Time Out for Federal Regulation

At the moment, the Federal Register stands at 61,247 pages–for 2011 alone. You can see the Code of Federal Regulations from space.

Assuming this perturbs rather than excites you, imagine if the federal government put the brakes on all this over-regulation of the economy for just a little while.

Sign me up. Were I feeling Herman Cain-ish, I’d even warn, “Pass Regulation, Ban Job Creation.” In fact I just did.

I’d open a Federal Bureau of No.

Well, that one I can’t do. So instead, Sen. Susan Collins (R-Maine) is proposing a freeze via her “Regulatory Time Out Act, which she recently outlined in the Wall Street Journal.

The “time out” would be a year-long moratorium on “significant” rules, typically defined as those expected to cost $100 million annually.

We could use this idea. Already, a substantial fall House regulatory reform agenda outlined by Rep. Eric Cantor (R-Virginia) would require a fast-track congressional vote on significant rules (the so-called REINS Act) and lessening of regulations’ impacts on small businesses (the Regulatory Flexibility Improvements Act from Texas Rep. Lamar Smith).

When it comes to recovery, one tries in vain to argue that the answer is not to artificially stimulate everything; in fact, overspending and endlessly overruling prices and adjustments in the marketplace are the worst moves. These signal inescapable underlying realities to heed and allow to play out.

For decades, the rise of the centrally administered state has delegitimized the crucial role of competitive forces in risk management, health and safety enhancement, environmental protection, infrastructure rollout and economic efficiency. Agencies often operate under the perception that they’re regulating, when in fact they’re often making actual regulation difficult, but that’s an argument for another day.

AQR Capital Management founder Clifford Asness pointed out that the often referenced “regulatory uncertainty” is not our problem. Sadly, the problem is that we know all too well the certainty and pervasiveness of accumulated regulation. That’s why nothing moves.

Switching the economy back on requires stopping the regulatory onslaught on American enterprise in heath care, finance, energy, infrastructure, telecommunications, high tech and more.  During the time out, we inventory all the regulations created by the default to bureaucratization and set about rolling them back.

In this past Spring’s federal Unified Agenda of Federal Regulations, 4,287 rules filled the pipeline (pre-rule, proposed, final, recently completed stages), up from 3,989 right after President Obama took office. The number of economically significant ones was 219, up from 172. Of all these rules, 876 are said by agencies to affect small business (about half of which require a “Regulatory Flexibility” analysis of the kind Rep. Smith seeks to improve).

Fast forward a few months, and Sen. John Barrasso’s latest Red Tape Review notes 468 rules now deemed economically significant. Regulations are now a Red Tape Worm.

Collins’ moratorium wouldn’t be the first. Former President Bush issued a moratorium on January 28, 1992, during which agencies were to refrain from issuing non-essential new rules and instead examine and reduce burdens of those already on the books.

The moratorium didn’t end up siring a considerably smaller Federal Register, although, arguably, moratorium-exempt, deregulation-oriented rulings to “foster economic growth” could account for the volume. Bush also, as Sen. Collins would do, explicitly exempted regulations addressing hazards that posed an “imminent danger to human health and safety.”

The executive branch can’t unilaterally curb regulation even when it goes so far as to freeze rules, even if reform-mindedness were somehow to sweep the White House.  A congressional effort like the Collins one is needed, along with a series of institutional checks on the very phenomenon of “regulation” that are far more stringent than anything currently operative.

Incidentally, a moratorium needs to target controversial rules, not just agencies’ officially designated “significant” ones. For example, Larry Downes plainly demonstrated the high costs of “net neutrality” regulations (the rules recently issued by the Federal Communications Commission without congressional authority) and yet here comes a study from Institute for Policy Integrity that says not regulating the Internet is what’s costly, echoing FCC’s lack of acknowledgement of costs.

During the moratorium, we need an inventory and review of rules and a Regulatory Reduction Commission to weed out underbrush.

The chart that follows depicts how laws and regulations on the books accumulate as a small business grows. It doesn’t even address the industry-specific rules (see endnote) so desperately in need of reform today. And it certainly doesn’t address tomorrow’s rules from the new financial reform and heath care legislation.

Time out, that’s my whistle you hear.