Budget battles dominate the headlines, and understandably so, given the record deficits in recent years 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 the seven years of the Obama Administration, new major regulations increased regulatory costs by more than $100 billion a year. Beyond these direct costs, these excessive rules hinder job creation and innovation while undermining Americans’ fundamental freedoms.
Many people regard regulatory costs as primarily a business problem. But, 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 the government’s expansive compendium of dos and don’ts. The regulatory excesses have also swelled the ranks of bureaucrats and the federal budget.
Regulatory excess cannot be blamed on just this Administration (although the rate of expansion during President Obama’s tenure appears to be unequaled). Congress ultimately authorizes regulations either through specific statutory mandates or through broad grants of authority to agencies. 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.
Require Congressional Approval of New Major Regulations Promulgated by Agencies. Typically, agencies are given broad mandates that allow them discretion in determining what to regulate and how to do so. But under the Constitution, Congress, and not regulators, should make the laws and be accountable to the American people for the results. Requiring Congress to approve new major 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 accountability of Congress itself.
Develop a Congressional Regulatory Analysis Capability. In order to exercise its duties responsibly, Congress should improve its capability to analyze proposed and existing rules without relying on the Office of Management and Budget or the regulatory agencies. This could be done through an existing legislative branch 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 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 funding.
Establish a Sunset Date for Federal Regulations. Every new regulation promulgated by executive branch agencies undergoes review, but there is no similar process for reviewing 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. Congress should make them the rule, not the exception.
Subject “Independent” Agencies to Executive Branch Regulatory Review. Increasingly, rulemaking is being done by so-called independent agencies outside direct control of the executive branch. Regulations from 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 undergo 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 and Figures
- According to reports by regulatory agencies, new major rules imposed more than $100 billion in new annual regulatory burdens from 2009 through 2015.
- The most expansive regulatory statutes include the Dodd–Frank financial regulation statute, which requires some 400 rulemakings by 11 different agencies; Obamacare, with a similar level of new government powers; and the Clean Power Plan, which puts the Environmental Protection Agency in charge of the nation’s energy supply.
- The torrent of new regulation will not end any time soon. The regulatory pipeline is full of proposed rules. The fall 2015 Unified Agenda—a semiannual compendium of planned regulatory actions by agencies—lists 2,142 rules (proposed and final) under preparation. Of these, 144 are classified as “economically significant”—nearly three times the 56 such rules in process identified in 2001.
Selected Additional Resources
James L. Gattuso, “Reforming Regulation: Some Sensible Steps,” Heritage Foundation Issue Brief No. 3677, July 25, 2012.
James L. Gattuso and Diane Katz, “Red Tape Rising: Six Years of Escalating Regulation Under Obama,” Heritage Foundation Backgrounder No. 3015, May 11, 2015.
Diane Katz and James L. Gattuso, “Ten Worst Regulations of 2012,” Heritage Foundation Commentary, January 5, 2015.
Norbert Michel, “Five Years of Dodd-Frank: ‘Too Big To Fail’ Still Unresolved,” Forbes, July 14, 2015.