Even before counting President Obama’s ambitious “stimulus” agenda,
spending by the U.S. government – the largest on planet Earth – is now
higher than ever. That’s right. America today has the biggest
government in history. We’re now looking at $3.55 trillion in direct
But that’s not all. Before making energy renewable, carbon capped, the
Net neutral and health care “available” to all, we need to know what
hidden regulatory costs these and other proposals will impose on
American businesses large and small.
The Office of Management and Budget (OMB) seeks public comments by
today on developing recommendations for a new “Federal Regulatory
Review” intended “to improve the process and principles governing
regulation.” We’re glad they asked!
Few Americans are aware of the massive scope of the federal regulatory
enterprise. It is hardly common knowledge that 4,004 rules from nearly
70 departments and agencies filled the regulatory pipeline in 2008, or
that the Federal Register now skirts 80,000 annual pages. These
business, health, safety and environmental regulations (plus paperwork)
cost $1.2 trillion annually – on top of the $3.55 trillion in direct
In the present economic environment, policymakers can ill afford to ignore the need to deregulate to stimulate.
Unfortunately, deregulatory stimulus will inevitably chafe against
federal agencies’ incentives to admit when rules are poorly targeted or
their benefits do not justify the costs. No matter how costly or
inconvenient, a nationwide 15-mile-per-hour speed limit and mandatory
15-foot bumpers would save lives. A net benefit could be claimed.
Undisciplined agency regulating isn’t affordable anymore.
The Constitution grants Congress to power to make law. But when
Congress delegates that power to agencies, voter control over
government is severed. For Congress, this is a political win-win – it
can take credit for popular regulatory initiatives but blame agencies
for ones that turn out unpopular or too costly.
Elected representatives should be required to approve significant
agency rules before they become binding. Accountability demands it: We
can no longer tolerate Congress passing so many laws that it cannot
even read them all!
Along with congressional accountability, better regulatory cost
disclosure is needed, since no one knows whether any given regulation
does more good than harm. Abundant information exists, scattered across
the federal landscape. An annual Federal Regulatory Review, properly
designed, would provide clarity.
The Review Card, which may be published as an addendum to the fiscal
budget or the Economic Report of the President every year, should
include numbers for the following: – Total major (costing $100
million-plus) rules and minor rules by regulatory agency. – Number and
percentage of rules impacting small business. – Cost estimates, with
subtotals by agencies and grand total. – Number and percentage of
agencies failing to provide cost estimates. – Federal Register
analysis: Number of pages, proposed rules and final rules by agency. –
The most active rulemaking agencies. – Rules that are deregulatory
rather than regulatory. – Number and percentage of rules required by
statute vs. agency discretionary rules. – Rules for which weighing
costs and benefits is statutorily prohibited. – Detail on rules
reviewed by the OMB, and action taken.
The absence of cost estimates should raise red flags. Agencies should
concentrate on fully presenting the costs of their initiatives – much
like the federal budget focuses on outlays, not benefits. Emphasizing
costs doesn’t mean ignoring benefits, which presumably propelled
Congress’ legislation in the first place.
Benefit assessment must happen while Congress considers legislation
that agencies later translate into regulations. It should not be
carried out by regulatory agencies, which have an incentive to increase
their authority – and thus to overstate benefits and understate costs.
Moreover, OMB –
where today Harvard legal scholar Cass Sunstein heads regulatory review
– could create benchmarks to critique high-cost, low-benefit rules by
comparing the alleged benefits of new regulations to those of hiring
policemen and firemen, buying smoke detectors, or painting stripes down
the middle of unmarked roads.
Better accountability and disclosure primarily affect future mandates.
The trillion-plus regulatory state we already have needs pruning, too.
Congress and OMB
could demand that agencies propose annual rule rollbacks, offset new
rules’ costs by eliminating older ones, and put an expiration date on
rules to sunset them unless Congress – not the agency – extends them.
The interagency competition generated by a disclosure-and-purge culture
may reveal that regulations do not always yield the benefits their
Furthermore, a congressionally appointed, bipartisan Regulatory
Reduction Commission could assemble a yearly package of cuts. Similar
in structure to the Defense Base Closure and Realignment Commission, it
could help overcome the otherwise politically insurmountable task of
tackling rules one at a time by instead assembling a bundle of
rollbacks to vote up or down. Since everybody stands a chance of
getting hit, bundling provides some political cover. The Federal Agency
Program Realignment and Closure Act (H.R. 1023), recently introduced by
Rep John Sullivan, Oklahoma Republican, is on the right track.
Today’s mounting spending and deficits increase incentives to regulate.
The Obama administration seeks input by today on regulatory procedures.
It needs to absorb the message that wealth-creating, small
business-friendly alternatives to “spendulus” deserve top
consideration. Deregulate to stimulate.