Why less regulation often means more regulation
© Greg Nash

Much has been said about the incoming Trump administration’s pledge to American voters to eliminate one federal regulation for every new one mandated. On its face, it’s a strategy which seems to promise a less complicated, more streamlined regulatory environment for the country going forward.

But, wait. Not so fast.

What will happen when the federal government begins cutting away at the existing regulatory structure, built up over decades and decades? In the planned turn away from regulatory federalism – the dominant historical trend since the New Deal – it seems likely many states will deem it necessary to step up and fill the resulting “regulatory void.”

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Think about what this means: theoretically a fifty-fold increase in the total number of regulations, (although, hopefully, the reality won’t be quite so extreme). For companies doing business across state borders, the situation could wind up analogous to a person driving a car cross-country prior to construction of the U.S. highway system.

Traveling from one state to the next, one might experience a dramatic shift in the consistency and quality of road surfaces, moving suddenly from a smooth asphalt track to an axle-breaking, moonscape of a roadway.

In addition, the speed limit may drop without clear signage indicating the change. But the local cop with a radar gun hiding behind a billboard won’t want to hear your arguments about a lack of clear road symbols in his state.

You can take up your case with the local judge -- if you want to spend the time and money fighting the ticket, that is.

Whereas a more unified federal regulatory system traditionally has meant greater consistency and predictability for businesses operating in multiple states, uncertainty moving forward now could lead companies to simply steer clear of jurisdictions with less-clear policy regimes.

The regulatory public notice and comment process, for example, differs from state to state, with some utilizing electronic communication channels, while some still print rulemaking notices only in the back of newspapers with minimal readership.

Of course, competition among states to attract investment and economic development in a more wide-open regulatory environment could arguably prompt state governments to develop more creative, coherent, and rational policies.

Conversely, the struggle for business investment could lead to greater regulatory Balkanization of the country, with bad corporate actors taking advantage of more lax regulations in certain states and local jurisdictions.

As the shift in regulatory authority occurs from federal to state levels, the overall outcome might be a beautiful quilt-work of complementary local systems. Or it might be an ugly patchwork of loopholes and a proverbial “race to the bottom,” in terms of protecting public health and safety.

What’s certain is that the sheer complexity of the current system at both the federal and state levels cries out for the use of advanced analytic tools which can help regulators -- as well as the regulated — make better decisions about how the entire matrix of rules and proposed rules fit together (or don’t).

For the regulated, which means every company and individual citizen, engaging state and federal regulators through the public notice and comment process becomes even more important as rulemaking activity accelerates and expands across every level of government.

We need to modernize the rulemaking process with the best technology available and we need to start now, to get ahead of the curve before President Trump’s rule-cutting axe starts to swing in earnest…and a whole new forest of regulatory undergrowth emerges in his wake.

John W. Davis, II is the founder and CEO of N&C, provider of the regulatory data analytics solution Regendus. Davis previously served as Director of the Homicide and Major Crimes Bureau as federal prosecutor for the U.S.Virgin Island Justice Department.


The views expressed by Contributors are their own and are not the views of The Hill.