The Progressive Policy Institute recently released a report titled “Unleashing Innovation & Growth.” The report covers a comprehensive list of public policy topics, including reforming America’s growing level of federal regulation. In what follows, PPI’s chief economic strategist Michael Mandel explains why pro-growth regulatory policies offer an alternative to the populist sentiments that are influencing both sides of the political spectrum.
Jared Meyer: The report states, “U.S. regulatory policy today is mostly a matter of political reaction and addition.” What does this mean?
Michael Mandel: What consistently happens is that new regulations are passed in response to immediate problems that people perceive, because that is how policymakers get enough support to pass a regulation. Unfortunately, it is rare that regulators or legislators go back and look at old regulations to decide whether or not they actually work, duplicate each other, or pose too much of an economic burden.
“Undoing" a regulation through the executive branch requires the same extensive hearing process that is necessary to make formal regulations in the first place...”
Our goal in publishing the report was to propose ways to improve the regulatory system by reducing its burden on the economy—without reducing the level of consumer protection.
JM: What are the main problems with regulatory accumulation?
MM: The problem is that dealing with regulations takes some time and energy. If too many regulations accumulate, they slow down the economy.
The example that I often use is throwing a pebble into a stream—if you throw one pebble in the steam, nothing happens. If you throw two pebbles in a steam, nothing happens. If you throw one hundred pebbles, you dam up the stream. Which pebble was it that dammed the stream? That is not a reasonable question to ask—it is all the pebbles together that caused the problem.
If you look at any regulation individually, very often there is some reason for it. It is only when you consider regulations collectively that you discover a problem. So I do not call any particular regulation “bad”— it is actually difficult to find regulations that serve absolutely no purpose—the question is how they fit into the larger whole of federal regulation.
JM: Why have previous efforts to address regulatory accumulation been unsuccessful? I argue that following President Obama’s strategy of asking executive agencies to reform themselves will never succeed.
MM: Every president calls for some level of regulatory review, and these efforts have made some difference. But, because of the way the rules for making regulations are written, “undoing” a regulation through the executive branch requires the same extensive hearing process that is necessary to make formal regulations in the first place. The reason for President Obama’s ineffectiveness in regulatory reform is mostly that the process of undoing regulation through the executive branch is an expensive and lengthy process.
Congress has to be an essential part of improving regulations, but a commission of some sort is needed to collect complaints about regulations, research their effects, and make a proposal of a package of outdated regulations that we can now do without.
The issue is that we lack a body to collect all kinds of complaints, from consumer groups, businesses, and government agencies, and then propose some sort of regulatory balancing. To remedy this, we recommend a Regulatory Improvement Commission, which is a part of the proposed Regulatory Improvement Act.
The RIC would function as a body to take in extensive feedback from various stakeholders, and then come up with a package of regulatory cuts or improvements that would go through Congress as an up-or-down vote (similar to the Base Realignment and Closure process).
In proposing the RIC, we were looking for a politically-viable mechanism to achieve regulatory improvement in today’s tense political climate. In other words, what is something that everyone can agree on? The answer is the consensus that we have many outdated, ineffective, and economically destructive old regulations . For effective regulatory reform, we need a mechanism that provides small steps to build trust. We at the Progressive Policy Institute see this as a start of a process, rather than something that has to be done in a big bang.
JM: This RIC proposal shares some similarities with the SCRUB Act, which passed the House in January with only six Democrat votes. The Regulatory Improvement Act has a bipartisan group of sponsors, but has not yet received a floor vote. Why do you think the Regulatory Improvement Act is superior to the SCRUB Act?
MM: The SCRUB Act has two parts—it has a part about looking back at old regulations, but it also has a part about evaluating new regulations. Evaluating new regulations is much more politically contentious than fixing old regulations, because new regulations are about dealing with an immediate problem. New regulations are going to be a partisan question no matter what—you cannot take politics out of it.
The Regulatory Improvement Act avoids this paralyzing fight since it exempts regulations that are under ten years old from the review process. I am not terribly concerned about the length of the exemption, but we need to evaluate regulations that have been in effect for a period of time that allows for an examination of their effectiveness and cohesion with other regulations.
Our view is that you want to deal with old regulations separately from new regulations because removing old regulations that cover a wide range of issues could get a fair amount of bipartisan agreement. It is a little like scraping barnacles off the bottom of a boat, as opposed to building a new boat. Everyone can agree that you have to scrape barnacles off of the bottom of a boat. But the debate over what new boat to buy—or even if we need a boat at all—is going to be much more difficult to settle.
JM: The Regulatory Improvement Act would not stop the continued growth in new federal regulation or provide greater transparency for proposed regulation. In my view, both of these reforms are sorely needed. Five of the six all-time-high annual Code of Federal Regulations page counts have occurred during President Obama’s tenure. Additionally, during 2014, only 16 of the over 3,500 rules published in the Federal Register had cost analyses. Do you have any other favored proposals that would slow this regulatory growth or at least give the public a greater idea of how much proposed regulations will cost?
MM: In our view, dealing with old regulations is much more important than dealing with new regulations. New regulations seem to have a very straightforward run through the political process: they are up or down in Congress for new laws, then if the law is passed executive agencies have to go through a long review process to implement most regulations, and then the Office of Management and Budget is supposed to provide a check and a balance against costly regulations.
You can either like this process or not like it. There seem to be an equal number of people that think there are too many regulations as there are who think there are too few regulations. I simply do not see any sort of consensus—in Congress, or in the public—for either view.
This piece originally appeared at Forbes
This piece originally appeared in Forbes