The White House Tuesday announced plans to “save U.S. businesses billions of dollars in regulatory burdens” through a regulatory look back initiative. This is certainly worth doing. It is important to re-examine regulations periodically, to discover what’s working and what isn’t, and weed out unnecessary or counterproductive requirements.
But despite the White House’s claims, this initiative is not “unprecedented.” Nor is it likely to have a significant effect on the current economic malaise.
Every recent president has undertaken efforts to review regulations with an eye toward removing those that are particularly burdensome or inefficient.
President Ronald Reagan made regulatory relief one of the three pillars of his administration. He charged Vice President George H.W. Bush with seeking public input and conducting the review. When Bush became president, he gave a similar assignment to Vice President Dan Quayle.
President Bill Clinton, through executive order, called for retrospective review of regulations. President George W. Bush ordered a review focusing on the manufacturing sector.
As President Barack Obama’s predecessors learned, however, removing regulatory requirements once they are in place can be challenging. Not only are government officials reluctant to give up regulatory authority, but regulated parties often resist efforts to remove regulations. That’s because regulations can confer competitive advantage on vested interests — who then are often more motivated to fight efforts to take away their advantage than reformers are to reform.
One important exception to this was during the mid-1970s to mid-1980s, when political entrepreneurs in Congress and in the Carter and Reagan administrations successfully defeated vested interests and eliminated regulation restricting competition. The Civil Aeronautics Board and Interstate Commerce Commission disappeared from Washington’s alphabet soup of agencies.
So, while Obama’s effort is welcome, it is unlikely to be successful at producing real reductions in regulatory burden. I do not anticipate that it can assuage the American people’s concerns about excessive regulation, or have any effect on economic performance.
The economy is not struggling because regulations on the books for decades are now suddenly having an adverse impact. Uncertainty regarding the effects of new regulations is causing businesses to think twice before making new investments or hiring new employees.
Close to 70 percent of small-business owners view the current period as a poor time to expand, according to the National Federation of Independent Businesses, and 75 percent of those cite economic uncertainty. The U.S. Chamber of Commerce considers the "regulatory tsunami … the single biggest challenge to jobs, our global competitiveness and the future of American enterprise."
Federal agencies have been issuing regulations at an unprecedented rate over the last few years. Executive branch agencies published 59 major regulations per year on average in the first two years of the Obama administration, compared to an average of 45 regulations per year during the two terms of the last two presidents.
The government’s most recent agenda of upcoming regulations (issued in July) does not indicate a slow-down in activity. It does list 4,257 regulatory actions under development — more than 300 more than last year at this time. Of those, 219 are expected to impose costs of $100 million or more — 28 more “major” regulations than were listed by this time last year, and 47 more than in 2009.
Some activity is required by new legislative mandates — particularly the Wall Street Reform and Consumer Protection Act (Dodd-Frank), and the Patient Protection and Affordable Care Act. Others, including the Environmental Protection Agency’s regulation of greenhouse gases under the Clean Air Act, are based on new judicial interpretations of statutes passed 20 or more years ago — and don’t necessarily reflect the priorities of any recent Congress.
But some are discretionary actions, like EPA’s pending decision to tighten ozone standards. This is likely to slow economic growth in thousands of counties across the nation and impose costs of $20 billion to $90 billion per year, according to the agency’s own estimates.
The reform efforts detailed in the agencies’ retrospective plans pale in comparison. Reforms that may promise real savings, like the Labor Department’s efforts to streamline some reporting requirements, at best offer paperwork burden reductions valued only in the millions. Other reporting reforms --like replacing paper submissions with electronic reports — might as easily facilitate regulatory enforcement as grant relief.
Some agencies’ plans may actually increase uncertainty — like the Council on Environmental Quality’s commitment to periodically review its “categorical exclusions.” These exemptions have traditionally provided potentially affected parties some certainty that projects would not face unexpected regulatory requirements.
A closer look at some initiatives that the administration has highlighted suggests they will not offer savings over current practices, but might be more accurately classified as “it could have been worse.”
For example, the EPA takes credit for a recent final rule that exempts milk producers from regulations designed to protect against oil spills, claiming annual savings of between $145 million and $148 million. But these aren’t costs that milk producers ever incurred.
Toward the end of the Bush administration, policy officials were alarmed that some eager EPA staff lawyers believed milk fit the statutory definition of “oil.” To ensure spilled milk would not require the response measures of an oil spill, EPA wrote a definitional regulation exempting it from these rules. Because that regulation was issued at the end of the Bush administration, though, the new Obama administration pulled it back — and then took two years to publish it again.
Yet, EPA is now taking credit for “saving” millions for a Bush initiative aimed at avoiding a statutory interpretation that never existed — except in the minds of a few zealous EPA staffers.
Another highlighted initiative is a Department of Transportation proposal to “eliminate unnecessary regulation of the railroad industry, saving a total of $340 million or more.” The back story here is that just last year the department issued a new regulation requiring “positive train controls.” It was promptly sued because, by DOT’s own estimates, the regulation’s costs far exceeded the benefits. In response, DOT announced yesterday that it will propose to carve out some of the requirements.
Through this rule, the Obama administration still intends to impose approximately $10 billion in new costs on the industry — just not quite as much as they had intended before being sued. Such “savings” will do little to help this economy recover.
Obama has been trying, since his January Wall Street Journal op-ed article, to convince businesses that he understands the dampening effect regulations can have on economic growth and prosperity. Tuesday’s announcement was a welcome demonstration of that understanding.
But it is unlikely to be enough to alter Americans’ dismal view of the country’s economic prospects. The savings from these reforms will likely be overwhelmed by the costs of new regulatory burdens.
Susan E. Dudley served in the Bush White House as administrator of the Office of Information and Regulatory Affairs from April 2007 to January 2009. She is now the director of the George Washington University Regulatory Studies Center.
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