Regulations tend to accumulate endlessly. Today there are over 1 million restrictive words (think “shall” or “must”) in the Code of Federal Regulations. Some states, like California and New York, layer on hundreds of thousands of additional regulatory restrictions. Fewer than 1 percent of these rules have been subjected to rigorous cost-benefit analyses. And once regulations are on the books, it is fairly rare to see them subjected to any sort of retrospective review to see how they have performed. Regulatory restrictions are not just cumbersome. They throttle innovation, favor established firms, and limit economic growth. Research suggests that if federal regulatory restrictions had been held to their 1980 levels, the US economy today would be 25 percent larger than it is. If governments
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Regulations tend to accumulate endlessly. Today there are over 1 million restrictive words (think “shall” or “must”) in the Code of Federal Regulations. Some states, like California and New York, layer on hundreds of thousands of additional regulatory restrictions. Fewer than 1 percent of these rules have been subjected to rigorous cost-benefit analyses. And once regulations are on the books, it is fairly rare to see them subjected to any sort of retrospective review to see how they have performed.
Regulatory restrictions are not just cumbersome. They throttle innovation, favor established firms, and limit economic growth. Research suggests that if federal regulatory restrictions had been held to their 1980 levels, the US economy today would be 25 percent larger than it is. If governments are to become more responsive to the needs of their citizens, they should conduct occasional “spring cleanings” of archaic rules and regulations that no longer make sense or are holding back economic and other progress. Unfortunately, these cleanups rarely happen.
Some states, however, appear poised to change that, and Idaho is taking the lead. This week, Idaho Gov. Brad Little signed a new executive order on “Regulatory Relief to Support Economic Recovery.” It is “focused on reducing barriers to economic recovery, waiving licensing provisions, increasing telehealth access, and augmenting healthcare capacity.”
Specifically, the governor’s order addresses what to do with the 150-plus regulations that Idaho state agencies waived in response to the COVID-19 outbreak. Perhaps most importantly, it eliminates the presumption that the affected rules are in the public interest. It states that “if waiving these regulations was deemed necessary to improve public health and welfare during the declared emergency, there is a rebuttable presumption that the regulations are unnecessary or counterproductive outside of the declared emergency.” In other words, if government officials viewed an existing rule as such a hindrance to response efforts during a serious public health emergency that they waived it, then the rule may not be right for normal conditions either.
This is consistent with a proposal we set forth in a recent Mercatus Center white paper, “A Fresh Start: How to Address Regulations Suspended during the Coronavirus Crisis.” In that paper, we note that the COVID-19 crisis was a major stress test for American institutions and that it “has laid bare the outdated, overlapping, and often contradictory morass of rules that make it difficult for public and private organizations to respond to changing circumstances.” Accordingly, we recommend that federal and state lawmakers consider forming “Fresh Start Initiatives,” and we suggest five steps:
- Any rule suspended or modified during the pandemic should remain off the books until further study.
- Congress or the state legislature should form an independent and bipartisan commission to study these rules.
- The commission should identify and study all the rules revised or suspended during the crisis.
- The commission should then formulate a set of recommended regulatory reforms for each of those rules and craft a plan and timetable for automatically sunsetting or comprehensively revising those policies or programs as part of a single reform package.
- All recommendations should take effect automatically unless both houses of Congress or the state legislature and the executive take affirmative action to countermand the commission’s experts.
Fresh Start Initiatives build on the successful experience of the Base Realignment and Closure (BRAC) commissions. For years, defense officials had attempted to close obsolete and unnecessary military facilities. And for years Congress resisted. While these bases served little or no public purpose, they were financially lucrative to the communities that hosted them and these communities (and their congressional representatives) were always able to block reform efforts. Under five rounds of BRAC commissions, however, 350 obsolete military bases were closed.
There were four key elements to the success of the BRAC approach. First, legislators were able to cast conspicuous votes for the general interest goal of reducing unnecessary spending, by supporting the closure of bases that no longer held strategic value in a post-Cold War environment. Second, a separate institution—namely, the commission itself, with expert and impartial members—decided which particular bases had to go. This allowed members of Congress to blame a decision to close any particular base on “those eggheads on the commission.” Third, it was difficult for the legislators to countermand the recommendations of the experts. All of the BRAC commissions’ recommendations took effect unless both chambers of Congress and the president took affirmative action to countermand them. And finally, the institution’s progress toward the end goal was measured and regularly reported to the public.
These same principles can clear away obsolete and counterproductive regulations—especially those that, like obsolete military bases, benefit special interests at the expense of the general public. Fresh Start Initiatives and other spring cleaning efforts are just one of many approaches to addressing regulatory accumulation and regulatory quality. Other reforms are also needed and, once again, Idaho has paved the way.
The state was already a leader on regulatory reform and has been taking steps to address ineffective and outdated regulations through efforts such as the earlier “Red Tape Reduction Act” and the “Zero-Based Regulation” executive orders. A year ago Idaho actually sunset its entire regulatory code in an effort to clean up its 8,200 pages of regulations containing 736 chapters of state rules.
Our Mercatus Center colleague James Broughel has written extensively on these and other state-based reforms. And along with co-author, Krista Chavez, he has shown that “the Idaho experience demonstrates that state governments can significantly reduce regulations without much fanfare or controversy.” They argue, “The state’s recent experience shows that it’s not inevitable that a state’s regulatory code grows ever larger and more complicated year after year. Indeed, major cuts in regulations are possible and need not be controversial.”
Now that Idaho has added the new “spring cleaning” executive order, it offers other states an even better roadmap for common sense regulatory reform.
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