Let’s Fix How Regulations are Made

U.S. Chamber President / CEO Tom Donohue.

by Sean Hackbarth, Contributing Author: Over the last year, federal regulatory agencies have dropped many costly regulations on the economy. Here are three just from EPA:

• Carbon regulations that threaten the reliability of the power grid.
• Water regulations that force farmers and home builders to get federal permits before doing ordinary work.
• A new ozone standard that could stymie America’s manufacturing renaissance.

This doesn’t scratch the surface. There’s health care regulations from Obamacare, financial rules from the Dodd-Frank law, and OSHA rules in the pipeline.

Naturally businesses respond to these additional regulatory costs and the uncertainty. They hunker down, stop investing, and refrain from hiring more workers.

And naturally, people respond to these business decisions. Millions of people have given up looking for work, which has pushed the labor participation rate to its lowest levels in decades.

At the same time, average hours worked per household has declined, and the middle class has seen its wages stagnate while the costs of everyday life go up [subscription required].

U.S. Chamber President and CEO Tom Donohue argued that reforming the regulatory process is urgently needed to improve economic growth and create jobs.

First, let’s get one thing straight immediately. No serious person argues that regulations aren’t needed in a complex economy. Donohue explained:They help establish the economic rules of the road. They help ensure workplace safety and protect public health. They provide needed standards and procedures on how to operate equipment, handle food properly, and keep the environment clean.But when does regulation go beyond the commonsense and effective to the absurd and ineffective? We’re at that point now:According to a former director of the Congressional Budget Office, every year since 2009, we’ve added about $150 billion in new compliance costs. This year we’re on target to do an astounding $200 billion. In fact, total compliance costs now exceed $2 trillion a year.With these high costs, we should ask a few questions:Do we really have to pay that much? Are we getting our money’s worth? What are the impacts on jobs, on small businesses, on our ability to compete around the world, and on our economic and personal freedoms? Why does it take so long to build anything anywhere in this country? Can we do it better and more efficiently?

Instead of the tiresome regulations/no regulations “debate” that drives DC media narratives, let’s examine how we can "reform the regulatory process itself."

Donohue laid out four principles.

1. Restore Accountability.
Congress has let regulatory agencies become a de facto fourth branch of government, and it must take its authority back:Congress should insist on an up-or-down vote on the largest and most costly regulations. Many argue Congress couldn’t handle that level of review—it would take too much time. Well, guess what? There were 30 regulations with a cost exceeding $1 billion from 2000-2013. Reviewing two or three rules a year is both warranted and doable.

Congress should impose a greater burden of proof on agencies to demonstrate that the costliest rules are truly needed and that they are pursuing the least costly alternatives to achieve their goal, as required by law.

Congress should hold independent regulatory agencies to identical standards as executive branch agencies for high impact rulemakings. That means they would be required to conduct a cost-benefit analysis and regulatory impact analysis.

And Congress can reclaim some of the authority it has surrendered to the regulatory agencies by more carefully crafting legislation so that congressional intent is perfectly clear and regulators’ discretion in writing rules is limited.“Whenever Congress decides to recede into the background and fails to exercise oversight, the executive branch almost always steps in and overreaches,” said Donohue.

2. Greater Transparency.
End the sue and settle process, “where environmental groups sue EPA or another federal agency, and with little to no push back, the agency agrees to a settlement, and a court signs off.” New regulations are written in secret instead of through the normal regulatory process. Greater transparency needs to be brought to the process.

Also, “require the agencies to divulge all the information and data they use in a rulemaking and allow citizens the right to challenge it.” Let the public know why costly regulations are being imposed on them.

3. Meaningful Public Participation in the Regulatory Process.
Give the public and those potentially affected by proposed regulations enough time to respond constructively:For the regulatory system to work properly, regulators must get the facts, the economics, and the science correct; otherwise, the regulatory process is merely a political process. At the least, agencies should be required to inform the public of pending regulatory decisions on high impact rules earlier in the process, share its data and economic models, and allow adequate time for comments.4. Guarantee a Safe but Swift Permitting Process.
Regulators need to make smart decisions on permits in a timely manner:Today, major energy, infrastructure, and other projects cannot be built or even granted a permit because of a broken environmental review process. The lack of deadlines for action and poor coordination among agencies means that critical projects are delayed for years or killed outright.

… They may not like it, but businesses can take no for an answer on a permit. What we can’t tolerate is no answer at all.In 2015, you’ll see the U.S. Chamber make the case for regulatory reform based on these principles. Legislatively this will include a bill to streamline the permitting process, the Regulatory Accountability Act for increasing transparency and the regulation development process, and the Sunshine Act for increasing transparency and accountability to the sue and settle process.

As Donohue explained, fixing how regulations are made by making it more accountable, transparent, and efficient will “ensure that we have rules that really work, that are fair to all, that meet the test of common sense, and that are compatible with our principles of economic freedom and our strong desire for jobs and growth.”

We all agree that effective regulations are necessary. Let’s improve how those rules are made.
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Sean Hackbarth is a blogger at U.S. Chamber Blog and does policy advocacy at the U.S. Chamber of Commerce. He is a contributing author at ARRA News Service.

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