Time for a regulatory budget

Time for a regulatory budget

America’s regulatory burden has thrived in solitude because it’s uncounted, and therefore uncontrolled.The first step to addressing it is to begin counting. America needs a federal regulatory budget.

According to the Competitive Enterprise Institute, which valiantly tries to quantify the officially uncounted, federal regulations cost the U.S. $1.9 trillion in 2016.  That staggering figure equals half 2016’s federal spending ($3.853 trillion) and almost 60 percent of federal revenues ($3.268 trillion).

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The regulatory burden has grown tremendously.  Unable to count long-past costs, we count pages: In 1936, The Federal Register had 2,620 pages; in 2016, it had 95,894.  Ominously, that nearly 40-fold increase will likely continue — without official counting.

Fortunately, the template for official counting already exists: Congress’ official budgetary procedures over the last four decades.  Congress created the Congressional Budget Office in 1974 to systematize its budgeting and compete with the presidency’s greater technical resources.  Both CBO and OMB could be mechanisms to begin a regulatory budget process.

Like spending, regulation must first be tabulated; however, doing so would be different.  Unlike spending, which is calculated after the fact, as dollars go out, measuring regulations’ cost would require CBO and OMB’s other major function: Estimating.  

A regulatory budget would require estimating past (the existing regulatory burden) and future (proposed regulations).  While with spending, “after” is more arithmetic, and “before” more art, both would be art with regulations.

While some regulatory estimation is done now, it does not encompass the entire regulatory burden; it is more focused on proposed regulations to determine if they generally exceed defined thresholds for greater scrutiny.  There is an obvious problem with such an approach: Limiting estimating to new, avoids the whole. Missing the forest for the trees is always a problem, but particularly with regulations: America shoulders the whole, not just the new.  

A budget would help address regulations’ two major issues: The obvious, affordability, and the overlooked, accountability.  

America’s private sector bears the cost of regulation.  Regardless of good intention, costs mount. Regulations have been aptly called an invisible tax.  As with taxes, while often justified by some programs deemed worthwhile, they still subtract from private individuals’ means.  The private sector — individuals and businesses — can do less than they would otherwise — save, invest, and spend.

Such subtraction costs the economy.  Eventually, regardless the intentions, it becomes as unaffordable as additional taxes.  Yet, while visible taxes have remained relatively constant as a share of GDP, regulation’s invisible one has not.  Many a business would confirm: Regulation’s burden is now greater.

This impact of regulation is clear.  Less so regulation’s impact on government accountability.  Regulations can also function as invisible spending: Mandating private sector action — such as required benefits on employers — the government shifts onto them costs it would otherwise incur.  

While in theory, Congress oversees federal spending, regulation is largely undertaken by regulators — America’s unelected administrators.  Just as federal spending accrues power to those controlling it, so too regulation’s invisible spending. However, in the latter case, power flows away from Congress, and more importantly, the people represented.  

For Congress and the country to fully appreciate regulation’s affordability and accountability, both must first know it in actuality.  Certainly, there will be objections — principally from those desiring regulation’s obscurity — that it cannot be done accurately. The same argument was used against estimating spending.  Yet, any official estimate will be better than the “zero” now attributed to regulation.

A regulatory budget should not stop at counting.  It should continue to cutting, and then containing.  Again, Congress’ budget history offers precedents.

For cutting, the 1988 Base Realignment and Closure Commission offers a perfect example.  Known as BRAC, it reviewed military bases and produced a closure list, which Congress could only vote for or against.  Similar review of existing federal regulations should be undertaken — ideally with direction to reduce these by a percentage — and the list then presented to Congress.  

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As for containing, government could keep regulatory cost at a fixed percentage of GDP.  Any new regulation exceeding that level would have to be offset by reduction elsewhere.

Admittedly, Washington’s poor spending record may seem a dubious roadmap for controlling regulatory burden.  However, because regulations do not deliver a direct monetary benefit to identifiable groups in most cases — as “visible” spending does — its defending constituency should be less.  And like “visible” taxes, regulations should have identifiable opponents willing to battle for reduction.

The most important step is to start: Counting.  Success will lead to recognition of the invisible burden now growing unchecked.  This will yield agreement it cannot continue. The result would be an increase in affordability and accountability — and private sector productivity — that most will surely support.  

J.T. Young served under President George W. Bush as the director of communications in the Office of Management and Budget and as deputy assistant secretary in legislative affairs for tax and budget at the Treasury Department. He served as a congressional staffer from 1987-2000.