An Overdue Review of Federal Regulations

Serious researchers agree on the scale of the US regulatory burden and the benefits that would flow from removing or updating many of the regulations. A careful review of federal regulations’ efficacy and their impact on consumers is underway. Those that are no longer beneficial or relevant should be removed to achieve a greater degree of freedom and economic benefit for Americans.

The current edition of “Ten Thousand Regulations,” from the Competitive Enterprise Institute’s Wayne Crews, tracks the “size, scope and cost of federal regulations, and how they affect American consumers, businesses, and the U.S. economy at large.” Crews reports that federal regulations and intervention cost Americans $1.9 trillion in 2017, slightly more than the total of individual and corporate taxes paid, and he notes that another 3,209 new regulations are in various stages of development, poised to add more burdens on the consumer.

The overabundance of federal regulations is a result of regulations retained long after their useful life and of regulations that pander to special interest groups at a cost to everyone else. Some new regulations are genuinely needed to respond to changes in technology and our economy. But that describes only the regulation headcount. The full impact of regulation comes from how well they are crafted to address the real public interest.

For example, when a new drug is in the approval process, regulators need to decide whether the drug’s expected reduction in suffering exceeds the impact of its dangerous side-effects (including death). If too much weight is accorded to the suffering from the side-effects, then too many people suffering from the targeted disease will be denied a viable treatment. Any decision on where to set the balance point will displease someone.

The Environmental Protection Agency (EPA) has a penchant for ratcheting up the monetary value of each life saved by its regulations. In 2008, it used a $5 million value, but raised it to $9.1 million in 2010. The Food and Drug Administration (FDA) raised its estimate of a life’s value to $7.9 in the same year. Evidently the EPA thinks people it serves are more valuable than those served by the FDA.

Choosing higher values for the value of a life forces firms to incur greater costs, costs that are passed along to consumers. In 2005, the Department of Transport (DOT) wanted to require a doubling of automobile roof strength. They estimated the stronger roofs would save 135 deaths per year, but it would increase costs by $800 million, so they relaxed the strength requirement to a level that would save 44 deaths per year. In 2010, the Obama Administration increased the value of a life from $3.5 million up to $6.1 million, enabling DOT to hit its earlier target of 135 lives. Fiddling with the value of a life seems to be a panacea that allows regulators to justify any health and safety posture they favor.

During the 2016 election cycle, President Trump vowed to remove two existing regulations for each new regulation he adopted. That ratio might well describe the state of federal departments and agencies. For most new administrations, the low-hanging fruit for right-sizing regulations is the batch of regulations the prior administration rushed to approve during its final days in the White House. The Office of Management and Budget reports that by mid-2017, the Trump Administration had “frozen or withdrawn hundreds of planned rules” in President Obama’s regulatory pipeline, including at least 30 regulations from the EPA.

Today, there are three regulatory cleanup processes in play: first, rescission of outdated or defective regulations; second, delay and or improvement of impending regulations; and third, the issuance of new regulations to achieve legitimate policy goals. The Brookings Institution is tracking how the federal departments and agencies are reviewing and changing more than 130 of the most significant regulations.

Last December, the General Counsel of the National Labor Relations Board (NLRB) rescinded many policy guidelines and initiatives of his predecessor. NLRB also issued a Request for Information on pending rules for “ambush elections,” a highly controversial rule that permitted calling a very hasty election for union representation.

Two aggressively unfair regulations that the EPA relied on in the last decade are being rescinded. First is the “once in, always in” policy that condemns firms that have been classified as a “major” source of hazardous air pollutants to remain classified as major sources even if they have lowered their emissions” to acceptable levels. While it may thrill some to see corporations in a doghouse forever, denying them a chance to improve their status is counterproductive. It kills the incentive to clean up their operations.

The second major EPA regulation for rescission is the scheduled increase in CAFÉ standards (mandatory fuel economy fleet average of 54.5 miles per gallon by 2025). Consumers are not buying enough of the very small and limited range electric cars to permit manufacturers to meet the CAFÉ standards applied to their fleet. Normal sedans, pickups, and SUVs do not provide the mix of fuel economy needed to meet highly optimistic CAFÉ standards. The small electric cars may meet the fancy of city dwellers, but they did not meet the needs of suburban-rural consumers and those who need to haul equipment to jobsites.

As part of the regulatory cleanup, the Internal Revenue Service (IRS) has delayed some specific regulations, such as section 987 and section 385 regulations. Section 987 covers the allowed timing and level of foreign exchange used in calculating US firms’ foreign revenue and expenses. Section 385 covers whether an interest in a firm must be treated as a stock or an indebtedness. Those issues may have a bearing in the repatriation of assets held overseas by US corporations, part of the tax reforms of 2017. A delay in Section 987 effectiveness probably makes sense given the likely issues related to asset repatriation.

Some may feel that once a regulation is adopted, it should be treated like a religious Commandment or like an amendment to the Constitution. That misreads the situation. Circumstances change, and sometimes errors were embedded in the regulations. We should welcome a campaign that checks on the need for and efficacy of regulations, provided it is conducted in a professional, analytical manner. So far, the review of regulations has identified a lot of obviously bad apples. Removing them delivers more freedom and economic benefits.