SMART REGULATION 

 

Over the last several decades, the number, scope and burden of Federal regulations have expanded exponentially. Today, America’s regulatory infrastructure costs the U.S. economy somewhere in the neighborhood of $1.75 trillion per year, according to a study from the Small Business Administration’s Office of Advocacy. That is more than the entire annual gross domestic product of Canada. 

 

Nearly 25,000 pages of final rules were issued by federal regulators in 2010. To put that into perspective, it would take more than 50 days of reading around the clock (with no breaks, even to eat and sleep) to keep up with the 3,573 final rules issued in 2010. Churning out this steady flow of regulations, will require an estimated 291,676 full-time federal workers in 2012, double the number of federal regulators employed in 1980. 

 

In 2008, the World Economic Forum ranked the U.S. as the world’s most competitive economy. Two years later, the U.S. has fallen to fourth place in overall competitiveness and 49th in terms of regulatory burdens. If America is to remain competitive, addressing the regulatory burden the U.S. government places on businesses is an urgent priority. 

 

Not all regulation is bad. Regulation is a necessary part of a well-functioning economy. However, even the most well-meaning regulations have real costs. Attention must be drawn to the strain regulation is placing on economic growth and job creation. Policymakers should better weigh the positive benefits of new regulatory initiatives against their costs.

 

SOLUTIONS 

 

Better Enforcement of Existing Laws Intended to Reduce Regulatory Burdens 

Over the years, Congress and successive Presidents have enacted laws and issued executive orders in an attempt to reduce the burden of regulations on businesses. These include the Regulatory Flexibility Act (RFA), Paper Work Reduction Act and the Small Business Jobs Act, just to name a few. While these efforts have yielded some progress, too many agencies still routinely ignore requirements of these laws and the regulatory burden continues to grow. 

 

Congress should examine ways to increase compliance with existing laws. For example, Congress may consider giving the Office of Small Business Advocacy enhanced authority to delay the implementation of regulations until burden reduction and cost analysis requirements are met. 

 

Scoring of Regulatory Costs 

Before laws are passed, greater emphasis should be placed on analyzing the prospective costs of regulatory initiatives. The Congressional Budget Office estimates the budget impact of all legislation. A similar process for scoring the economic costs of regulations should be established as well. Better disclosure will hold lawmakers responsible for the burdens new regulations place on job creators.

 

Regulations Should Come with an Expiration Date 

As new rules are added, old regulations are often left on the books and forgotten about. Various provisions intended to reduce regulatory burdens often overlap, wasting valuable resources on unnecessary paperwork and creating confusion. Congress should place a sunset date on most regulations, after which the agency must justify the continuation of the regulation and re-open the rule for comment.

 

In an Executive Order issued in January of 2011, President Obama instructed federal regulatory agencies to develop plans for periodic reviews of existing regulations to identify “ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned." While that is an important start, a more robust and comprehensive approach is needed.

 

Regulatory Reform Commission 

Congress should also create an independent commission with a specific mandate to make recommendations for consolidation or elimination of unnecessary and outdated regulations. To ensure that its recommendations are headed, Congress should consider giving the Commission the ability to ask for a straight up-or-down vote in Congress on its proposals.

 

CONCLUSION 

 

While large companies with big accounting, legal and compliance departments have the resources to deal with new regulations, small businesses often do not. This gives a significant advantage to large, mature firms, who are creating few, if any, jobs against small, entrepreneurial firms that generate the vast majority of new jobs.

Congress and successive presidents have recognized this reality by enacting initiatives intended to reduce the burdens regulations place on smaller firms. Yet, these burdens continue to mount. Policymakers should seek solutions that align incentives to ensure that the views of small businesses are not only considered, but that a priority is placed on reducing the regulatory burden on small firms.