The Heritage Foundation

Backgrounder #1267 on Regulation

April 2, 1999

April 2, 1999 | Backgrounder on Regulation

The Senate's Opportunity to Shine a Light on Proposed Federal Mandates

On February 10, 1999, the U.S. House of Representatives passed the Mandates Information Act of 1999 (H.R. 350), sponsored by Representatives Gary Condit (D-CA) and Rob Portman (R-OH), by a vote of 274 to 149. Two days later, Senators Spencer Abraham (R-MI), Trent Lott (R-MS), Pete Domenici (R-NM), and 15 others introduced the Senate's companion bill (S. 427). These legislative proposals seek to build on the successes of the Unfunded Mandates Reform Act (UMRA) of 1995 so that proposed private-sector mandates receive as much analysis and deliberation as do mandates affecting state and local governments. Similar to a version of the bill that passed the House last year (H.R. 3534), this legislative effort would make additional improvements to the information and procedures Congress uses to conduct its daily business. The Senate now has the opportunity to help Congress to shine an even brighter light on the ways in which proposed mandates will affect the lives and prosperity of Americans.

Since UMRA passed in 1995, it has played an important, positive role in helping Members of Congress to deliberate, assess, and reassess more carefully the economic impact of proposed federal mandates. Understandably, those who advance new legislative proposals have the incentive to highlight the benefits (economic, social, environmental, and other) of their proposals and downplay their costs. As Deputy Secretary of the Treasury Lawrence Summers writes, "There is no sense in which benefits become 'free' just because the government mandates them."2 The Mandates Information Act would continue to improve UMRA's effectiveness as a check on that imbalance by demanding recognition and discussion of economic costs as well as benefits of proposed new private-sector mandates.

UMRA permits Members of the House and Senate to raise a point of order on any bill when its intergovernmental mandates, as estimated by the Congressional Budget Office (CBO), exceed $50 million in annual cost. Unless waived by a majority vote, a point of order prohibits further floor action on the measure. Although UMRA directs the CBO to estimate whether a bill's private-sector mandates exceed $100 million in annual cost, it does not establish a point of order if the mandates exceed that threshold.

If the Senate chose to act, the Mandates Information Act would correct this unfair preference. It also would direct the CBO to provide more information to Members of Congress about the effects of the proposed new private-sector mandates on consumers, workers, and small businesses.

EFFORTS TO ACHIEVE SENSIBLE DECISION-MAKING

In passing UMRA, the 104th Congress was responding to the outcry of states and localities to Washington's growing practice of imposing unchecked and costly federal mandates. Governors and mayors were complaining that federal mandates imposed by such laws as the Endangered Species Act, the Clean Air Act, Superfund, the Family and Medical Leave Act, and the Individuals with Disabilities Education Act were costing them billions of dollars annually.3

Title I of UMRA specifically established a procedure by which Members of Congress would obtain information about the economic costs of proposed new public- and private-sector mandates to enable them to deliberate more carefully before they passed the legislation. The contribution of the CBO's cost analysis led to Members' seeking information at an earlier stage in the development of legislative proposals, which often has resulted in revised, less costly policy proposals in such areas as immigration, telecommunications, agriculture, and the Internet.4

Indeed, as former Acting CBO Director James Blum recently testified, the CBO has been doing cost analyses since 1983 of the ways in which federal legislation would affect state and local governments under the State and Local Governments Cost Estimates Act of 1981.5 It was not, however, until the

procedural steps, [that] the point of order requirement be adopted...that the demand for such information was set in place, and as a result, we now have a lot of interest in the analysis we are doing.6

Blum also noted that

[the] CBO has assisted legislative staff by identifying mandates in draft legislation and, particularly with respect to intergovernmental mandates, has seen the language changed in final versions to reduce or eliminate the costs of the mandates.7

The CBO reiterated these conclusions in other testimony before Congress.8

Not surprisingly, in an era of fiscal budget restraint and in the face of being held to the spending caps in the Balanced Budget Act of 1997, private-sector mandates with their more hidden costs can be politically appealing alternatives to new government programs and higher direct taxes.

As Table 1 shows, between 1996 and 1998, the number of reported bills containing private-sector mandates with costs over the $100 million threshold has been consistently higher than the number with intergovernmental mandates. In 1998, the CBO identified three times as many bills with private-sector mandates above the threshold (18) as intergovernmental mandates (6).9

EXPOSING HIDDEN COSTS

Such a proposal as the Mandates Information Act represents an effort to bring the hidden costs of new private-sector mandates into the sunshine so that the public and its representatives can be better informed about their impact. Too often, the best defense a small business owner has against the annual deluge of constantly changing federal mandates is simply not to grow--to stay small and not create additional new jobs (making existing staff work harder and longer)--just so they can remain exempt from at least some of the mandates.

As small business owner Ryan Null of Hagerstown, Maryland, recently testified before Congress,

We have Department of Labor reports, unemployment insurance reports, W2, W3, W4, 1099, I-9, 940, and 941 reports and section 125 deductions...all this and more just to make sure my employees receive their paychecks on time...some government regulations go so far as to provide disincentives for my (24-person) company to grow.10

Legally mandated benefits, such as unemployment insurance and workers' compensation, are not "free" to the worker. A range of studies indicates that, on average, some 88 percent of the cost of all employer-paid, government-mandated benefit taxes is shifted to workers in the form of reduced cash compensation.11 New federal mandates can have the effect of slowing investments in new technologies that improve productivity, and reduce workers' income, which can impact their quality of life and affect their health and well-being.

The problem of burdensome federal mandates is real. In 1996, states and localities reported on 200 separate federal mandates involving 170 federal laws, including labor and health and safety laws.12 The concerns expressed included the costs, lack of flexibility, unreasonable standards, unreasonable implementation timelines, and the often overlapping and duplicative roles of the federal agencies administering the laws.13 These problems demand attention; and they also are problems for the private sector. The Mandates Information Act, as it amends UMRA, is just one tool Congress can use to make sure that it deliberates fully before imposing new mandates that could make a bad situation worse.

Information, the "Lifeblood of Democracy"

As consumer group Public Citizen observes on its Web site regarding the freedom of information,

The availability of this [federal government] information is important for several reasons. First, such information is necessary to inform the public about what the government is or is not doing with regard to matters of public concern. Access to such information is the lifeblood of democracy. Second, government records often contain facts that can be helpful to organizations, businesses, and individual citizens.14

Yet special interest groups like Public Citizen conveniently argue, as Chicken Little does, that the sky will fall because of the proposals in the Mandates Information Act. Ironically, they now argue that giving Congress and the public access to more and better information is dangerous somehow. For example, Public Citizen recently testified before Congress and claimed a proposal like the Mandates Information Act represents a "regulatory rollback" that will endanger the public. Yet, when pressed to explain what aspect of the bill represents such a "rollback," the response was that such a term is a "descriptive phrase for the type of bill this is. This bill does not roll back one single regulation."15

Indeed, the health of the U.S. economy and, more important, the desire to achieve the highest level of investment in public health, public safety, and environmental protection demand that Congress use exactly the type of information and analysis provided by proposals like the Mandates Information Act. As a 1994 Harvard University study that examines 500 life-saving interventions concludes, 60,000 fewer lives are saved each year because of an inability to set priorities that protect the public from the most serious risks they face.16 The real costs of mandates are the lives that are lost if Congress and the public are denied information that would help them to see what must be done, as opposed to doing what feels good.

Since 1995, the information made available to Congress and the public through UMRA has proved helpful, not only to policymakers as they consider new policies but also to organizations, businesses, and individual citizens. Ultimately, this information strengthens America's democratic system of government.

The Mandates Information Act proposes giving any Member of Congress the right to use a point of order to make the Congress stop and take a little more time to consider a proposed, new private-sector mandate that carries significant costs--a mandate that might force a small business owner to work longer days because he must cut back on staff to absorb those costs; that might drive a mother or father out of a much-needed job. If, after considering the costs, the majority of Members still want to pass the new mandate, Congress can do so.

In almost all cases, having more information and analysis of the impact of a legislative proposal, whether it adds new mandates or eliminates or modifies existing ones, would help Congress and the public debate the best allocation of national resources. A more informed, democratic process would mean a country that devotes more, not less, of its resources to policies that will save more lives, improve the quality of life and the environment, and allow Americans to become more prosperous.

CONCLUSION

Clearly, there is room for Congress and federal agencies to do a better job of assessing the impact of federal mandates on states, localities, and the private sector. Many American families, unlike the Washington bureaucracies, are forced to set priorities every day. They work hard to manage their budgets and allocate their resources in a way that maximizes their family's health and well-being.

Such proposals as the Mandates Information Act are intended to give Congress and the public the very best information and analysis available about important decisions affecting Americans' health and prosperity. Most Americans expect their elected representatives to want to know how proposed policies would affect their ability to ensure the country is getting the best return on its investment. They would consider it risky and dangerous to the future of their families if the Senate turned its back on the opportunity to seek better information on legislative proposals, which would allow it to work smarter, achieve higher levels of protection, and promote a better quality of life for every dollar spent.

Angela Antonelli is the former Director of The Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Endnotes

1. This paper is based on testimony delivered at a hearing on the Mandates Information Act of 1999 before the Subcommittee on Rules and Organization of the House and the Subcommittee on Legislative and Budget Process, Committee on Rules, U.S. House of Representatives, 106th Cong., 1st Sess., February 2, 1999. See also Angela Antonelli, "Senator Abraham's Mandates Information Act: The Way to Help Congress Work Smarter," Heritage Foundation F.Y.I. No. 129, February 6, 1997, and "Promises Unfulfilled: Unfunded Mandates Reform Act of 1995," Cato Institute Regulation No. 2 (1996).

2. Lawrence H. Summers, "Some Simple Economics of Mandates Benefits," American Economic Association Papers and Proceedings, May 1989, p. 182.

3. U.S. Advisory Commission on Intergovernmental Relations, The Role of Federal Mandates in Intergovernmental Relations, A Preliminary ACIR Report for Public Review and Comment, January 1996. See also National Governors' Association, "States Identify Most Costly Mandates," Governors' Bulletin, October 16, 1995; Michael J. Pompili, "The Rising Impact of Environmental Mandates on Local Government," Cato Institute Regulation No. 1 (1995); and Douglas Munro, Ph.D., "Summary Orders from Distant Gods: The Unfinished Agenda Following the Unfunded Mandates Reform Act of 1995," Goldwater Institute Issue Analysis, February 1995.

4. See Congressional Budget Office, The Experience of the Congressional Budget Office During the First Year of the Unfunded Mandates Reform Act, January 1997; An Assessment of the Unfunded Mandates Reform Act in 1997, February 1998; An Assessment of the Unfunded Mandates Reform Act in 1998, January 1999. See also Angela Antonelli, "Promises Unfulfilled: Unfunded Mandates Reform Act of 1995."

5. Testimony of Acting Congressional Budget Office Director James Blum on the Mandates Information Act of 1999 before the Subcommittee on Rules and Organization of the House and the Subcommittee on Legislative and Budget Process, Committee on Rules, U.S. House of Representatives, 106th Cong., 1st Sess., February 2, 1999.

6. Ibid.

7. Ibid.

8. Statement of James L. Blum, Deputy Director, Congressional Budget Office, on the Unfunded Mandates Reform Act before the Committee on the Budget, United States Senate, 105th Cong., 2nd Sess., February 12, 1998; Statement of James L. Blum, Deputy Director, Congressional Budget Office, on the Unfunded Mandates Reform Act before the Subcommittee on Rules and Organization of the House and the Subcommittee on Legislative and Budget Process, Committee on Rules, U.S. House of Representatives, 105th Cong., 1st Sess., October 30, 1997.

9. Congressional Budget Office, An Assessment of the Unfunded Mandates Reform Act in 1998, p. vi.

10. Statement of Ryan Null, Owner, Tristate Electronic Manufacturing, Hagerstown, Maryland, before the Subcommittee on Rules and Organization of the House and the Subcommittee on Legislative and Budget Process, Committee on Rules, U.S. House of Representatives, 106th Cong., 1st Sess., February 2, 1999.

11. The 88 percent figure is based on such analyses as Jonathan Gruber and Alan B. Krueger, "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers Compensation Insurance," Tax Policy and Economy (1991); Jonathan Gruber, "The Incidence of Mandated Maternity Benefits," American Economic Review, Vol. 84 (June 1994), pp. 622-641; and Lawrence H. Summers, "Some Simple Economics of Mandated Benefits."

12. U.S. Advisory Commission on Intergovernmental Relations, The Role of Federal Mandates in Intergovernmental Relations, A Preliminary ACIR Report for Public Review and Comment.

13. Ibid.

14. At http://www.citizen.org/litigation/foic/foilguid.html, March 18, 1999 (emphasis added).

15. Testimony of Maura Kealey, Deputy Director, Public Citizen's Congress Watch, before the Subcommittee on Rules and Organization of the House and the Subcommittee on Legislative and Budget Process, Committee on Rules, U.S. House of Representatives, 106th Cong., 1st Sess., February 2, 1999 (emphasis added).

16. See Tammy O. Tengs, "Optimizing Societal Investments in the Prevention of Premature Death," doctoral dissertation, School of Public Health, Harvard University, June 1994.

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