Sunset for Regulations, Sunrise for Opportunity

Affordability is the big concern in households across the country, yet politicians are overlooking one big solution: regulatory reform. Federal regulations drive up the price of all goods and services, costing the U.S. economy more than $2 trillion per year.

So far this year, Congress has done almost nothing to make regulations more affordable (and sensible). By contrast, President Trump has been more active, issuing some executive orders that direct agencies to trim unneeded rules. For example, the Environmental Protection Agency could save hundreds of billions of dollars in the coming years due to its recent repeal of the “Endangerment Finding,” which had awarded the agency the authority to regulate carbon-dioxide emissions.

Getting rid of individual regulations one by one is helpful, but it isn’t enough. Our elected representatives need to reform the rule-making process itself, which generates more than 3,000 new regulations in most years. If this task seems daunting, Congress can look for inspiration to the 50 laboratories of democracy called “states.” Idaho stands out as a success story.

In 2019, Idaho enacted a reform called zero-based regulating (ZBR). In this approach, a program’s budget is assumed to be zero — unless an agency affirmatively justifies its existence.

The idea for Idaho’s ZBR comes from the world of budget policy. In most places, the starting point for this year’s budget is last year’s budget. The burden of proof for any changes falls on the people proposing the change. Since it’s easier to rubber stamp a preexisting plan than it is to make the case for cuts, few changes are defended and approved. Programs slowly grow on autopilot, even when both parties agree that they are ineffective or wasteful.

Zero-based budgeting flips that burden of proof, so wasteful spending and failed programs automatically disappear instead of lingering for decades for no reason. 

Idaho reformers borrowed this zero-based idea and applied it to their state’s regulatory code. On June 30, 2019, Idaho’s entire regulatory code expired. Agencies then had to justify the rules they wanted reinstated. As a result, Idaho has trimmed its own regulatory code by 38 percent, which enables agencies to pursue their missions with less regulatory sludge and fewer procedural complications. Other states should consider similar reforms, as should Congress.

It is difficult to overstate Idaho’s improvement. In the six years prior to zero-based regulation, the trend was in the wrong direction. Idaho’s regulatory code expanded by about 6 percent, or more than 500 pages. Sixty percent of agencies increased regulation, 24 percent made no changes, and only 16 percent made cuts. Similarly, at the federal level, regulatory restrictions in the Code of Federal Regulations have more than doubled over the past half-century. Without regular housekeeping, regulations naturally accumulate over time.

This is why, in addition to the giant first step of sunsetting the entire regulatory code and then reinstating its essential parts, all regulations in Idaho going forward will be on five-year sunsets. The initial statewide sunset alone reduced regulatory page count by 25 percent from 2018 to 2020. Five-year sunsets have contributed to an additional 17 percent decrease since 2020, with further cuts anticipated as cyclical reviews continue. Idaho properly understands that deregulation is not a one-time event. Rather, it requires regular maintenance. 

But Idaho didn’t stop there. To prevent this from becoming a box-checking exercise where agencies just automatically renew all their rules, the state set goals and gave out achievement awards.

Agencies were tasked with reducing their regulations by 20 percent, which most agencies achieved. In fact, the agencies surpassed expectations by cutting down statewide regulatory page counts by nearly 40 percent. The state also gave out “Golden Scissors” trophies to the best-performing agencies to give them good publicity, positive reinforcement, and even add a bit of friendly inter-agency competition.

The most effective of these award-winning agencies was the Division of Occupational and Professional Licenses, which eliminated 649 pages of regulations, a 63 percent decrease that reflected 20 percent of cuts statewide. The Office of the Governor and the Insurance department each cut roughly half of their total regulations. And total economic-development regulations more than halved. Even departments that tended to decrease regulation prior to ZBR, such as Lands or Health and Welfare, were able to make 18 and 30 percent cuts respectively.

Read more at National Review