Regulations and Rules Equal Broken Government

When President Obama and Mitt Romney are jousting about taxes during their Wednesday night debate, one or both candidates might correctly point out that the Constitution explicitly forbids taxation without representation. They would do well to also point out that it guarantees against regulation without representation. Article I, Section 1 states, “All legislative powers herein granted shall be vested in a Congress.” In practice, however, that protection has significantly eroded over the years. Both candidates could win many voters to their side by pledging to do something about it.

Congress eagerly delegates rule-making responsibilities to unelected executive branch agencies, such as the Environmental Protection Agency (EPA), Food and Drug Administration, National Highway Transportation Safety Administration and way too many others to name here. What’s more, those agencies have discovered several loopholes in the legal constraints on delegation. Closing them would make a winning issue for politicians across the political spectrum.

A Competitive Enterprise Institute working paper, “Tip of the Costberg: On the Invalidity of All Cost of Regulation Estimates and the Need to Compile Them Anyway,” assembles total federal regulatory costs of $1.8 trillion — equivalent to half the federal budget ( Guarding against overregulation without representation could help bring that figure down. It is long past time we did so.

Theoretically, agencies must go through a number of steps to legitimately enact a new regulation, as outlined in the Administrative Procedure Act of 1946 (APA) and related legislation. Many rules are also subject to cost-benefit analysis under Executive Orders 12291 and 12866, which passed under Presidents Reagan and Clinton, respectively.

Once an agency decides to issue a new rule, it must publish a Notice of Proposed Rulemaking in the Federal Register, the daily depository of all things regulatory. This opens up a public comment period, during which anybody can register views about the proposed rule’s pros and cons. Agencies are expected to consider these comments before publishing their final rule and decreeing the date it becomes effective.

More than 3,500 rules get finalized annually, with varying degrees of adherence to APA procedure. The less observant agencies have devised ways to work around the APA. For example, if a rule clearly would not pass muster under cost-benefit analysis, the agency has other, less transparent options to enact it anyway.

A July 2012 House Oversight and Government Reform Committee report, “Broken Government,” details three of these routinely used agency workarounds.

The first is “sue and settle.” Agencies like the EPA work closely with environmental and other pressure groups that sue targeted employers or states over some grievance to force a settlement, opening what our Competitive Enterprise Institute colleague William Yeatman aptly describes as “EPA’s New Regulatory Front.” Litigation is costly. Companies routinely settle to avoid protracted court battles, and settlement terms usually force compliance with the goals of the EPA or the allied interest group.

The second option, involving what are called guidance documents, is less opaque, but no lovelier. Agencies issue these to clarify rule interpretations when there is confusion. As the House oversight panel report explains: “Guidance documents, while not legally binding or technically enforceable, are supposed to be issued only to clarify regulations already on the books.” Guidance documents can be helpful, since many regulations are so poorly written that they border on incomprehensible.

Some guidance documents exceed mere helpful clarification. The committee report continues: “However they are increasingly used to effect policy changes, and they often are as effective as regulations in changing behavior due to the weight agencies and the courts give them.”

If the first two options aren’t available, agencies have a third way to regulate outside the rules: good old-fashioned emergency powers. The APA contains a loophole that allows agencies to avoid the public comment period and make final rules effective on their publication date during an emergency, as determined by the agency itself.

This reasonable-sounding exemption gets unreasonably abused. For example, for a regulation enacted pursuant to legislation, Congress can intentionally make the rule enactment deadlines unrealistically short. That way, agencies can pass the rules via the emergency process, keeping transparency — and public outrage — to a bare minimum. Congress, meanwhile, escapes the blame if the rules were to prove unpopular.

So can this broken government be fixed?

Yes. Rule-making can be fixed, just as rules can. The strain that today’s high, unbudgeted federal regulatory costs are placing on the economy should give Congress the incentive to amend the APA to end the abuse of sue-and-settle, guidance documents and emergency rule-making.

Rolling back regulation without representation is not only the right thing to do, it is absolutely necessary to ensure America’s future prosperity.

Finding the political will shouldn’t be hard. As economic growth resumes, legislators and aspiring presidents who lead the way on reform may find voters well-disposed toward them.