Yes.
Regulators empowered to improve good rules, scrap bad ones.
By Michael Greenstone
The Obama administration’s regulatory reform proposals will help spur private-sector job growth by identifying the regulations that fail to protect American families and then reforming or removing them.
Despite their centrality to our economy and our well-being, the debate over regulations has remained unchanged and largely uninformative for decades.
The opponents of regulations shout that they cost jobs. At an equal volume, proponents claim that the failure to adequately regulate costs lives or in some other way endangers our well-being.
Indeed, we see these debates taking place right now over the regulatory decisions required by the health care and financial reform bills passed by Congress, as well as the fight over the authority of the Environmental Protection Agency to regulate greenhouse gases.
These debates miss the central question about regulations: are the costs justified by even greater improvements to Americans’ health and well-being?
The Obama administration’s recent regulatory reform proposal is a revolutionary step in the right direction.
It reaffirms the principle, established in the Reagan administration, that enacted regulations should have benefits that exceed their costs.
Where the president’s executive order breaks from tradition is the requirement that agencies routinely revisit the measurement of costs and benefits of existing regulations and identify the least costly ways to achieve a regulation’s goals.
It then requires agencies to amend their regulations, based on these findings. Supporting these reforms should be natural, but it should not be lost that these are dramatic changes in regulatory policy.
Until the president’s reforms, the approach to developing regulations has not been inspiring. When a potential regulation is under consideration, the implementing agency estimates its likely costs and benefits.
Since the regulation is untested, decisions must be made based on an incomplete analysis.
Once a regulation is implemented, it goes on the books and generally stays there unexamined for years, often decades.
If the costs to our economy outweigh the benefits, we generally won’t know and the regulation will remain in force.
This approach of limiting evaluation to the period before the regulations take place lacks common sense. After all, this is the point when we know the least.
In the spirit of continuous improvement, the president’s reforms require agencies to design new regulations in a way that facilitates their evaluation.
The combination of this advanced planning along with advances in computing power and understanding about evaluation methods means that we could be at the doorstep of a critical transformation.
The goal is a virtuous feedback loop in which regulations are reformed or discarded based on how they work in the real world.
Of course, the executive order is not perfect.
Evaluations are currently performed by agencies that write the regulations. But objectivity about one’s own performance is always difficult and a primary reliance on self-evaluations is not the hallmark of a well-fuctioning system.
While these evaluations are subject to public comment and White House review, a next step might be to consider shifting to a system of independent evaluations in addition to, or in place of, self-evaluation.
Still, the Obama administration has taken vital steps in reforming our system of regulation.
The result has newfound potential to spur private sector job growth, while also protecting the health and well-being of American families.
Michael Greenstone, 3M Professor of Environmental Economics at MIT, served as chief economist on President Barack Obama’s Council of Economic Advisers.
No.
New regulations in pipeline could cost billions, stall recovery.
By Evan Bayh and Andy Card
As the country emerges from one of the most serious economic downturns in recent history, the last thing we need are more regulations that impose heavy burdens on job creators.
One way to get Americans back to work is by removing excessive regulations that make it harder for businesses to grow.
It appears that the Obama administration’s executive order requiring a review of existing regulations “that are out-of-date, unnecessary, excessively burdensome, or in conflict with other rules” has encouraged some regulatory agencies to make recommendations that will save businesses time, money, headaches and resources. But more must be done.
That’s because the order exempts from review the huge flow of regulations in the pipeline generated by the health care and financial reform laws, as well as the large number of major rules generated by the Environmental Protection Agency over the past two years.
This enormous onslaught of new regulations could well cost hundreds of billions of dollars, hamper our recovery, undermine our competitiveness and cost jobs.
The regulations are being promulgated under the same system that generated the ones the administration found necessary to review. And the “look back” plans do not appear to fix this problem.
If we don’t take necessary steps now, our competitiveness and the success of our small businesses are at risk. Businesses with fewer than 20 employees incur regulatory costs 42 percent higher than companies with up to 500 employees.
The average regulatory cost for each employee of a small business exceeds $10,000 per year. The Small Business Administration priced the total cost of federal regulation compliance at $1.75 trillion in 2008 — $15,000 for each U.S. household.
Consider the case of Ronald Myers, the former owner of Hot Shot Equipment Co. in Prescott, Ariz. Myers was forced to shut down his iron gate manufacturing shop because overly burdensome workplace safety and health regulations prevented metalworking from being done by hand. Unable to compete against foreign suppliers, he had no other choice than to let his workers go and close his business.
Make no mistake — we need some regulations. Businesses require “rules of the road,” and we need adequate protections for health and public safety. But when regulations suck the vitality out of our economy, it’s time we take a hard look at restoring balance and accountability to the process.
First, Congress should wrestle back the unprecedented power that it has yielded to bureaucratic agencies during the past few decades.
Today, nearly all major regulations go into effect without the people’s representatives in Congress ever voting on them. Congress needs to play a larger role by exercising more vigorous oversight.
A good place to start would be to pass legislation pending in Congress to guarantee an up-or-down vote, with no Senate filibuster, on regulations with an economic impact of more than $100 million.
Second, we need more rigorous cost-benefit analysis. Major rule proposals should require independent verification and public disclosure of economic and employment impact studies. Existing rules should be periodically reviewed by independent parties and those deemed ineffective or unnecessary should be phased out.
Finally, citizens should have the judicial access and tools they need to hold federal agencies accountable for limiting regulatory burdens and for using sound science to support proposed rules.
We need to restore balance, restraint and common sense to the regulatory process. It’s time to open America for business again.
Evan Bayh is a former Democratic senator from Indiana. Andrew Card was White House chief of staff under President George W. Bush.
