Jobs Speech Won’t Do the Job
Presidential candidate Mitt Romney released his own jobs agenda this week in anticipation of President Obama’s Thursday address to Congress.
The most important idea is a skeletal “regulatory budget.”
“I will pare back regulation. … I will direct every government agency to limit annual increases in regulatory costs to zero. The impact of any proposed new regulation must be offset,” Mr. Romney said.
Our fiscal budgetary process fails to streamline spending in any direction but up. Nonetheless, we need a budget for off-the-books regulation. After all, we have to start somewhere.
Many have noted with increasing alarm that regulations cost more than $1 trillion annually, with more financial, health and environmental regulations spewing forth as you read these words. Compliance costs are equivalent to the entire fiscal budget of the 1990s – and rising. The president was forced to delay implementation of Environmental Protection Agency ozone rules just last week.
Regulations are a desperate drag on jobs now and have to be tracked and reduced, even if a regulatory-cost budget presents only ballpark figures. Today’s fiscal budget itself only originated with the Budget and Accounting Act of 1921.
Limited regulatory-cost budgeting can make agencies more responsible for the quality of their decision-making relative to other agencies and adhere better to congressional intent. Today, they rarely pare anything back.
Depending on the kind of rule, a regulatory budget would induce health and safety agencies to compete to ensure that their least-effective mandates save more lives per dollar or correct some alleged market imperfection better than another agency’s rules do.
A budget would help show that government probably ought not worry about regulating risks that are far more remote than those we undertake daily, while recognizing that some significant risks are undertaken willingly (kite-boarding, neglecting the smoke detector, juggling chain saws).
In a limited regulatory budget proposed back in the 1990s by Rep. Lamar Smith, Texas Republican, Congress would set a regulatory budget for each newly enacted law – such as today’s health care and financial reform laws, for example. Any agency exceeding that budget at the rule-making stage would need congressional approval. That puts a brake on overdelegation to agencies in the first place. In combination with the REINS Act effort by Sen. Rand Paul, Kentucky Republican, and Rep. Geoff Davis, Kentucky Republican, which would require Congress to approve final rules, it could be powerful.
In probably the most thorough regulatory budget, agency tallies would add up to a total regulatory budget paralleling the fiscal budget. Congress would specify the total cost budget for which it is willing to be held accountable and divide that among agencies roughly in proportion to potential lives saved or some other metric for what is regarded as a regulatory benefit. Agencies’ responsibility would be to rank hazards from most to least severe and regulating within the constraint.
Agencies could be free to regulate as recklessly as they do now, but the consequence of ill-considered rules would be transfer of the squandered budgetary allocation to a rival agency and unwinding or full sunsetting of the agency itself. That could benefit consumers in the case of an entity like the Federal Communications Commission, for example, which, apart from the legitimate need for it to get spectrum into the marketplace, insists upon expanding its turf by mandating net neutrality on communications networks.
A budget would relieve agencies of benefit-calculation responsibilities because benefits would have been assessed already when Congress passed a law in the belief it needed to act. Agencies would concentrate on properly assessing costs, just as the fiscal budget focuses on costs and not benefits.
Theoretically, budgeting would mean that adopting a new nanny-state regulation that may offer a minuscule improvement in safety would be weighed directly against the much greater and more cheaply achieved benefits somewhere else. The cross-agency discipline absent now might emerge.
A regulatory-cost budget is at the thought-experiment stage, and it poses substantial risks in its own right – particularly legitimization of government regulation relative to superior competitive discipline.
That’s why limiting government’s power – not just measuring it better with a budget – is what really matters. Budgeting can only really work within that context.
But just as we monitor the taxes we pay, it’s important to monitor the non-tax expenditures the government imposes. Taxes – stratospheric as they are – increasingly tell less of the tale about government’s presence in the economy. Regulation is where the action is today, as the Romney platform, a slate of regulatory reform bills in the 133rd Congress, and dismal employment numbers attest.
Regulatory-cost budgeting can be a vital part of a modern “liberate to stimulate” job-growth platform. But the larger agenda requires curbing the power that agencies, legislators and presidents wield today.