February 2, 2011

February 2, 2011 | Commentary on Economy

President’s Assault on Regulation Rings Hollow

At least that’s the message coming from the White House. The administration’s regulatory offensive began Jan. 18 with an opinion piece by the president in the Wall Street Journal. The op-ed coincided with a new executive order which, the president wrote, not only ensures that regulators will consider the economic consequences of new rules, but also launched a 120-day government-wide review of regulations already on the books. The promised review even got a mention in the State of the Union address.

Sounds like good news for a beleaguered economy. But is this a real war on regulation or just a charm offensive?

Businesses and individuals certainly could use some regulatory relief. New rules have been coming out of Washington at an unprecedented pace. Based on information from the Government Accountability Office, some 43 major rules imposing new costs on the private sector were adopted during the last fiscal year. These rules imposed a record $28 billion in new annual costs on Americans.

Contrast that with the total of just $1.5 billion in regulatory relief scored over the same time.

In his opinion piece, President Barack Obama acknowledged the problems of overegulation, writing that sometimes “rules have gotten out of balance, placing unreasonable burdens on business -- burdens that have had a chilling effect on growth and jobs.”

Just Plain Dumb

While stressing that he would not back away from needed regulations, a point emphasized even more strongly in his State of the Union address, he said that “we are also making it our mission to root out regulations that conflict, that are not worth the cost, or that are just plain dumb.” Not quite Ronald Reagan, but pretty strong stuff.

The executive order that is supposed to do this hardly seems up to the job. In large part, it simply reiterates the guidelines for regulatory review in use since 1981. And in some ways, it even opens the door to more regulation.

In assessing benefits of proposed rules, for instance, regulators are instructed to consider non-quantifiable factors such as “human dignity.” Oddly, there’s no corresponding language on non-quantifiable costs, such as consumer choice or individual freedom.

Underwhelming Promise

Even more underwhelming is the promised “government-wide review” of rules. Such a review, similar to that undertaken by President George H. W. Bush in 1992 and overseen by Vice President Dan Quayle, would be welcome.

But that’s not what the executive order calls for. Rather than require agencies to eliminate, or even just identify, unwarranted rules during the next 120 days, the order merely requires agencies to submit a “preliminary plan” for reviewing regulations in the future, with the goal of making their regulatory program either less burdensome or “more effective.”

This is hardly new or groundbreaking. In fact, agencies were required to prepare exactly such plans under a 1993 executive order signed by President Bill Clinton, although there is little evidence they were actually implemented.

Moreover, the initiative is hardly “government-wide.” It excludes independent agencies such as the Federal Communications Commission, the Securities and Exchange Commission and the new Consumer Financial Protection Bureau. In so doing, the president has excluded many of the largest producers of red tape.

Phony War

And arguments that the president has no authority over these agencies ring hollow. Each is headed by an Obama appointee who would, no doubt, gladly participate in the program if asked. In fact, that is what happened in 1992, when independent agencies fully participated in Bush’s review.

This is a phony war on regulation. And it’s a blown opportunity for progress on a problem that need not be partisan. After all, no president did more to eliminate outdated regulation than Jimmy Carter, a Democrat. Even Clinton, certainly no deregulator, achieved some significant reforms.

To show that this new initiative is more than talk, Obama must follow up on his rhetoric with action. He should identify specific regulations in need of reform while requiring agencies to identify others. He should ask independent agencies to do the same.

And he should work with Congress to develop legislative reforms to ensure that the tide of regulation can be controlled effectively in the future.

Until and unless such specific steps are taken, the president’s words will remain just words.

James Gattuso is the senior research fellow in regulatory policy at The Heritage Foundation.

About the Author

James L. Gattuso Senior Research Fellow in Regulatory Policy
Thomas A. Roe Institute for Economic Policy Studies

First appeared in Bloomberg