House Republicans Outline Proposal to Reform Regulations, Rein in Regulators

This Tuesday, a task force of House Republicans released a regulatory policy agenda outlining what policies Congress should enact to help jumpstart the economy.

Entitled “A Better Way,” this task force agenda offers significant policy proposals that would improve our economy by empowering businesses to succeed. Good ideas are not enough. Congress must take legitimate action to pass legislation.

Heritage Foundation senior research fellow in regulatory policy, Diane Katz, takes an in-depth look at the regulatory reform section of “A Better Way”:  

The new tract on regulatory reform opens with the observation that the last recession ended in 2009, but the economy has only been limping along ever since. “Job growth has been weak. Household income has stayed put. Business investment has barely budged.”

The authors then conclude that: “One likely contributor is the growing federal regulatory burden.”

That’s a considerable understatement. According to The Heritage Foundation’s newest edition of “Red Tape Rising,” the Obama administration has increased the annual cost of major rules by an astonishing $108 billion. (And that’s the government’s lowball estimate.) Combined with the regulatory burdens imposed during the administration of George W. Bush, the annual cost of red tape has increased by $176 billion since 2001.

As the new regulatory reform agenda states, “It is time for serious and fundamental reform. Every step in the process needs to be revamped.”

That’s for sure. When it comes to regulation, the White House, Congress, and federal agencies routinely breach legislative and constitutional boundaries. The “Better Way” identifies both systemic reforms that are urgently needed as well as reconsideration of some woefully outdated regulatory regimes that no longer reflect current conditions.

It is not enough only to consider how to reform federal regulation. A more substantive debate must address the extent to which it is even appropriate for the federal government to intervene. The new agenda rightfully acknowledges the myriad benefits of devolving a great many regulatory responsibilities to states and the private sector.

Among the most important reforms in the document is the intention to impose accountability on Congress for the most burdensome rules.

To that end, the agenda calls for requiring the explicit approval of Congress before any major regulation is allowed to take effect. This reform was the centerpiece of the so-called REINS Act (Regulations From the Executive in Need of Scrutiny), which was passed by the House in July 2015 but is still awaiting action in the Senate.

The agenda also calls for a much more rigorous rulemaking process. Agencies very often fail to quantify the costs—and overstate the benefits—of their rules, and in too many instances simply fail to conduct any cost analysis at all. But analyzing costs is necessary to identify the trade-offs inherent in rulemaking, and to determine the most efficient and effective course of action among various alternatives. It is also crucial information that allows the public to hold regulators accountable. Without such information, regulators are free to act on a whim.

Thus, the recommendations include:

  • Requiring a detailed and rigorous accounting of the direct and indirect costs of rules, including the impact on jobs and on low-income households.
  • Requiring publication in the Federal Register an advance notice of proposed rulemaking involving a major or high-impact rule, a negative impact on jobs and wages rule, or a rule that involves a novel legal or policy issue arising out of statutory mandates.
  • Requiring that the agency adopt a rule only on the basis of the best evidence and at the least cost.
  • Holding a hearing before the adoption of any high-impact rule (the cost of which is expected to exceed $1 billion annually).
  • Require a formalized, multi-agency analysis of the cumulative impacts of specific major rules on jobs, energy prices, electric reliability, and global competitiveness.

Some of these reforms, and others, were incorporated in the Regulatory Accountability Act, which passed by the House on Jan. 13, 2015. It is also entirely reasonable, as recommended in the agenda, to require regulation to be based on publically available, reproducible research and data.

Another persistent problem requiring attention is the tendency of lawmakers to enact vaguely worded statutes that effectively delegate their policymaking powers to regulatory agencies, and a string of judicial precedents that uphold such deference. In response, the agenda proposes to prohibit a court from deferring to an agency’s interpretation of a rule if the agency fails to comply with specific rulemaking procedures. Also worthy of support is the recommendation to prevent high-cost regulations from taking effect while litigation is pending.

Rulemaking is increasingly being conducted by independent agencies outside the direct control of the White House.

Regulations issued by agencies such as the Federal Communications Commission, the Securities and Exchange Commission, and the Consumer Financial Protection Bureau are not subject to review by the Office of Information and Regulatory Affairs or even required to undergo a cost-benefit analysis.

This is a gaping loophole in the rulemaking process. The agenda recommends that the Commodity Futures Trading Commission be required to perform cost-benefit analysis, which is reasonable. However, all independent agencies should be fully subject to the same regulatory review requirements as executive branch agencies.

Dozens of other reform recommendations populate the new report, which ought to be required reading for all members of Congress. Regulation acts as a stealth tax on the American people and the U.S. economy.

The weight of this tax is crushing. Absent substantial reform in the post-President Barack Obama era, economic growth and individual freedom in America will continue to suffer. The reform agenda released today offers informed and practical guidance for 2017 and beyond.

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