- - Tuesday, February 12, 2013

When President Obama delivers his fourth State of the Union Address from the Capitol tonight, we will certainly hear him speak about many of today’s most important issues. Perhaps most of all, America will be listening for him to address the one unyielding narrative that has come to define Washington in recent years: partisan gridlock. As nearly every major proposal to reduce the federal debt ultimately gets bogged down by bickering among politicians, everyday Americans pay the price of inaction. 

The intransigence on debt reduction is unfortunate, because as the nonpartisan Congressional Budget Office (CBO) confirms, changing the trajectory of the debt would generate substantive economic growth. A CBO analysis released this month found that a generic $2.3 trillion deficit reduction plan would increase the size of the economy by almost one percent by the end of the decade. A package that included pro-growth reforms could generate even more growth.  

Policymakers favoring revenue increases will continue to spar with those who back spending cuts, but their disagreements over how to best balance the budget shouldn’t prevent them from finding common ground on other ways to generate growth. Fortunately, there is broad bipartisan agreement that a debt fix will become much easier if the economy is growing, rather than shrinking.  

One reason growth is eluding us is the uncertainty and high cost posed by a looming tidal wave of new federal regulations. Last fall, a National Federation of Independent Business report showed that three of the top five problems had to do with economic uncertainty and government regulations. Additionally, the NFIB’s January Small Business Economic Trends Report shows that small business owners cited regulations and government red tape as the second most important problem they face. Most concerning, a recent NFIB/NAM (National Association of Manufacturers) survey found that a majority of small business owners and manufacturers said that given what they know now, they would not start a business today because regulations at the federal, state and local levels are too numerous and too costly. Clearly, there is an ever-present theme of government being a barrier rather than a help. 

How did regulations become such a roadblock to growth? The rate of new regulations has become excessive in recent years, even as the disconnect has grown more pronounced between the people who write the rules and the people who have to live with them. Last year, the federal government employed 283,615 full-time workers to draft and enforce new rules, while fewer than 50 employees at the Office of Management and Budget were responsible for reviewing those new rules and determining whether they are justified and accurate prior to implementation.  

A healthy economy requires a regulatory system conducive to growth – fewer outdated rules, a reduction in duplicative regulations and more clarity for the businesses who must comply with them. To that end, Congress should embrace five concrete reforms:

  • Risk Assessment: Regulations are designed to mitigate risks, but before a regulation is issued, the risks should be measured and assessed using the best available data and science.
  • Cost Benefit: Every major regulation should be analyzed so that the costs are fully understood, and the benefits are significant enough to justify the costs.
  • Objective Peer Review: The peer review process shouldn’t be a rubber stamp for agency regulations; instead, it should include a range of opinions in a transparent process.
  • Judicial Review: To encourage accountability, regulations should be subject to congressional oversight and review by the courts.
  • Prioritize Compliance Over Enforcement: Federal agencies should always place greater emphasis on promoting compliance than they do on issuing harsh penalties, particularly on small businesses.

According to a Tarrance Group survey sent to Public Notice, 67 percent of Americans recognize there’s been a dramatic increase in federal regulations in recent years. As a result, 74 percent of Americans believe the economy is over-regulated.

Washington can and should find common ground on meaningful regulatory reform. I hope the president’s State of the Union will pave the way for true cooperation that would show America that Washington can actually get things done. The resulting growth enabled by this bipartisan regulatory reform would then lay the groundwork for cooperation as we tackle the other fiscal challenges ahead.

Dan Bosch is manager of regulatory policy for the National Federation of Independent Business.