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April 3, 2014

Red tape rising: Five years of regulatory expansion

By and

In his State of the Union address earlier this year, President Obama vowed to wield his executive powers when faced with congressional resistance to his legislative agenda: "America does not stand still - and neither will I. So wherever and whenever I can take steps without legislation ... that's what I am going to do."

This provocative declaration was startling in its bluntness, but it was hardly a new development. For the last five years, the president has aggressively exploited regulation to get his way. In fact, the Obama administration is very likely the most regulatory in history, issuing 157 new major rules at a cost to Americans approaching $73 billion annually.

But even this substantial figure is seriously understated. A dismaying number of regulations undergo no cost-benefit analysis. And bureaucrats also have a penchant for downplaying the costs of their initiatives.

This runaway red tape, however, can't be solely blamed on the president. Many of the regulations issued over the past five years stem from far-reaching and vaguely worded legislation such as Obamacare and the Wall Street Reform and Protection Act (commonly known as Dodd-Frank), in which Congress granted broad discretion to regulatory agencies.

Dodd-Frank alone accounted for 13 of the 26 new major rules issued during President Obama's fifth year. Altogether, the 400-plus Dodd-Frank rules represent a massive regulatory power grab that is raising the cost of banking for Americans and restricting their access to credit.

Some of the most problematic new rules of 2013 came from the Consumer Financial Protection Bureau, including four major rules restricting access to mortgage credit. (Each "major" rule represents costs in excess of $100 million per year.) These rules cover every aspect of financing a home - including mortgage options, eligibility standards, and even the structure and schedule of payments - that will limit financing options and thus further expand government control over Americans' lives.

Despite the potentially enormous impact, the bureau failed to quantify the actual costs of these rules.

Of the 2013 rules for which costs were released, the most expensive was an Obamacare-related mandate requiring health insurers to provide "parity" in benefits between mental health or substance abuse services and other benefits, at a cost of almost a billion dollars each year.

Ranking second was a Department of Labor rule extending government wage and overtime dictates to more live-in helpers for the disabled and elderly. Such "companionship" services have always been exempted from government wage control to make it possible for helpers to spend more time with their charges. Under the new rule, far fewer caretaking activities will qualify for the exemption, including dressing a client, preparing food not consumed in the caretaker's presence, or drawing a bath.

Hundreds more costly regulations are already in the works. The most recent Unified Agenda - a semi-annual compendium of planned regulatory actions by agencies - lists 125 "economically significant" rules in the pipeline. This includes dozens of additional Dodd�Frank, Obamacare and very costly Environmental Protection Agency rulemakings.

The red tape doesn't just envelop businesses. Regulations increasingly restrict lifestyle choices that once were left to individual preference. The Food and Drug Administration is preparing to remove trans fats from the list of food ingredients that are "generally recognized as safe," an initial step toward prohibition. On the auto front, the National Highway Traffic Safety Administration this week issued a rule requiring a rear-mounted video camera and in-vehicle screen to reduce the likelihood of a vehicle striking a pedestrian while in reverse.

Reforms of the regulatory process are critically needed. Congress should increase scrutiny of new and existing regulations to ensure that each is necessary, and that costs are minimized.

For starters, lawmakers should require congressional approval before any new major regulation takes effect. They should also prepare analyses of the regulatory consequences of all proposed legislation before a vote is held, and impose expiration dates ("sunset") on all major regulations.

In addition, independent agencies' regulations, such as the Securities Exchange Commission, should be made subject to the full regulatory review process.

Without such decisive action, the costs of red tape will continue to grow, and the economy - and average Americans - will be the victims.

 - James L. Gattuso is senior research fellow in regulatory policy, and Diane Katz is research fellow in regulatory policy in the Roe Institute for Economic Policy Studies at The Heritage Foundation.

Originally distributed by the McClatchy-Tribune News Service

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