Is Better Regulation Ahead?
In his "state of manufacturing" speech February 13, NAM President and CEO Jay Timmons complained that the "regulators in Washington are unchecked, imposing new costs and additional uncertainty on manufacturers."
Timmons said regulations should be based on "sound science" and regulators should be forced to "weigh the costs of regulations against the actual benefits rather than against speculative or imaginary gains."
In his 2011 State of the Union Address, President Obama, like a number of his predecessors, promised to fix "rules that put an unnecessary burden on businesses." On Jan. 18, 2011, he issued Executive Order 13563, which instructed federal agencies to develop plans to "facilitate the periodic review of existing significant regulations" and modify or repeal rules found to be ineffective or excessively burdensome.
Michael Greenstone, a professor of Environmental Economics at the Massachusetts Institute of Technology, called Obama's requirement that agencies routinely revisit the costs and benefits of regulations "a revolutionary step in the right direction" and urged that these reviews be legislatively mandated. He also called for the creation of a body similar to the Congressional Budget Office that would allow the legislative branch to conduct independent, objective reviews of regulations.
Hal Quinn, president of the National Mining Association, gives the president credit for issuing EO 13563, but he says the results are another matter.
"After a year, out of a $1.75 trillion burden, all these agencies were able to identify was $10 billion of regulatory burden they could eliminate over five years. That is one-half of 1% of the entire burden," said Quinn. "That was a really underwhelming, unimpressive result and raises concerns about the urgency and seriousness given to this issue."
Federal agencies have typically estimated that the benefits of regulations exceed the costs by a factor of 10, says Susan Dudley, a former OIRA director and now director of George Washington University's Regulatory Studies Center. And she notes there is considerable uncertainty built into these estimates. Pointing to a recent OIRA estimate of total regulatory benefits, she said more than 90% of the benefits were attributed to EPA rules to reduce air particulates.
"The uncertainty of those benefits is huge," she said. "In fact, the uncertainty is so huge that the benefits could be zero, because we don't know if exposure to particulate matter causes the consequences EPA is estimating."
Business groups such as the U.S. Chamber of Commerce say one way to bring more order and accountability to the regulatory process would be through passage of the Regulatory Accountability Act. Among other things, that bill called for more attention to cost-benefit analysis in rulemaking and expanded opportunities for public challenges to rules. In the last Congress, the bill (HR 3010) passed the House but died in committee in the Senate.
The Center for Effective Government's Katherine McFate charged the bill was a "backdoor way for conservatives to prevent the implementation and enforcement of decades of public protections -- without actually having to vote against the Clean Air Act or the Clean Water Act."
But as the nation's regulatory burden grows, some believe the system needs more radical change to prevent the rules of the road from driving the economy off a cliff. One idea floated by Sen. Mark Warner, D-Va., is to require agencies to retire an old regulation in order to implement a new one.
If fixing the regulatory system is controversial, the cumulative impact of regulation is certain. And that leaves experts like GW's Dudley asking, "How is it that every year we need 40 major $100 million, sometimes $1 billion, regulations? Were things working so badly one year ago, five years ago, that we're always thinking up ways to constrain the markets?"
