Regulations

Talking Points

  • In President Obama’s first term alone, new major regulations increased annual regulatory costs by nearly $70 billion. Beyond their direct costs, unnecessary dictates hinder job creation and innovation while undermining Americans’ fundamental freedoms.
  • To protect Americans and the economy against runaway regulation, oversight and accountability must be strengthened. Specifically, Congress should increase scrutiny of proposed regulations to ensure that each one is necessary and costs are minimized.
  • Most important, Congress should be required to affirmatively approve major new rules, as provided in the proposed Regulations from the Executive in Need of Scrutiny (REINS) Act. The REINS Act would help to ensure a congressional check on regulators as well as the accountability of Congress itself.

The Issue

Budget battles dominate the headlines, and understandably so given the record deficit and unsustainable levels of U.S. debt. Equally significant, however, is the ever-growing cost of the regulations that have overtaken every facet of Americans’ lives. In President Obama’s first term alone, new major regulations increased annual regulatory costs by nearly $70 billion. Beyond these direct costs, the unnecessary dictates hinder job creation and innovation while undermining Americans’ fundamental freedoms.

Many people regard regulatory costs as primarily a business problem. Although that is true, the costs of excessive regulation inevitably are paid by consumers in the form of higher prices and fewer product choices. Virtually every product and service, from toilets and television sets to health care and the Internet, costs significantly more because of government’s expansive compendium of do’s and don’ts. The regulatory binge also has swelled the ranks of bureaucrats and the federal budget.

Regulatory excess cannot be blamed on just this Administration (although the accelerated rate of expansion in President Obama’s first term appears to be unequaled), as Congress ultimately authorizes by statute all rulemaking either through specific requirements or through broad authorizations that grant agencies broad discretion to impose requirements. Reform of the regulatory process is critically needed, including steps to make lawmakers more accountable for the rules that are imposed. Without decisive action, the costs of red tape will continue to grow, undermining investment, innovation, economic growth, and job creation.


Recommendations

  1. Require congressional approval of new major regulations promulgated by agencies. Under the Constitution, Congress is responsible for the rules governing Americans. Regulatory agencies operate only with the authority delegated and within the limits set by Congress. Typically, agencies are given broad mandates that allow them broad discretion in determining what to regulate and how to do so. This may sometimes be necessary, but Congress should not be able to evade accountability for the outcome. Requiring Congress to affirmatively approve major new rules, as provided in the proposed Regulations from the Executive in Need of Scrutiny (REINS) Act, would help to ensure a congressional check on regulators as well as the accountability of Congress itself.
  2. Develop a congressional regulatory analysis capability. In order to exercise its duties responsibly, Congress should improve its capability to analyze proposed and existing rules independently without relying on the Office of Management and Budget or the regulatory agencies. This could be done through an existing congressional institution, such as the Congressional Budget Office or the Government Accountability Office. Such a capability would also help Congress to better evaluate the regulatory consequences of its legislation. This need not require any net increase in staff or in budget, but could easily be paid for through reductions in existing regulatory agency expenses.
  3. Establish a sunset date for federal regulations. Every new regulation promulgated by executive branch agencies undergoes a detailed review, but there is no similar process for reviewing the need for regulations already on the books. Old regulations tend to be left in place even when they are no longer useful, which can be particularly harmful when, as now, there is a flood of new and untested regulations. To ensure that substantive reviews occur, regulations should automatically expire if they are not explicitly reaffirmed by the relevant agency through a notice and comment rulemaking. As with any such regulatory decision, this reaffirmation would be subject to review by the courts. Sunset clauses already exist for some new regulations. Regulators and, if necessary, Congress should make them the rule, not the exception.
  4. Subject “independent” agencies to executive branch regulatory review . Increasingly, rulemaking is being done by so-called independent agencies outside of effective executive branch control. Agencies such as the Federal Communications Commission and Consumer Financial Protection Bureau are not subject to review by the Office of Management and Budget or even required to conduct cost-benefit analyses. This is a serious gap in the regulatory process. These agencies should be fully subject to the safeguards applied to executive branch agencies.

Facts & Figures

  • According to reports by regulatory agencies themselves, more than $70 billion in new annual regulatory burdens was imposed during the first term of the Obama Administration.
  • The most expansive regulatory statutes include the Dodd–Frank financial regulation statute, which requires some 400 rulemakings by 11 different agencies, and Obamacare, with a similar level of new government powers.
  • Regulations also swell the government workforce and fatten the federal budget. According to a report by the Weidenbaum Center on the Economy, Government, and Public Policy and the George Washington University’s Regulatory Studies Center, federal spending on regulatory agencies increased more than 10 percent in President Obama’s first term, from $46.7 billion in fiscal year (FY) 2009 to more than $51.5 billion in FY 2012 (in constant 2005 dollars). Staff levels grew by 21,654 full-time equivalents (FTEs) in the same period, from 261,961 FTEs to 283,615 FTEs, an 8 percent increase.
  • The torrent of new regulation will not end any time soon. The regulatory pipeline is full of proposed rules. The most recent Unified Agenda—a semiannual compendium of planned regulatory actions by agencies—lists 2,305 rules (proposed and final) in the pipeline. Of these, 131 are classified as “economically significant.” This is two less than the number pending in the previous agenda (fall 2011) and still high by historical standards. This year’s 131 “economically significant” rules represent an increase of 133 percent from the 56 identified in 2001.

Selected Additional Resources

Heritage Experts on Regulations


  • Nicolas Loris

    Herbert and Joyce Morgan Fellow


  • James Sherk

    Senior Policy Analyst in Labor Economics


  • Norbert Michel

    Research Fellow


  • Diane Katz

    Research Fellow in Regulatory Policy


  • James Gattuso

    Senior Research Fellow in Regulatory Policy

To talk to one of our experts, please contact us by phone at 202-608-1515 or by email.