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February 3, 2004

Votes May Be Hiding in Heap of Regulations

By and

Election watchers -- or candidates -- seeking a sleeper issue in the 2004 race for the White House might want to take a long look at the state of regulation in America. They might find, as President Reagan did, a potentially rich harvest of votes from Americans who resent paying too much for goods and services, or fear losing their jobs because of rules put in place by federal bureaucrats. President Bush raised the topic in his State of the Union address, which included one line promising relief for small-business owners from "needless federal regulation." To actually succeed in cutting back the regulatory thicket, however, the president must make reform a real priority, not just an applause line in a speech.

Regulation imposes a huge burden on consumers and the economy. The cost, according a recent study conducted for the Small Business Administration, may total some $843 billion -- close to what Americans pay in income taxes. Strikingly, a global CEO survey shows six in 10 company heads view regulation as a serious threat to the growth of their business, topping exchange rates, corporate governance issues and even terrorism.

Some regulations border on the silly, such as "food identity" rules that define the content of everything from cherry pies to canned mushrooms. More seriously, other regulations hinder innovation in the economy, like telecommunications rules that deter Internet investment. Some rules can even diminish health and safety -- for instance, too-slow approvals for needed drugs.

Can overregulation be a winning economic and political issue? It has been in the past. Reduction of regulatory burdens was one of the four pillars of Reagan's economic agenda upon taking office, along with tax reduction, monetary stability and slowing the growth of federal spending. With these policies Reagan was not only overwhelmingly reelected, they also spurred the longest economic expansion in peacetime history.

Some believe that times have changed and that regulation is more popular than it was then. Last fall, for example, Howard Dean called for a program of re- regulation. But apparently he misjudged: The concept was attacked by two of his Democratic rivals. "It failed in the past; it will fail again," said Wesley K. Clark. Similarly, Sen. Joe Lieberman accused Dean of trying to "turn back the economic clock."

If even some Democrats see this, why doesn't Bush make the issue a priority? He has taken positive steps, most notably in rejecting the Kyoto "global warming" treaty and its limits on energy use. And the administration's chief gatekeeper for approving regulations -- the Office of Information and Regulatory Affairs -- has been strengthened, enforcing stricter criteria for proposed rules. Still, there hasn't been much progress. Nearly 100 economically significant new regulations have been sent each year to the regulatory affairs office by Bush administration agencies -- topping not only the Reagan average of fewer than 70 but the Clinton rate of 90.

Given the effects of Sept. 11 and the corporate accounting scandals, it may have been impossible to achieve net reductions in regulations. And many new rules were justified, in light of homeland security and other needs. But opportunities to cut back on unnecessary regulations have been missed.

In early 2002, for instance, the regulatory affairs office requested comments from the public on potential regulatory changes. Some 1,700 suggestions were made, resulting in 156 discrete recommendations for changes. This October, 1 1/2 years after the process started, the office announced that agencies would look into 34 of the 156; no actions had yet been taken.

More troubling, in some cases administration inaction has led to the failure of deregulatory initiatives. Early in 2002, for instance, the Federal Communications Commission was embroiled in a dispute over regulation of telephone companies. Despite efforts by Chairman Michael K. Powell in favor of substantial deregulation, the administration preferred to stay out of the fray. In the end, much of Powell's initiative failed -- perhaps threatening the telecommunications recovery and thousands of jobs.

As the Bush administration enters its fourth year, the president needs to commit to a governmentwide effort to reduce the regulatory burden. Taking this page out of the Reagan playbook might not only prove popular but could provide a critical boost to the economy.

--Edwin Meese III, former U.S. attorney general, is the Ronald Reagan Distinguished Fellow in Public Policy at the Heritage Foundation. James L. Gattuso is a research fellow in regulatory policy at Heritage.

First appeared in the L.A. Times

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