Economy & Budget

Are there too many regulations?

That is the question my coauthor Deborah Borie-Holtz and I asked in a recent survey of business owners in five Midwestern states. We found that these business owners indeed felt overwhelmed by the sheer number of regulations, but in many cases (more than 80 percent) could not name specific regulations that burdened them. We think that this argues for greater attention to the effect of regulatory volume both in the political rhetoric surrounding regulation, and in proposals for regulatory reform.

Seventy-five percent of respondents cited the number of regulations as an important area of concern for their business. The volume of regulation ranked third out of a list of concerns business owners named when asked about the most important concern their business faced. It was bested only by taxes and employee health benefits in this list. We asked questions regarding concerns about regulation in numerous ways, and no matter the format of the question, regulatory volume came back as a significant concern.

{mosads}Before drawing anti-regulatory conclusions from this data however, there are two important qualifications. First, more than nine out of 10 respondents agreed that some form of regulation of business was necessary and 96 percent agreed that they could live with “regulation if it is fair, manageable, and reasonable.”

Second, there was a major difference regarding the perception of regulatory volume by party affiliation. Two-thirds of Republicans think the volume of rule-making should be a high priority for their governor and state legislature, as compared to 40 percent of all others. This party difference was mirrored in responses to other questions that we asked. However, it is impossible to know the direction of causality here. Are Republican business owners more likely to blame regulation for economic woes because they have heard a great deal of rhetoric doing so from the politicians they support and the media outlets they follow? Or are business owners who feel burdened by regulation more likely to vote Republican because they believe that Republicans will cut regulation?

If the volume of regulation is a genuine concern, then many regulatory reform proposals are misguided. Most proposals being considered by Congress add to existing procedures which address the issuance of new regulations. There are already laws and executive orders in place that attempt to ensure that new regulations issued by the executive branch are well designed, and it is my view that while not perfect, they work relatively well. Few of the legislative proposals address the existing stock of regulations, with which businesses already have to comply.

There are some exceptions. President Obama’s requirement that agencies look back on their existing regulations and search for ways to reduce regulatory burden addresses regulations already in place is one such exception. Michael Mandel and Diana Carew have proposed creating an independent commission to review regulations (modeled on the Base Realignment and Closure Commission that made decisions about which military bases to close) and propose candidates for repeal to Congress. This has been proposed in Congress as the Regulatory Improvement Act of 2014.

Businesses face a myriad of requirements from federal, state, county and local governments. Many of these regulations produce benefits that justify the cost of compliance. But collectively they may impose a hidden cost that could deter businesses from opening or stifle their growth. Regulatory reform efforts may be more successful if they facilitate the examination of the many already existing regulations, rather than focusing on adding new duplicative requirements for agencies to follow when they promulgate new regulations.

Shapiro is an associate professor and director of the Public Policy Program at Rutgers University and a member of the Scholars Strategy Network.

Tags Economics of regulation Regulation Regulatory Improvement Act of 2014

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