead to higher taxes and inflated water bills.
Trump’s EPA could solve this problem by simply eliminating IRIS and directing that all chemical-risk assessments be performed in accordance with the recently reformed Toxic Substances Control Act (TSCA). Such a move ought to be uncontroversial, given that the TSCA gained overwhelming bipartisan approval in Congress and was signed by President Obama last spring.
Such regulatory dark matter is by no means confined to the EPA, of course. After more than 20 years of deliberation, in 2008 the FDA’s Center for Veterinary Medicine issued guidance to industry that every “transgenic” animal (one that contains DNA from more than one species) crafted through modern genetic engineering would be subject to the procedures and requirements for approval of “new drugs” used to treat animal diseases, such as pain relievers or anti-flea medicines.
But the introduction of a gene is not the same as the administration of a drug, and the FDA’s approach represented a major shift in the regulation of biotechnology that has been hugely expensive to animal breeders and detrimental to consumers. In fact, the policy — promulgated as “guidance,” and thus exempt from the APA rulemaking process — has virtually wiped out an entire once-promising sector of the biotech industry.
What kinds of animals does the FDA’s guidance encompass? One is an Atlantic salmon that contains a newly introduced growth-hormone gene that remains turned on all year round, cutting the time to marketable adult weight from 30 months to 18. The extra gene confers no detectable differences in the salmon’s appearance, taste, or nutritional value; it just speeds up growth. Yet an application seeking approval of the new gene languished in the FDA’s hands for 13 years before the 2008 guidance, and in total it took more than two decades for the agency to process.
There are numerous other such genetic-engineering applications in various stages of research — genes that make the muscle mass of livestock leaner, enhance animals’ resistance to disease, improve the use of dietary phosphorous to lessen the environmental impacts of animal manure, and make dairy cows hornless. Few if any of these innovations are en route to commercialization, because of the daunting FDA approval process.
The CFSN’s approach has worked quite well for many years. Yet the FDA continues to treat every new animal as though it contains a “new drug,” sometimes dragging out the evaluation process for years even if there is virtually no likelihood of harm. And on January 18 of this year, the FDA doubled down on its dubious policy by publishing “proposed guidance” to clarify that animals created with the newest gene-editing techniques — which might alter existing genes without even introducing new ones — would also be regulated as a “new animal drug.”
Why would the EPA, the FDA, and an alphabet-soup of other federal agencies adopt such dubious policies? The answer is that it’s in their DNA: Whenever they can, via formal rulemaking, guidance, or regulatory dark matter, bureaucrats exhibit a tendency to arrogate new responsibilities and expand their fiefdoms. “Dogs bark, cows moo, and regulators regulate,” FDA Commissioner Frank E. Young was fond of saying. We can only hope that in addition to getting rid of many regulations, Trump administration officials will work with the Republican Congress to shine a light on and extirpate the dark matter.
Originally posted at National Review Online.