Runaway Spending and Deficits–Plus Runaway Regulation

These hearings are long overdue. Runaway regulation is now nipping at the the heels of runaway spending and deficits. The Dodd-Frank financial legislation alone has already, as of April, generated 3.3 million words of regulation in 3,500 Federal Register pages, according to the Wall Street Journal, and the translation of law-to-rules there has barely begun.

A much-cited evaluation of the United States federal regulatory enterprise for the Small Business Administration finds annual regulatory compliance costs hit $1.75 trillion. (Criticisms of this report have emerged; but for starters let’s recognize that estimated costs of Sarbanes-Oxley alone–the post-Enron but pre-Dodd Frank financial law–top $1 trillion.)

The expanding scope of federal regulations is newly explored in the 2011 edition of the Competitive Enterprise Institute’s Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State. (The report also has been circulated this week as a Dear Colleague letter by Sen. John Barrasso (R-WY)).

Of note:

• The Federal Register stands at an all-time record-high 81,405 pages.

• In 2010, federal agencies issued 3,573 final rules.

• While agencies issued 3,573 final rules, Congress passed and the president signed into law a comparatively “few” 217 bills. Sweeping delegation of lawmaking power is addressed in proposals such as the REINS Act.

• Proposed rules in the Federal Register have surged 19 percent, from 2,044 in 2009 to 2,439 in 2010.

• Of the 4,225 rules now in the regulatory pipeline, 224 are “economically significant” meaning they wield at least $100 million in economic impact–a 22 percent increase over 2009’s 184 rules.

• Given 2010’s government spending (outlays) of $3.456 trillion, the regulatory “hidden tax” stands at approximately half the level of federal spending itself. It’s greater than all government spending was in the 90’s, highlighting the urgency of hearings such as today’s.

• Regulatory costs exceed 2008 corporate pretax profits of $1.463 trillion.

• Regulatory costs dwarf corporate income taxes of $157 billion.

• Regulatory costs tower over the estimated 2010 individual income taxes of $936 billion by 87 percent.

Whatever this hearing’s conclusion, regulations need more official scrutiny, transparency and accountability from Congress, including votes on economically significant rules before they become binding as the REINS Act would require. Congress should also implement a Regulatory Reduction Commission and explore regulatory cost “budgeting.”

In the meantime, an annual “Regulatory Report Card” roundup for Congress in service of sound regulatory policy and hearings like today’s might include the following:

• “Economically significant” rules (the big ones that cost over $100 million) and minor rules by department, agency, and commission;

• Numbers/percentages of rules impacting small business and lower-level governments;

• Numbers/percentages of rules featuring numerical cost estimates;

• Tallies of those cost estimates, with subtotals by agencies, and grand total;

• Numbers/percentages of rules lacking cost estimates;

• Numbers/percentages of rules lacking benefit estimates (which is very valuable information to have)

• Explanation of lack of cost estimates;

• Percentage of rules reviewed by the OMB for quality and whether any action was taken or whether recommendations were ignored;

• Analysis of the Federal Register: page counts, proposed and final rule breakdowns by agency;

• Identification of the most active rule-making agencies, to guide reform focus;

• Identification of rules that are deregulatory rather than regulatory, and efforts to expand this category;

• Identification of rules that affect internal agency procedures alone with an eye toward separate reporting for this category;

• Numbers/percentages of rules required by statute vs. discretionary rules;

• Numbers/percentages of rules facing statutory or judicial deadlines; and

• Rules for which weighing costs and benefits is statutorily prohibited

Having information like this won’t turn off the Federal Register firehose right away; after all, we get a detailed fiscal budget each January and spending is still utterly out of control. But costs of regulations now stand at half the level of that government spending itself–equivalent to the level of all government spending back in the 1990s–yet are entirely unbudgeted. So along with sweeping liberalization, we have to start measuring stuff.