House Subcommittee Addresses High Costs of Regulations

Washington, D.C. May 3, 2011 – Tomorrow, the House Judiciary Committee’s Subcommittee on Courts, Commercial and Administrative Law will hold a hearing on “Cost-Justifying Regulations: Protecting Jobs and the Economy by Presidential and Judicial Review of Costs and Benefits.”

CEI Vice President for Policy Wayne Crews says such hearings are “long overdue.” His full statement is below.

Statement of Wayne Crews:

Runaway regulation is now on the heels of runaway spending and deficits.

A much-cited evaluation of the United States federal regulatory enterprise for the Small Business Administration by economists Nicole V. Crain and W. Mark Crain finds annual regulatory compliance costs hit $1.752 trillion in 2008. (Criticisms of this report have emerged; but for starters let’s recognize that estimated costs of Sarbanes-Oxley alone top $1 trillion.)

The scope of federal regulations is explored in the Competitive Enterprise Institute’s Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State. (The report also has been circulated this week as a Dear Colleague letter by Sen. John Barrasso (R-WY)).

Of note:

• The Federal Register stands at an all-time record-high 81,405 pages.

• In 2010, federal agencies issued 3,573 final rules.

• While agencies issued 3,573 final rules, Congress passed and the president signed into law a comparatively “few” 217 bills. Sweeping delegation of lawmaking power is addressed in proposals such as the REINS Act.

• Proposed rules in the Federal Register have surged 19 percent, from 2,044 in 2009 to 2,439 in 2010.

• Of the 4,225 rules now in the regulatory pipeline, 224 are “economically significant” meaning they wield at least $100 million in economic impact—a 22 percent increase over 2009’s 184 rules.

• Given 2010’s government spending (outlays) of $3.456 trillion, the regulatory “hidden tax” stands at approximately half the level of federal spending itself. It’s greater than all government spending was in the 90’s, highlighting the urgency of hearings such as today’s.

• Regulatory costs exceed 2008 corporate pretax profits of $1.463 trillion.

• Regulatory costs dwarf corporate income taxes of $157 billion.

• Regulatory costs tower over the estimated 2010 individual income taxes of $936 billion by 87 percent.

Whatever this hearing’s conclusion, regulations need more official scrutiny, transparency and accountability from Congress, including votes on economically significant rules before they become binding. Congress should also implement a Regulatory Reduction Commission and explore regulatory cost “budgeting.” An annual “Regulatory Report Card” roundup for Congress in service of sound regulatory policy and hearings like today’s might include the following:

• “Economically significant” rules and minor rules by department, agency, and commission

• Numbers/percentages of rules impacting small business and lower-level governments

• Numbers/percentages of rules featuring numerical cost estimates

• Tallies of existing cost estimates, with subtotals by agencies, and grand total

• Numbers/percentages of rules lacking cost estimates

• Numbers/percentages of rules lacking benefit estimates

• Short explanation of lack of cost estimates, where applicable

• Percentage of rules reviewed by the OMB and action taken

• Analysis of the Federal Register: page counts, proposed and final rule breakdowns by agency

• Numbers of major rules reported on by the GAO in its database of reports on regulations

• Rules up for 10-year review (under Section 610 of the Regulatory Flexibility Act)

• Identification of the most active rule-making agencies, to guide reform focus

• Identification of rules that are deregulatory rather than regulatory

• Identification of rules that affect internal agency procedures alone

• Numbers/percentages of rules required by statute vs. discretionary rules

• Numbers/percentages of rules facing statutory or judicial deadlines

• Rules for which weighing costs and benefits is statutorily prohibited

Read the report: Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State

Read new articles on the 2011 report in Investor’s Business Daily, and The Sacramento Bee.