July 27, 2012
By James L. Gattuso
Regulation is like the weather. Everyone likes to complain, but nobody does anything about it.
That’s not true, however, of the House of Representatives, which just took up legislation adopting a fistful of reform ideas. The reform package is hardly the stuff of revolution, and few of the proposals will make their way on to bumper stickers. But they shouldn’t be dismissed lightly. While modest in scope, they represent common-sense changes that promise to help restrain the growing burdens of red tape.
Regulatory costs have been growing in recent years, and growing fast. According to a Heritage Foundation analysis, 106 major new regulations — each imposing $100 million or more in new costs on the economy — were adopted in the first three years of President Obama’s tenure. That compares with 28 during the first three years under President Bush.
In dollar terms, the acceleration is even starker, with $46 billion in new burdens being assessed under Obama, compared with $8 billion in the three years following President Bush’s inaugural.
The package of reforms in the House would take a number of approaches to stemming this rising tide of red tape. The headline proposal is a regulatory freeze — banning adoption of new major regulations until the national unemployment rate dips below 6 percent. A freeze is no cure-all, of course. Past freezes, such as the one imposed by the first President Bush in 1991, had little long-term impact. High-profile rules tend to get waivers, and even those stopped by the freeze tend to be adopted as soon as it is lifted. But it is an important symbolic move, sending the message to regulators that now is not the time for new restrictions on the economy.
The freeze, though, is only one among many reforms before the House. Among the others: Limiting “midnight” regulations. As a presidential administration comes to a close, the number of new rules adopted by regulators invariably skyrockets. It doesn’t matter whether the president is a Republican or Democrat, liberal or conservative — policymakers, freed from normal political constraints, rush to clear their desks and put their pet ideas into effect while they can. The result is a glut of new restrictions, hastily considered with limited accountability.
The House bill would limit this periodic circus, banning promulgation of new rules after Election Day whenever the presidency changes hands. Even better, accountability could be maintained by requiring Congress’ approval of new regulations, as proposed under legislation approved by the House last year.
The bill also would help make regulatory settlements transparent. A significant number of new regulations are imposed under court order with regulators seemingly having little choice but to promulgate the new rule. In many cases, however, such court orders are not the result of an adversarial process lost by the agency, but rather the product of an elaborately staged kabuki dance among outside pressure groups, the courts, and the agency itself.
This “sue and settle” process is simple: An interest group sues a regulatory agency, the agency takes a dive and settles the case, resulting in a court order requiring the agency to do what it wanted to do in the first place. The House bill would not end this practice, but it would require more transparency in the process, including an opportunity for public comment to the agency before any settlement is agreed to.
The bill also would require cost/benefit analyses. These would be conducted by the Securities and Exchange Commission and Commodities Futures Trading Commission. For more than 30 years, executive branch agencies have been required to assess the benefits and costs of major new rules. This requirement does not apply, however, to so-called “independent” agencies, which are outside direct presidential control. The House legislation would require, by statute, two of the most significant independent agencies to conduct such analyses before adopting new rules.
These reforms are sensible, common-sense improvements to the regulatory process. Combined with other, broader reforms already approved by the House, they represent a major step toward limiting the regulatory burden on the economy and American consumers.
The next stop for the legislation is the Senate, where — unfortunately — it is expected to receive a chilly reception. But that weather forecast could always change.
First appeared in Tallahassee.com
Enterprise & Free Markets Initiative of the Leadership for America Campaign
James L. Gattuso
Senior Research Fellow in Regulatory Policy
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