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Regulatory Reform Needs to Be Comprehensive



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The House votes on the REINS Act today, which is an important step in the right direction. Congress needs to take responsibility for the regulatory results of the legislation it passes. But let’s face it, there is no silver bullet that will fix our regulatory problems. In my view (which is informed by the work of my colleagues at the Mercatus Center), there are two core problems with the current system. 

First, agencies often fail to follow basic decision-making principles and assume that more regulation is always necessary. Back in March, my colleague Jerry Ellig testified before the House Judiciary Committee and made the point that the regulatory system suffers from systemic institutional problems. For example, there is a broad-based consensus on what regulatory analysis should involve and what its role in agency decision-making should be (as I described in my prior post), yet academic research shows that, more often than not, agencies do not produce or use thorough regulatory analyses. This is true regardless of what party is in charge of the executive branch.

Basic reforms that would begin to address these problems include:

  1. A requirement that executive-branch and independent agencies use regulatory analysis in their rule-making, which would force all agencies to focus on the basic elements of informed decision-making.
     
  2. A requirement that agencies publish a preliminary regulatory analysis, along with all underlying data and research, for public review and comment before the agency makes a final decision on whether or not to engage in further regulation, which would promote transparency and discourage the misuse of regulatory analysis as a justification document rather than an objective tool.
     
  3. A requirement that agencies explain how their regulatory analysis affected the decisions they end up proposing, including (1) the ultimate value to citizens that the regulation is supposed to produce and the evidence that the regulation will produce those outcomes; (2) the definition and root cause of the systemic problem the regulation seeks to solve; (3) the alternative approaches to solving the problem that the agency considered; and (4) the costs and net benefits of each alternative.

The good news is that the House recently passed the Regulatory Accountability Act and the Regulatory Flexibility Improvement Act, which, taken together, include these basic reform concepts. For example, the RAA would significantly amend the Administrative Procedure Act (APA), which governs federal agency actions.

The second core problem with the current system is that the more regulation agencies generate, the harder it is for individuals and businesses to comply. In many cases, no one knows for sure how many of the regulations we have on the books are really necessary or effective. Thankfully, while the House has made substantial progress in laying a foundation for regulatory reform, it does not appear to be resting on its laurels. Increasingly, members of Congress are demanding answers to the critical question of what actually works to solve problems. 



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