January 25, 2012

Currrent Regulatory Reform Misses the Point

Jerry Ellig

Former Senior Research Fellow
Summary

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The administration recently highlighted its efforts to clean out the regulatory code, noting “[w]e’ve already announced over 500 reforms, and just a fraction of them will save business and citizens more than $10 billion over the next five years.”

Mercatus Center Senior Scholar Jerry Ellig said the following in response:

“It’s great to clear out old regulatory underbrush, such as excessive paperwork requirements. But it’s about as helpful as ordering a Diet Coke with your deep-fried butter-on-a-stick. We have numerous new regulations on the way that could create a lot of new problems if agencies don’t think them through carefully.

“And our research shows that federal agencies are far too often writing regulations before they’ve fully defined the problem—let alone identified and examined the best options to address it. This approach has yielded a maze of regulations that both Democrats and Republicans now recognize creates harmful unintended consequences for American consumers. That’s the problem that real regulatory reform must address.”

The Mercatus Center's recent research on regulatory reform includes:

Beware the Rush to Presumption: This research looks at the eight major “interim final” regulations federal agencies issued to implement the Patient Protection and Affordable Care Act (ACA) and finds "ready, fire, aim!" rulemaking at its worst. In the rush to implement key provisions of the ACA, the federal government produced regulatory analysis that failed to comply with its own standards, yielded poorly substantiated claims about the health care law’s benefits and costs, and would receive an average grade of ‘F’ using the standards of the Mercatus Center's Regulatory Report Card (click here to see a brief overview.)

Regulatory Overload: There are over 165,000 pages of federal regulations, almost 20,000 of which were added in the past four years. Psychology, economics, and organizational science, however, suggest that too many regulations—particularly highly detailed regulations—may reduce compliance, discourage innovation, and fuel uncertainty, ultimately making Americans less safe (click here to see a brief overview.)

Ready, Fire, Aim! This short research summary reviews the foundational problems with the regulatory process.

Assessing the Quality of Regulation: The Mercatus Center’s Regulatory Report Card is an ongoing research project that assesses the quality and use of regulatory analysis by federal agencies using criteria set forth in executive orders, OMB guidance, and statute. To date, the average score for regulatory analysis by federal agencies is an ‘F’. The research indicates that the weakest aspects of regulatory analysis are: (1) identifying the systemic problem a proposed regulation is supposed to solve, (2) defining the outcomes the regulation is supposed to accomplish, (3) identifying and assessing the options available for solving the problem, and (4) assessing the costs and benefits that each option entails.