A new report from the Office of Management and Budget indicates President Bush is ready to apply some brakes to the regulatory state. Bush is calling for better scientific analysis, more public involvement in rulemaking, better attention to small business concerns, as well as more aggressive central review — and rejection if need be — of agency rules by OMB.
Bush is not the first observer to note that regulations often are not well targeted, cost more than they should, and may have costs that outweigh benefits.
Health, safety and environmental regulations cost up to $229 billion annually, according to OMB. An outside estimate by professors Thomas Hopkins of the Rochester Institute of Technology and Mark Crain of George Mason University that also includes economic regulations and paperwork costs pegs regulatory costs at about $840 billion.
But better analysis aimed at assuring “net benefits” has its limits.
The cure for excessive regulation, along with the measures like those proposed by the administration, is to end “regulation without representation.”
Congress delegates immense legislative power to agencies despite the fact that the Constitution grants legislative powers solely to Congress. That severs the voters’ connection to those who regulate them, and allows Congress to take credit for popular regulatory initiatives while blaming agencies for costs.
Rational regulatory policy — not to mention Constitutional government — demands that every elected representative be on record for significantly costly regulations that are imposed on citizens. That would force legislators to demand the science and analysis that Bush can only encourage.
One proposal, the Congressional Responsibility Act, introduced by Rep. J. D. Hayworth (R-Ariz.) and Sen. Sam Brownback (R-Kan.), would require congressional approval of significant agency rules. As to the complaint that voting on agency regulations would bog down the Congress, stop and think a minute: do we really want a society that makes so many laws the legislature can’t even pass them all during waking hours?
In addition to improving congressional accountability, better cost disclosure is vital. A lot of regulatory data already exists, but is scattered across government agencies. For example, 4,509 rules were at various stages in the pipeline in 2001 — but how many policymakers knew that? And of these rules, 149 will cost more than $100 million each annually.
A breakdown of the numbers of such costly rules — as well as those sent back by OMB — could be included in an annual “regulatory report card.” The agency “guidance” documents that often function as stealth regulation that escapes OMB review could be tallied the same way. Other useful items that could easily be included in an annual Report Card include: total numbers of rules produced by each agency; the top rule-making agencies; numbers of rules facing statutory or judicial deadlines; and the numbers of rules impacting small businesses, or impacting state and local governments. Historical tables for all such data would help shine a spotlight on the regulatory state.
A report card would expose where cost estimates do and do not exist, thereby highlighting the best and worst agency efforts at cost disclosure and competence in congressional oversight. A report card would also help reveal whether or not we can say with certainty that the regulatory enterprise does more good than harm, which seems to be one of the Bush goals.
The problem with focusing on agency-driven, cost-benefit analysis at the expense of congressional accountability, on the other hand, is that, to work, agencies would frequently need to admit their rules’ benefits do not justify the costs. That chafes against bureaucratic incentives. After all, no matter how costly or inconvenient, a nationwide 15 mph speed limit and mandatory 15-ft bumpers would save lives.
Instead, in preparing regulatory report cards, agencies could concentrate on assessing and fully presenting the costs of their initiatives — much as the federal budget focuses only on the amounts of taxes, not the benefits of the dollars spent.
Emphasizing costs doesn’t mean that benefits can be ignored. Quite the contrary: the proper time to assess regulatory benefits is while Congress is contemplating legislation that later will become translated into regulations. Saving benefit appraisals for the time regulations are written has it backwards. Those benefits were presumably the reason for Congress’s seeking legislation in the first place.
The proper regulatory reform goal is assurance that regulatory compliance dollars are allocated according to where an accountable Congress believes benefits to lie.
Moreover, OMB has the experience and know-how to create “benefit yardsticks” by which it can objectively critique high cost, low benefit rules. OMB could note the cost of a new regulation and compare its anticipated benefits to the alternative benefits that could be had if the compliance costs went instead toward hiring policemen or firemen, buying smoke detectors, and so on.
Improving congressional accountability and instituting annual reporting would primarily affect future regulatory mandates. So what about overhaul of the existing multi-hundred-billion-dollar regulatory state?
For starters, Congress could ask agencies and OMB to propose rules to cut each year. Increased inter-agency competition generated by those report cards may increasingly make it apparent that regulatory benefits are not always what their proponents claim. More formal review and “sunsetting” of regulations are also options.
Limited regulatory cost budgeting could help as well. For example, an agency might be asked to offset the cost of a new regulation by eliminating one or more existing rules of roughly equivalent cost, or by persuading another agency to eliminate a regulation on its behalf.
“Pollution credits for regulatory emissions,” one might say.
Finally, another reform worth considering is that embodied by the military base closure and realignment commission, which for a time helped resolve the politically impossible task of closing obsolete military bases one at a time by instead assembling a bundle of them to vote on at once. Since everybody stood a good chance of getting “hit,” the bundling provided some political cover. Likewise, a congressionally appointed, bipartisan regulatory reduction commission could hold hearings and assemble a yearly package of proposed regulatory reductions to vote on, with no amendments permitted.
OMB has its work cut out for it with its new regulatory proposals. Since government spending and regulating can be substitutes for one another, today’s pressures to regain and maintain the federal budget surplus could increase incentives to regulate instead. Regulatory report cards and holding Congress accountable for rules are the best bets for offsetting that tendency and for improving disclosure and openness in the regulatory state.