Academic journal article Policy Review

A Better Way to Regulate

Academic journal article Policy Review

A Better Way to Regulate

Article excerpt

What Government Can Learn from the Market

AT LEAST SINCE RONALD REAGAN'S election in 1980, voters have expressed dissatisfaction with the traditional, 60 year-old model of government involvement in both the economy and society. Yet this dissatisfaction has resulted in relatively little in the way of comprehensive government reform.

There is a reason for the relative unresponsiveness: the fact that regulation is allowed, and sometimes mandated, by federal statutes that poorly reflect market conditions. To significantly improve government performance, statutory reform must precede regulatory reform and must be carefully tailored to the specific market imperfections that government involvement is designed to correct. Instead, the outdated structure of government statutes often impedes the economy from adapting to new conditions.

Regulation has always been important to economic and social prosperity. But it often imposes unnecessary social costs, reducing competitiveness and economic growth. Over the past few years, the broader public has begun to demand improved government efficiency. In the early 1990s, a book by David Osborne and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector, From Schoolhouse to State House (Addison Wesley, 1992), remained on the national bestseller list for over a year. The Clinton administration engaged in a well-publicized attempt to reinvent government led by Vice President Gore's National Performance Review. Within Congress efforts have focused primarily on regulatory reform, one of the 10 items in the House Republicans' 1994 "Contract with America." Although opposition has frustrated reform, congressional Republicans continue to push for key changes in regulatory procedures. These include increased use of cost/benefit analysis, compensation to property o wners for the loss in value of private property due to regulation, risk analysis, peer review of agency scientific findings, and broader legal powers to challenge agency determinations in court.

Although almost everyone now acknowledges the need to improve the way government operates, the two parties have taken very different approaches. Democrats have generally preferred a piecemeal approach to reform, taking each regulation or issue separately. This approach, which assumes that government is already doing the right things but needs to do them better, has produced some gains. The Clinton administration ordered each agency to develop plans to reduce unnecessary regulations, become more user-friendly, and adopt a policy of cooperation rather than confrontation with the private sector. The Internal Revenue Service was reorganized. Major regulatory agencies such as the Occupational Safety and Health Administration and the Environmental Protection Agency announced that they were reducing the size of their regulations. Although helpful, these marginal reforms do little to improve the basic structure of the relationship between the government and the private sector.

Republicans so far have focused on broader regulatory reform and efforts to constrain the growth of federal power. Their efforts attempted to shift the balance between regulatory agencies and the private sector by increasing the procedural requirements agencies must meet before promulgating regulations that impose substantial costs on the private sector. Efforts to restrain government spending would force agencies to set priorities among numerous objectives, abandoning those that offer little public benefit. [1] The Republican leadership has succeeded in reforming the law in some fields such as welfare, agricultural commodity programs, banking, and worker training. It has also made major progress in other areas such as bankruptcy and telecommunications. In each case, Congress rewrote the underlying statutes governing federal policy. However, relatively little has been accomplished in other regulatory areas such as the environment, worker safety, food and drug inspection, education, and housing -- largely beca use efforts have been limited to improving the regulatory process while preserving the existing statutory framework. …

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