Increasingly, American families find they have a permanent and rather demanding house guest: Uncle Sam.
Federal regulators are making their presence felt more and more in our daily lives. As a result of new efficiency standards on kitchen ovens, some of our favorite recipes just don’t turn out the same any more. Incandescent light bulbs will soon be a thing of the past — so thank your friendly federal regulator as you wait for your CFL bulb to build up to full brightness. And who doesn’t love those mandatory “low-flow” toilets that have changed the flushing habits of millions?
From the bathroom to the kitchen, from the game room to the bedroom, federal regulation touches virtually every product we use (or can no longer use), every action we take. Yet the full cost of regulation remains largely invisible.
At least once a year, Americans come face-to-face with the magnitude of income taxes when they file income-tax returns. Their forms include a clear bottom line telling them exactly how much income tax Washington requires them to pay. Not so with regulation. Regulatory costs are hidden — embedded in the prices of products and services, in reduced innovation and in lost opportunities.
But, by any reckoning, these hidden costs are enormous. According to a report recently released by the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year.
And these costs are increasing. As outlined in a recent Heritage Foundation report, in fiscal year 2010 alone, federal agencies issued 43 major new rules increasing regulatory burdens. The total costs for these rules, based on estimates by the regulators, topped $26.5 billion. That’s the highest single-year increase in costs imposed via regulation since at least 1981, the earliest date for which figures are available.
Many more rules are on the way. According to one estimate, the recently passed financial-regulatory law will alone require 243 new formal rule-makings by 11 different federal agencies. A similarly large number of rulemakings will likely be required to implement the new health care law. Significant new regulations also are in the pipeline at the Environmental Protection Agency, as well as at independent agencies such as the Federal Communications Commission and the Consumer Product Safety Commission.
Taken together, these initiatives embody a stunningly full regulatory agenda. Odds are this year’s record for regulatory increases will not stand for long.
There is no magic bullet that will stop the excessive growth of regulation, but Congress can take steps to bring the regulatory octopus under control. The key is to increase scrutiny of new and existing rules to ensure that each is necessary and that costs are minimized.
Specific steps Congress can take include:
• Putting expiration dates on federal rules. Once adopted, rules tend to be left in place, even if they have outlived their usefulness, or if they never worked at all. Just as we put an expiration date on grocery products to protect consumers from bad food, there should be an expiration, or “sunset” date, for regulations to protect Americans against bad rules. Regulations should automatically expire if not explicitly reaffirmed by regulators.
• Adding up the costs before enacting new laws. Although Congress requires all proposed legislation to be examined by the Congressional Budget Office to determine likely fiscal costs, there is no similar requirement to identify regulatory costs. Congress should not enact new rules without the best possible estimate of their likely effect. All bills proposing new or expanded regulation should undergo a regulatory-impact analysis to assess the likely costs and benefits.
• Requiring an up-or-down vote on major regulations by Congress. Today, many of the most critical regulatory decisions are made by unelected bureaucrats, not lawmakers. While Congress can veto rules, and under the 1996 Congressional Review Act has “fast-track” rules for doing so, that authority is almost never used. As a result, Congress escapes accountability for the costly consequences of most regulatory policy. Congress should instead be required to affirmatively approve all major rules before they take effect.
This requirement, however, must be carefully crafted. First, the process should apply only to the imposition of new regulatory burdens on consumers or the economy. It should not be required in order to lift such burdens. Second, it should be clear that congressional approval doesn’t confer powers on regulators they don’t already have. If regulators don’t have legal authority to impose a rule, the congressional approval process should not give them a free pass to proceed as if they did.