A Comprehensive Regulatory Reform Agenda, Barack Obama Veto Pen Notwithstanding

Congress passes a few dozen laws each year, but regulators meanwhile issue several thousand rules and regulations. On top of that, “regulatory dark matter“ like presidential and agency memos, guidance documents, bulletins and press releases may enact policy directly or indirectly.

Memos and notices already exceed the number of agency rules accompanied by cost-benefit estimates that the Office of Management and Budget presents in annual roundups. Legal scholar Jerry Brito in a project with the Mercatus Center describes the use of agency threats and “offers you can’t refuse” against targets; others protest agency use of adverse publicity in press releases for which there is no legal recourse.

Nice business you got there; shame if something were to happen to it.

Dealing with all this could be even a bigger project than dealing with entitlements. It’s already almost Memorial Day and Congress needs to start now before the 2016 campaign cycle begins, even though President Barack Obama’s pen and phone remain active.

CEI Agenda for Congress — 114th Congress

When it comes to federal regulation and red tape, I like to break it down into (1) the existing hairball and (2) what hasn’t happened yet.

For the existing, we could benefit from an ongoing Regulatory Reduction Commission that assembles a package of rules for up or down vote. Furthermore Congress must change the underlying statutes that generate so much of the flow in the first place; and eliminate agencies entirely, and replace their “regulation” (which often doesn’t work) with competitive disciplines. Laissez faire doesn’t mean companies get to run wild, and it never did; insurance, risk management and safety standards all must evolve alongside new products and services.

Also, categories of regulation, not just agencies and their rules, have to be philosophically challenged by a Congress that unfortunately lacks the vocabulary for defending large-scale free enterprise — antitrust, privacy, cybersecurity, network industry liberalization. Net neutrality is one example showing how Congress does not possess such chops.

For future regulations — Congress must approve every single one–not the agencies we didn’t elect. In proposed legislation called the “Congressional Accountability Act,” which emerged over 20 years ago, Reps. J. D. Hayworth and Nick Smith and Sen Sam Brownback in various Congresses sought to require Congress to affirm the costliest of rules. The modern proposal is the REINS Act, or “Regulations from the Executive In Need of Scrutiny.” (Congressional Accountability was a better name.) Also, sunsetting of regulations: have them expire unless reauthorized. Sunsets will be avoided, but that gives us something to quantify (as bullets below show).

So far in President Barack Obama’s year of the veto, the House of Representatives has passed the Regulatory Accountability Act (H.R. 185) introduced by Rep. Bob Goodlatte (R-VA), which would codify some executive order reg reform elements, allow judicial review, and provide for formal quasi-judicial rulemakings for mega-rules. The House Judiciary Committee has marked up REINS.

Now, Congress can’t pass any of these reforms in the year of the veto, so below are bullets of what I propose in the new book chapter “One Nation, Ungovernable? Confronting the Regulatory State.” The chapter describes the legislative approaches just named, but acknowledges that in the last two years of the ”pen and phone” era, the Constitution isn’t coming to the rescue, so we need to lay new groundwork for a new Congress, and also perhaps a new Chief Executive who will use “Liberty’s Meataxe” (think Reagan’s Terrible Swift Sword by Donald J. Devine) rather than a “pen and phone,” and try to roll things back aggressively as much as possible administratively within the rule of law, and work with Congress on all the above.

Regarding what I refer to as the meataxe, for example, Mitt Romney’s 2012 platform had pledged that, even if Congress didn’t pass REINS, he would issue an executive order requiring agencies to secure a vote on their rules anyway before he would allow them to be issued. Another formulation of this sort of reset mentality that I believe is necessary was that of Sen. James Lankford (R-Oklahoma); when describing George Washington to a crowd at the Heritage Foundation, he marveled that no matter how much others wanted him to be a king, Washington always refused, always sought to take power off. That’s something unique in the world. This senator is spearheading a #CutRedTape Initiative that needs widespread support.

Alrighty then — here are some elements an executive can do “alone” (like Obama boasts) or with Congress, to begin liberalization and lay groundwork for its expansion. Here, the pen and phone advance liberty, rather than curtail it as has been the modern way. (Again for details, see “One Nation, Ungovernable? Confronting the Regulatory State,” which appears in the Fraser Institute book What America’s Decline in Economic Freedom Means for Entrepreneurship and Prosperity.)

  • Enforce, strengthen and codify existing executive orders requiring regulatory review and oversight. Congress should pass a law codifying all four of Obama’s regulatory reform executive orders, for example; it’d be fun to watch him veto them. In the future, an executive could prioritize the good principles in the handful of regulatory reform-minded E.O.s without, but hopefully with, legislation.
  • Implement a regulatory moratorium
  • Boost resources at the Office of Information and Regulatory Affairs (OIRA, the entity charged with reviewing agencies’ rules for cost effectiveness) and increase free-market law and economics staff at agencies
  • Systematize review, sun-setting, revision and repeal of regulations
  • Reduce dollar thresholds that trigger mandatory “Regulatory Impact Analyses” of agency rules
  • Scrutinize all agency decrees that affect the public, not just “rules”; this gets at the systematic scrutiny of “regulatory dark matter” as well as the need to punish agency personnel for engaging in it.
  • Give some teeth to the Unified Agenda of Federal Regulations, the bi-annual planning document
  • Tally federal regulations that accumulate as businesses sectors grow
  • Compile an Annual Regulatory Transparency Report Card. “Measure what is measurable, and make measurable what is not so,” is a quote frequently attributed to Galileo but he probably didn’t say it; still, we need need numbers on when agencies do and do not follow the rules.
  • Designate multiple classes of “major” or “economically significant” rules in transparency reporting
  • Report separately on economic, health and safety, and environmental regulations. Independent agencies like the Federal Communications Commission and the Consumer Financial Protection Bureau need more scrutiny as well as different approaches to reform.
  • Improve assessments of “transfer” costs. Retirement/Social Security and health care/Medicare were government takeovers that became untouchable after a couple generations pass; be on guard for the like in the future, such as with Obamacare.
  • Acknowledge and minimize indirect costs of regulations
  • Formalize “do not regulate” reporting and offices. Here I’m not just talking about more resources for OIRA or establishing a Congressional Office of Regulatory Analysis, but an entity actually formally chartered with an anti-regulatory “bias” to offset the pro-regulatory bias prevailing in the entire rest of the federal government, including its independent agencies. Its job would be to explain the reasons not to regulate in every instance, that regulation requires something other than a bureaucracy, that the things agencies seek to “regulate” (privacy, financial stability, internet access, food safety, etc) are forms of wealth and require something different than the man-made administrative agency bureaucracy behemoths created by long-dead ideologues and/or rent-seekers, that didn’t and do not work, and that are increasingly abusive and accountable to no one. Especially as dark matter expands.

The regulatory process itself needs more regulation. While it would be preferable for Congress to implement the Regulatory Improvement Act, the REINS Act and other measures that directly limit agency authority, those face veto threat and must await a change in the presidency. Many recommendations presented here can be implemented by executive action, by the same pens and phones now used to expand the state. However it happens, the new normal needs to be one that ensures that, if an expensive or burdensome regulation is enacted, elected representatives are on record for or against, and accountable to voters.