October 29, 2015

Make America Great Again (on Regulations)!

James Broughel

Senior Research Fellow
Summary

Every day newspapers remind us of the daunting challenges we face: Entitlements that threaten to bankrupt the country, a political system incapable of solving big problems, diminished influence on the world stage. The dysfunction in Congress may generate most of the headlines, but there is evidence of U.S. decline in one additional, and often overlooked area — regulation.

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Donald Trump's popular campaign slogan is "Make America Great Again." Implicit in these four words is the idea that America's greatest days are behind us. To many Americans, it feels like the United States is in a state of decline, hence Trump's message resonates with ordinary Americans who want to see the country make a turnaround.

Every day newspapers remind us of the daunting challenges we face: Entitlements that threaten to bankrupt the country, a political system incapable of solving big problems, diminished influence on the world stage. The dysfunction in Congress may generate most of the headlines, but there is evidence of U.S. decline in one additional, and often overlooked area — regulation.

Regulatory policy may not be sexy, but it touches on nearly every aspect of American life from the price of food at the grocery store to the quality of our children's daycare. And these days, with a gridlocked Congress, regulation is the primary way policies are enacted in Washington D.C.

There was a time when the U.S. regulatory system was an inspiration to other countries. In the early 1980s the United States became the first major country to require economic analysis for our biggest executive agency rules. We implemented a rigorous third party review process of agency analysis to ensure quality. Dozens of other countries followed our example by requiring some form of regulatory analysis from their own agencies.

Yet now the U.S. is slipping behind when it comes to advancing evidence-based policy. Europe is the most recent example. In May, the European Commission released details of its "Better Regulation" initiative, a comprehensive effort to overhaul the EU regulatory state. The European vision is ambitious: Require more rigorous and earlier economic analysis from regulators, set up a permanent body to review the existing stock of regulations, make regular recommendations to reduce cumulative regulatory burdens and put analysis in the hands of legislators who can use it to set priorities and make funding decisions. Better regulation shows us what a 21st century regulatory system might look like.

Similar reform proposals exist in the U.S., but they are bogged down in a gridlocked Congress. Meanwhile, other countries are making strides of their own. The United Kingdom and Canada set caps to limit the amount of red tape piling up on their books. If an agency wants a new rule in place, it has to remove an old one and sometimes two. Such caps constrain regulatory growth, helping ensure regulations don't stack up indefinitely towards the heavens.

Back home in the U.S., regulators say the sky is the limit. The U.S. Code of Federal Regulations is now more than 175,000 pages and growing. Laid end to end the pages of this volume stretch almost the length of a marathon. Who has time to read — let alone understand — so many rules?

In part, the problem lies with the process whereby agencies create regulations. It dates back to a bygone era — the 1940s — when Congress designed the current system of rulemaking. Since then presidents have made small incremental changes to the rulemaking process, as has Congress, but the essential structure of our regulatory system remains what it was in the mid-20th century. That structure incentivizes more regulation, but not necessarily what the Europeans are seeking — better regulation.

Whether or not one supports Donald Trump on most issues, we can all agree with his goal of making America great. The regulatory process we have is nearly 70 years old and wasn't set up to deal with a rapidly changing 21st century marketplace. If we really wish to "Make America Great Again," a great place to start is regulation.