June 3, 2011

June 3, 2011 | Commentary on Regulation

Obama the Deregulator? A Wish Still to Be Fulfilled

Is the Obama war on over-regulation for real? That was the question that White House regulatory chief Cass Sunstein tried to answer in the affirmative last week as he reported on the administration’s four-month review of federal regulations.

Sunstein did bring some real scalps to make his case, citing a number of completed and proposed reforms aimed at reducing burdens on businesses and individuals. The total claimed savings from the Environmental Protection Agency and the Transportation and Labor departments alone: $1 billion a year, raising hopes that the initiative is more than the “phony war” against regulation it originally seemed to be.

The initiatives announced last week are encouraging. While the administration and Sunstein deserve credit for undertaking an substantive review of federal rules, and identifying regulations that are costly and unnecessary, it is only a small and tentative step on a very long road.

Phony or not, the struggle against unjustified regulation has hardly been won, and the president’s long-term commitment to the battle is still uncertain.

Obama’s Orders

The administration’s regulatory reform effort began in January, when President Barack Obama issued an executive order giving his agency heads 120 days to create plans for reviewing outdated and unnecessary regulations.

Although the order only required agencies to make plans for identifying unnecessary rules, many used the process to identify reforms. Among them:

-- Modifying an EPA rule that defined milk as an “oil, " thus requiring milk spillages at dairies to be treated as hazardous oil spills. Exempting milk from the rule will save dairies some $1.4 billion over the next 10 years, according to the White House Office of Management and Budget.

-- Eliminating an EPA requirement that gas stations maintain gas vapor recovery systems, a requirement which is redundant with air pollution controls required on cars today. Estimated savings: $67 million a year.

-- Scaling back Department of Transportation requirements that railroads maintain automated anti-collision systems to areas where it is actually needed. Savings: $400 million right away and $1 billion over 20 years.

-- Eliminating some 1.9 million hours of Occupational Safety and Health Administration paperwork, saving businesses some $40 million a year.

-- Harmonizing OSHA hazard classification and labels with requirements in other countries, saving businesses some $585 million per year.

Liberal Opposition

For an administration that until now had deregulated virtually nothing, this agenda is significant -- and surprising.

Many pro-regulatory groups were outraged by the announced steps. One group, the Center for Progressive Regulation, condemned the president’s initiative in terms it normally reserves for corporate lobbyists, free-market economists and other arch-enemies, calling it a ‘‘blatantly one-sided effort to loosen restrictions on industry while paying little heed to the numerous threats to public health and the environment that remain unchecked.’’

Given that the same administration added some 43 major new regulations to the rulebooks last year, while lessening burdens only three times (according to Heritage Foundation research), worries over anti-regulatory bias seems a little misplaced.

The group even expressed concern that efforts to eliminate unnecessary and ineffective rules would drain resources from efforts to write new rules. In other words, regulators can’t be bothered to examine whether the rules they have imposed make sense, because they need to focus on writing more rules.

Low-Hanging Fruit

For now, the Obama administration seems to have rejected these somewhat shrill voices for ever more regulation. Still, it is too soon for Americans to breathe a collective sigh of regulatory relief. Many of the steps that were announced are the low-hanging fruit of regulatory excesses which should have been plucked long ago.

For instance, the rules defining milk as potentially as dangerous as oil had been in place since the 1970s, and a petition to fix the definition had been pending at EPA since at least 2007. The fact that it took four years to get that accomplished is less a notable achievement than a sign of how broken our regulatory system is.

Suggestions Not Actions

Many more ‘‘actions’’ are merely suggestions for change at a later date. For instance, only two actual rule changes were touted for the EPA. Of the 31 rules in the EPA’s formal plan, 15 are ‘‘longer-term actions’’ that officials have identified for review, and 16 are ‘‘early actions’’ that could lead to regulatory change.

Moreover, these proposed regulatory rollbacks will be far outweighed by new regulations still in the pipeline. While the administration has recently backed away from some of its more costly new rules -- most recently postponing new restrictions on industrial boilers which would have cost billions -- the overall flow of new regulations remains at flood stage.

Until the torrent of new regulations is stopped, or at least narrowed, net regulatory burdens will continue to increase.

James Gattuso is senior research fellow in regulatory policy at The Heritage Foundation and a columnist for Bloomberg Government. The opinions expressed are his own.

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First appeared in Bloomberg