- - Wednesday, June 6, 2012

Regulation is playing a starring role in keeping the economy in neutral. Recognizing this, President Obama has recently been making some baby steps in the direction of regulatory sanity. He issued a new executive order this month that could save billions of dollars in regulatory costs over the next several years. It builds upon his January 2011 executive order, titled “Improving Regulation and Regulatory Review.” The idea is to ensure that benefits “justify” (not to be confused with “exceed”) costs, and to emphasize the “least burdensome” means for achieving regulatory ends.

The estimated savings total up to about $10 billion over five years. Cass Sunstein, who heads Mr. Obama’s Office of Information and Regulatory Affairs at the Office of Management and Budget, sees this as a significant achievement. Of course, federal regulations cost more than 500 times that much - more than a trillion dollars annually - so this is a curious use of the word “significant.”

The Office of Management and Budget, which tends to downplay regulatory costs, fesses up to $5 billion in new annual costs in its yearly reports. So a generous interpretation of the Obama order is that it might kind of freeze things. It would almost certainly not cut regulatory costs on net. The current administration sees regulation as a fundamental good, and has no real agenda for pruning it.

Furthermore, as Richard Belzer noted in a letter in the Wall Street Journal, Mr. Obama’s order isn’t likely to work as well as advertised. Many costly rules don’t get designated that way during the regulatory process. Such rules can skate past initial intense review, meaning true regulatory costs can be significantly undercounted. Worse, future reviews like the one Mr. Obama has just ordered could miss these rules entirely, making it harder to scrub them from the books.

As we show in the new 2012 edition of “Ten Thousand Commandments,” the number of rules in the pipeline at agencies is mounting - 4,128 at last count. Major rules, those expected to cost more than $100 million annually, have experienced a particularly strong surge. And keep in mind, as noted above, many major rules escape detection. Indeed, just to get where we were a year ago, many rules would have to be cut.

These new executive orders are welcome, no doubt about that. But they are hardly a war on red tape, and no affected businesses or consumers are going to be able to sue anybody to force compliance - it’s just an “order” to agencies to behave.

Confronting regulation, the extent of which remains unappreciated by both parties, requires going far beyond a few executive orders. Options outlined in “Ten Thousand Commandments” and elsewhere include:

Implement a bipartisan, annual Regulatory Reduction Commission to vote up or down on a package of rules to eliminate in one sweep.

Institute a freeze on federal rule-making in order to rediscover federalism. Many health and safety matters are best left to states.

Hold hearings on Sen. Mark R. Warner’s “one-in, one-out” requirement for any new rule, which, for some reason, he isn’t talking about much lately but should be.

Increase exemptions for small businesses, which can least afford regulatory costs.

Lower the threshold for what counts as an “economically significant” or “major” rule, and improve explicit cost analysis.

Just as Congress is supposed to pass a spending budget, it should pass a limited regulatory budget every year.

Sunset regulations after, say, five years unless Congress explicitly reauthorizes them.

Mr. Obama’s executive orders for agencies to review regulations are welcome; all future presidents need to make similar (and stronger) commitments.

These reforms should be supplemented by annual regulatory transparency report summaries covering what agencies are really up to in terms of numbers of rules, their costs and even justifying why they’re regulating at all. In order to be taken seriously, one must be able to be taken seriously.

For a body as image-conscious as Congress, these reforms are a golden opportunity to improve on its 15 percent approval rating.

Wayne Crews is vice president for policy at the Competitive Enterprise Institute and author of the annual report, “Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State.” Ryan Young is CEI’s fellow in regulatory studies.

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