Thankful for Regulatory Reform

On this Thanksgiving holiday, the economy itself might be thankful if Congress would take a machete to the regulations strangling business and job creation.

From transportation to trade, from communications to banking and from telecommunications to technology policy, policy makers of both parties have at times challenged the moral legitimacy and economic rationality of federal regulatory intervention. For example Democrats helped spearhead transportation deregulation decades ago; both parties rolled back unfunded mandates in the 1990s.

Regulations are frequently anti-competitive and anti-consumer, annually costing consumers hundreds of billions of dollars. The Small Business Administration, in a study by Mark and Nicole Crain, peg today’s cost at $1.7 trillion. Policymakers still largely do not know the full benefits and costs of the regulatory enterprise. Meanwhile, regulatory agencies grow in power and budget; simply look at EPA carbon-dioxide regulation campaign, FCC’s net neutrality hunger, and the rules-to-come from the health care and financial reform bills.

Many reform ideas have been proposed. Strengthening cost-benefit analysis of new regulations, however informative it may sometimes be, is politically unpopular; nor does it actually bring the largely unaccountable regulatory state under any congressional control, so there’s nothing in it for voters to react to.

Rather, greater congressional accountability for each regulation and cost disclosure matter most in regulatory reform. A congressional vote on major or controversial agency rules before they take effect–along with regulatory cost transparency through such tools as improved annual cost and trend reporting–would help voters to hold Congress responsible for Washington’s 3,000-plus new rules every year. Reining in excessive delegation of power to federal agency employees would help close the breach between lawmaking and accountability, while forcing Congress to internalize the need to demonstrate regulatory benefits. Among its reforms, the new Congress should:

• Establish a bipartisan Regulatory Reduction Commission to survey and purge existing rules.

• Develop a review and sunsetting schedule for each new regulation, and agencies too for that matter.

• Explicitly approve major agency regulations (the REINS Act is one mechanism).

• Publish a detailed annual Regulatory Report Card to accompany the Federal Budget.

• Require that agencies explicitly report rules’ costs (Congress itself must assess relative benefits and compare agency effectiveness).

• Have agencies and the Office of Management and Budget (OMB) annually rank rules’ effectiveness, and recommend rules for elimination.

Let’s be Thankful now, and have a Happy New Year later. We focus on government spending, properly so; but regulations are catching up in volume and impact. Meanwhile pass the turkey.