Date: Wed, 6 Dec 1995 09:10:30 -0500 (EST) From: Competitive Enterprise Institute To: Recipients of the CEI List Subject: CEI List: Reg Reform a Must Why Regulatory Reform is a Family Affair by Clyde Wayne Crews, Jr.* appeared in tthe Journal of Commerce, Dec. 4 1995. Despite early promise, regulatory reform is all but dead in this session of Congress. Senate Majority Leader Bob Dole's "Comprehensive Regulatory Reform Act" Died of procedural causes. A new, watered down version that would scuttle some regulations only after a trail run has inspired little legislative support. The failure of the reform presents a curious paradox. Americans pay more in regulatory costs ($647 billion in 1994) than in personal income taxes ($543 billion), but seem not to care unless directly subject to one of those regulations. Selling Regulatory reform to the public is tough, mainly because the costs of regulations are hidden from view. If costs were visible, a tough reform bill probably would have passed years ago rather than endure the indignity of a filibuster in the midst of a government downsizing. In terms of visibility, regulatory costs contrast sharply with income taxes. Inescapable and paid directly, income taxes cause anxiety and even loathing as April 15 day of reckoning approaches. Regulations don't inspire such emotions. Although regulatory costs are embedded in the prices of nearly everything we buy, nothing on a label or sales receipt shows what portion of price is attributable to health, safety, or environmental norms. Similarly, the costs of economic restrictions that artificially inflate prices--such as sugar quotas, import restrictions, licensing laws, or price controls-- is invisible. The Senate bill would have provided relief by stipulating that: (1) No final regulation costing more than $100 million annually (originally, the limit was $50 million) could be issued without cost-benefit and risk analysis; (2) Interested parties would have limited rights to sue agencies that do not perform the required analyses; and (3) those subject to existing major rules could petition for cost-benefit analysis and relief. If costs were to exceed benefits the issuing agency would have to amend or revoke the rule. Since the Senate bill primarily addressed regulations, incorporating a right to petition agencies for relief from the existing regulatory burden was critical. Senator Phil Gramm (R- Texas) last year suggested targeting the existing rules via a "regulatory reduction commission," modeled on the military base closure commission. Under his proposal, a presidentially appointed body would select regulations for elimination. Congress would vote on the entire package, without a right to amend it. Although we rarely know what regulation adds to the cost of any particular product or service, aggregate studies have shown that rules of all types (economic, environmental, and social) costs approximately $647 billion a year, or $6,457 per family. The average 1994 after-tax income for a family of four with two wage earners was $34,728. The $6,457 per family/per year in regulatory costs is greater than the average family spends on any item in the budget except housing, which is the largest expense at $8,995 per year. The second and third most costly items in the family budget-- medical costs ($6,008) and food ($5,556)--were both comfortably outstripped by the cost of regulation, as was transportation ($3,959) and clothing ($2,362) combined. Dismantling much of the existing regulatory state--perhaps by employing Sen. Gramm's commission idea--is necessary. But an even more important and fundamental reform is to require Congress to vote on agencies' final regulations before they take effect. Further, both new and old regulations ought to be sunsetted periodically with the requirement that Congress--not the agencies--act to revive them. In other words, cost-benefit analysis and risk assessment are secondary. Genuine regulatory reform should revitalize the principle that the power to make laws resides only in Congress. Administrative reforms like those in the Senate bill are important, but voters will never have adequate recourse against unelected bureaucrats who enact silly, ineffective, or expensive regulations. With accountability established, steps toward full disclosure of regulatory costs in some form of regulatory "cost budget" would be valuable as a management tool. Publishing cost data as a chapter in the federal fiscal budget or as an addition to the annual Economic Report of the President would bring such costs to the attention. While discerning indirect costs is tricky business, anything would be better than today's utter lack of regulatory scorekeeping. Families jolted into awareness by cost disclosure would appreciate the fresh opportunity to kick out the responsible legislators. ## _______ ________ __________ / | | | |_______ | | | | \ _______ |_______ __________ COMPETITIVE ENTERPRISE INSTITUTE 1001 Connecticut Ave. NW #1250 Washington, DC 20036 202-331-1010, fax 202-331-0640 Permission to reprint must be obtained from the publishing journal listed above. Permission to copy granted as long as these lines are left intact. To subscribe to the cei list, send a message to CEI@digex.com. "The Virtual Hand: CEI's free-market guide to the information superhighway" is available for $5. CEI's monthly newsletter, "CEI UpDate," is free to contributors of $25.