Regulatory Reform: A Beacon of Light for Bipartisanship
Common ground is nearly impossible to find in Washington these days. But with the Senate’s recent confirmation of Neomi Rao as the White House’s administrator for the Office of Information and Regulatory Affairs (OIRA), and a renewed interest in cutting regulatory red tape on both sides of the aisle, there might be hope for us — and the economy — yet.
Rao’s new job will put her at the forefront of the administration’s effort to reorganize the federal regulatory state — now the largest it has ever been. Nonetheless, there are a number of Republicans and Democrats who agree that improving the regulatory process will expand jobs and grow the economy by relieving consumers and business owners from the crushing burden of federal regulations.
It wasn’t that long ago that relief for small businesses from unfunded mandates on states drove reform during the Clinton era. In fact, the recent controversial rollbacks of 14 Obama-era rules by Congress and President Trump were facilitated by the bipartisan, Clinton-era Congressional Review Act.
Regardless of one’s politics, the numbers speak for themselves. President Obama’s final year in office saw an unprecedented surge in regulations coming out of Washington, imposing a total estimated burden of almost $2 trillion on businesses and the economy last year. That amounted to a hidden tax of nearly $15,000 per U.S. household in 2016.
It is appropriate to call them “hidden” because unlike taxes, regulatory costs are not fully known and even unmeasurable. They are unbudgeted and often indirect. But regulatory costs can raise the prices that consumers pay, reduce workers’ wages and opportunities, and slow innovation.
The good news is that there are current efforts in Congress and the White House to introduce more transparency and accountability into the regulatory process. There is rare agreement that undoing outdated, unnecessary, and harmful rules will be beneficial for all Americans.
Earlier this year, the U.S. House of Representatives passed the Regulatory Accountability Act (RAA), which would require better cost-benefit analysis of new regulations and review the impact of existing regulations. A companion bill in the Senate is sponsored by Republican Rob Portman (R-OH) and Democrat Heidi Heitkamp (D-ND).“Federal regulations keep our air clean and families safe, and no one wants to go back to an era without safety standards,” Senator Heitkamp explained. “But sometimes regulations don’t work as intended and create red tape.” The bipartisan Senate version of the RAA would put recent presidential orders on smarter regulation — including those of Clinton and Obama — into law.
The House also passed the REINS Act, which would require Congress to vote on any new regulations costing more than $100 million per year, and is exploring a regulatory “budget” to restrain the compliance costs agencies may impose on the economy.
President Trump has also demonstrated that his administration is serious about curtailing harmful regulation. Look at the president’s first four months in office as opposed to the corresponding months in 2016 under President Obama. Obama issued 1,164 rules, while the Trump administration issued 897 rules — a 23 percent decrease. This is partially due to a regulatory freeze implemented by Trump that has effectively put the brakes on substantive new federal regulations.President Trump said 70 percent of existing regulations “can go.” Although we haven’t seen such a purge, what we’re witnessing is still unprecedented. The closest comparison is President Reagan, who initiated much of today’s regulatory review and oversight machinery, which cut federal regulations by more than one-third.
It’s also heartening that both Congress and the White House are starting to tackle “regulatory dark matter” — agency memos, bulletins, and guidance documents that can circumvent the legally required rulemaking process. The Regulatory Accountability Act would implement “good guidance principles” to ensure agencies solicit public input on significant guidance. Other legislation such as Rep. Jason Lewis’s “Reforming Executive Guidance Act” (REG Act) would subject guidance to more congressional accountability.
America has long had the world’s most innovative and productive economy. But that has changed over last few decades, with its economic freedom rankings in decline over the last few administrations. The decades-long gradual increase in federal regulations has persisted from one administration to the next. Both political parties have contributed to the problem and now have a responsibility to pursue meaningful solutions.
The single most important step today’s legislators can take to guarantee America remains a land of opportunity is to reduce the regulatory burden. Entrepreneurs, innovators, and consumers can take care of the rest.
Ryan Young is a fellow at the Competitive Enterprise Institute focusing on regulatory policy.