Notice & Comment

Regulatory Deossification Revisited, by Jim Tozzi

Every year the federal government decides three major economic matters 1) the amount of money that the government will spend 2) the amount of money it will raise in taxes and 3) the amount of money that it will require the private sector and states, municipalities and tribes to spend on regulatory compliance costs. The first two issues are decided, however imperfectly, through formal processes that are subject to financial limitations. Regulatory burdens, by contrast, are imposed by legislators and regulators on an ad hoc basis without any financial ceiling.

Two alternatives available for addressing the ever growing size of the regulatory state are (1) to continue the current process of adding procedural constraints on regulators or (2) to place a ceiling on the total cost regulators could impose on the public—the implementation of a regulatory budget. If in fact the regulatory state has become ossified then the proponents of this argument should support the implementation of a regulatory budget because it could reduce the historical reliance on option (1) above.

The federal management problems stemming from absence of a regulatory budget were discussed by President Carter in his 1980 Economic Report of the President. President Carter explained in the report that “Regardless of which branch initiates and which completes the priority-setting, however, it is clear that the regulatory process as yet lacks any mechanism analogous to the expenditure budget for comparing and integrating priorities among different program areas.”

President Carter further explained that:

 As the process of regulation develops, more consideration will need to be given to the impact of regulations on the economy. The Nation must recognize that regulation to meet social goals competes for scarce resources with other national objectives. Priorities must be set to make certain that the first problems addressed are those in which regulations are likely to bring the greatest social benefits. Admittedly, this is an ideal that can never be perfectly realized, but tools like the regulatory budget may have to be developed if it is to be approached. [p. 126]

Following the footsteps of President Carter the nation is finally moving towards the implementation of a regulatory budget as set forth in this recent publication. To this end, during the Carter era a well-developed legislative proposal to integrate a regulatory budget into the fiscal budget process was introduced in Senate in 1979 by Senator Lloyd Bentsen (D-TX) who went on to Chair the Finance Committee and to serve as Treasury Secretary under President Clinton.

S. 51 proposed to “amend the Congressional Budget Act of 1974 to require the Congress to establish, for each fiscal year, a regulatory budget for each Federal agency which sets the maximum costs of compliance with all rules and regulations promulgated by that agency. . . .”

S. 51 contained a notable statement in its Statement of Findings and Purpose. In addition to discussing the size and increase in regulatory burdens, S. 51 stated that “it is the responsibility of the Congress to determine the appropriate levels of costs of compliance with Federal rules and regulations.” S. 51 places primary responsibility for federal decisions determining the size of the regulatory state on elected officials who are supported by a shrinking handful of White House regulatory watchdogs located in OMB’s Office of Information and Regulatory Affairs, OIRA.

S. 51 was not enacted.

Interest in establishing a regulatory budget did not end with the Bentsen bill. A 2014 in-depth reviewof a regulatory budget found that the “concept of a regulatory budget has undergone three decades of scholarly, legislative, and administrative consideration.”

Recent examples of the ongoing regulatory budget developments include:

1. Publication of The Regulatory Budget Revisited .

2. Release of a white paper authored by Administrative Conference of the United States’s research chief, “ Controlling the Cumulative Costs of Regulation ,” that includes discussion of a one-in-one-out regulatory budget.

3. Senate hearings on the issue by both the Government Affairs Committee and the Budget Committee .

4. Endorsement of the idea of regulatory budgeting by at least two candidates for the Republican nomination for president.

5. Discussion of regulatory budgeting at the American Bar Association’s 2015 Administrative Law Conference.

6. Recognition in a recent Council on Foreign Relations publication that regulatory “budgets do force bureaucracies to weigh regulatory decisions more carefully and systematically analyze the existing regulatory stock.”

7. The adoption of a regulatory budget in Canada.

The Regulatory Budget Revisited concluded that after “a long gestation period, the increasing adoption of complementary policy tools such as cost-benefit analysis, and recent experience with the ‘One-in, Two-Out’ initiative in the United Kingdom, the time has come for further debate about regulatory budgeting as a reform option in the United States.”

To this end there are two simple steps to jumpstart the establishment a regulatory budget:

1. Congress should initiate the deliberative process by reintroducing the legislation proposed by then Sen. Bentsen (D-TX), The Regulatory Budget Act of 1979 (S. 51) with any necessary conforming amendments, and

2. The Administration should seek public comment on administrative mechanisms that could be used to implement a regulatory budget based upon existing law and on the experiences gained from a comparable effort made by the Carter Administration.

*Jim Tozzi served as a regulatory official in five presidential administrations starting with Lyndon Johnson and ending with Ronald Reagan. He is presently the head of the Center for Regulatory Effectiveness ; kudos to Bruce Levinson of CRE for his assistance.

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