Obama, Ryan, and the Future of Regulatory Reform: An "Upstream" Approach to Reform Would Reassert Congressional Authority, Saving Jobs and Lowering Compliance Costs

By Brannon, Ike; Batkins, Sam | Regulation, Fall 2011 | Go to article overview

Obama, Ryan, and the Future of Regulatory Reform: An "Upstream" Approach to Reform Would Reassert Congressional Authority, Saving Jobs and Lowering Compliance Costs


Brannon, Ike, Batkins, Sam, Regulation


Washington, D.C. may have once been known for politicians ignoring the fiscal realities of its making, but it now appears awash in budget blueprints. Rep. Paul Ryan's (R, Wisc.) plan, "The Path to Prosperity," aims to cut $6.2 trillion in government spending over the next decade. President Obama's vision, as outlined in his April 13 speech at George Washington University, seeks to reduce the deficit by $4 trillion over the next 10 years.

How these competing visions for the role of government arrive at their reductions is drastically different. However, both plans provide few details about the future of our regulatory environment and the burden it imposes on businesses and consumers.

Ryan's plan does at least address the $1.75 trillion in estimated regulatory costs. It goes further to propose a streamlined regulatory process and measures to reduce America's dependence on foreign oil President Obama's budget is mostly silent on regulatory reform, but his Executive Order 13563 and his budget for Fiscal Year 2012 shed light on the impact regulations have on job creation and destruction. Regardless of the budget plan put forth, U.S. businesses will suffer if Washington does not begin to regulate its regulators at the same time it tries to put its fiscal house in order.

Attempts at Reform

Although attempts at federal regulatory reform stretch back 65 years to the Administrative Procedure Act (APA), the results of "major" overhauls have produced only modest results and higher price tags for compliance. As George Washington University professor Susan Dudley has found, the cost of regulations has more than doubled over the past 20 years and the Federal Register continues to eclipse 70,000 pages a year.

What is missing? Previous reform attempts have all focused on "downstream" approaches by trying to rein in onerous regulations after they have been promulgated. One pitfall of this strategy is that agencies generally have a legal obligation to enforce laws passed by Congress and many independent regulatory authorities escape the scrutiny of reform efforts. Subsequent Congresses might try to curb administrative authority, but as long as each regulation withstands the "arbitrary and capricious" standard of the APA, federal courts are usually willing to uphold agency rules.

In a perfect world, Congress would simply stop passing laws that contain countless federal mandates and unchecked rulemaking authority. Absent this utopian reality, a better approach would focus "upstream," allowing Congress to restrict administrative agencies before giving them rulemaking authority during the legislative process. This could yield fewer and less costly regulations and, unlike the legislative veto, it would be constitutional. This approach would insert specific guidelines into all major legislation imposing federal mandates, including:

* requiring agencies to conduct reviews of regulations once implemented,

* demanding agencies rescind duplicative rules,

* placing a limit on the number of regulations an agency could promulgate during implementation of a particular law,

* establishing regulatory "pay as you go" that would require the elimination of a rule whenever a new rule is adopted, and

* prohibiting new regulations where costs exceed benefits.

[ILLUSTRATION OMITTED]

This "upstream" approach would end the regulation "whack-a-mole" strategy that has dominated the conversation for generations and instead focus on Congress placing limits on regulations before agencies implement federal mandates. The benefit of this approach is to (reasonably) restrain regulators before they exceed power given to them by Congress.

Ideally, a comprehensive reform package that implements each of these reforms would pass Congress. Absent that scenario, the House Committee on Rules would require that all major legislation include these reform proposals, similar to the recent move to include "Constitutional Authority Statements" in all legislation. …

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