Like kudzu – or, around here, Himalayan blackberry – it is the nature of the Regulatory State to expand, rapidly. It justifies itself by proliferating new regulations, and by expanding into new areas. One of the top concerns cited by businesses seeking to grow is the ever-rising number of rules and regulations to follow, and all of the compliance busywork that goes with it.
We’ve seen efforts over the years to systematically pare back outdated and useless regulations. These have not been particularly successful, for a number of reasons.
- Most of the costs of regulations are borne by business, not government. While certain politicians may push for regulatory reviews, the bureaucracy itself feels little impetus to get rid of outdated rules.
- Sometimes the lowest-cost option for government is to leave old rules in place, but every time it’s the lowest-effort option. In the real world, that matters.
- Even if a rule is ineffective, its original reasoning will be used against those who try to scrap it. It’s a “you’re killing the whales” argument, even if some unneeded fisheries regulation from 1977 isn’t actually helping the whales. In the face of that pushback, government usually folds rather than endure the heat.
The growth of the Regulatory State is partly due to the willingness of Congress and state legislatures to turn over the details of regulations to the executive branch. Legislative bodies have also been susceptible to granting rent-seeking regulations desired by some industries and business groups to block competitors and stifle innovations.
Both parties, in executive and legislative branches, share some blame here. As The Economist showed recently, the growth of regulatory rules has been consistent across Republican and Democratic presidential administrations (the content of those regulations, of course, varies).
At the federal level, major regulations have to clear the fairly high hurdle of an Office of Information and Regulatory Affairs review. That office compares the imposed costs of a regulation against its supposed benefits. That’s great, but it’s a decision made long before all the facts are in. The Economist points out:
“But once a rule has cleared the hurdle, there is little incentive for agencies ever to take a second look at it. So it is scrutinised only in advance, when regulators know the least about its effects, complains Michael Greenstone, of the University of Chicago.”
What can be done?
How can future regulatory review efforts be made more effective and result in actually reducing the burden of red tape?
Australia’s approach has led the OECD to recognize it as the global leader in systematic reviews. In the Land Down Under, a body independent of parliament is tasked with identifying regulations that are outdated or no longer needed.
Another approach (one contemplated here in Washington for tax exemptions) is automatic sunset dates. That could force some real thinking about whether an overall regulation is still necessary, and if so, which parts of it are still relevant.
This one of those unexciting but critically important efforts, but the reality is that there’s strong incentive for many to do nothing. That’s not what’s best for our future economic growth.
If you’ve ever done battle with invasive blackberry vines, you know that successful removal requires a little vigilance and a lot of effort. The same is true for beating back the ever-spreading Regulatory State.