How Loosening Regulations Can Fight Coronavirus and Help the Economy

The headquarters of the U.S. Food and Drug Administration in Silver Spring, Md. (Jason Reed/Reuters)
A new Trump Administration executive order is a step in the right direction.

NRPLUS MEMBER ARTICLE I f a regulation isn’t needed during a crisis, it was probably never needed at all. To his credit, President Trump signed an executive order on May 19 to encourage federal regulatory agencies to remove regulations hindering the response to the COVID-19 pandemic. Federal, state, and local officials have already removed more than 500 regulations from the books in recent weeks. The Food and Drug Administration lifted restrictions on telemedicine, enabling millions of people to check in with their doctors without risking virus exposure, for example. The FDA has also promised drastically accelerated approval for coronavirus treatments as scientists develop them. And local authorities across the country waived permitting requirements for restaurants to offer delivery to customers who were unable to dine in. Now is the time to continue that process and speed it up. There has been plenty of talk about how the pandemic demonstrates the need for more government, but the advantages that can come from regulatory relaxation suggest that, on the contrary, it has made the case for rather less.

As it is, Washington’s response to the COVID-19 crisis so far has fallen short. Hasty “flash policy” has sprinted through Congress with little debate, costing trillions of dollars and likely with limited economic impact. The new executive order’s proposed actions on regulation send a positive signal at a time when it is desperately needed.

Politicians do not make medical supplies. Entrepreneurs, businesses, and workers do — when they can get the right permits. Politicians will not lead an economic recovery, either. Washington can best help by getting out of the way — though doing so will take considerable effort.

Waiving regulations can take months or even years, even when they are clearly harmful. Trump’s new executive order is a start. It encourages agencies to use whatever emergency powers they have to speed along the cleanup process. Unfortunately, many drastic regulations are passed during emergencies, from unconstitutional national-security and surveillance policies to bailouts for favored big businesses. But fortunately, regulations can also be removed that way. We have a choice. The famous “ratchet effect” of government’s grabbing power during a crisis and keeping it afterward does not have to be an iron law.

The executive order directs agencies to use discretion in enforcing rules they keep and to “decline enforcement against persons and entities that have attempted in reasonable good faith to comply.” It also directs agencies to issue rulings and clarifications in a timely matter where possible. This would be a welcome change. People have more important things to worry about during a pandemic than filling out forms in triplicate.

So far, most waived regulations are only being temporarily suspended. The executive order encourages agencies to look at making the suspensions permanent. The coming economic and health recovery could take years, and a longer-term approach to regulatory easements could save a lot of livelihoods and eliminate surprise policies.

There is a lot more to do. Executive orders can be easily undone by the next president, but legislation has more staying power. Congress and the president should jointly enact automatic expiration dates for new regulations to prevent them from gumming up the economy as they become obsolete. Existing regulations should be reviewed by a standing independent committee, modeled on the 1990s Base Realignment and Closure (BRAC) commission, which saved billions of dollars by closing military bases no longer needed after the Cold War ended. A regulatory BRAC-style commission would send Congress annual omnibus packages of harmful and obsolete rules to get rid of, giving fresh economic boosts every year.

President Trump and Congress also need to contain their own regulatory impulses, especially where the technology sector is concerned. We are fortunate that net-neutrality regulations were removed a few years ago, or else people in lockdown would have the same slow, throttled Internet speeds that Europeans are dealing with now. The new bipartisan anti-tech push on antitrust and media-content regulation would significantly harm economic recovery in the name of scoring political points.

Tariffs and buy-American requirements make medical supplies and other goods scarce and expensive, while harming agriculture, manufacturing, housing, and other essential industries. In public policy, the rule of thumb is that if you want less of something, you tax it. A tariff, after all, is a tax. Tariffs have been eased on some medical supplies from China since the spread of COVID-19. While there is now clearly pressure for a tougher trade regime with China for both strategic reasons and “to bring industry home,” we must consider the costs to Americans that would involve.

Meanwhile, other policies, such as automatic FDA approval of treatments already approved by trusted foreign allies, could strengthen America’s response to the pandemic and, by lowering costs, help the economy. This principle, called mutual recognition, would not only speed up access to treatment for COVID patients, but would also deliver a diplomatic advantage. If the administration is intent on fighting an economic war with China, the U.S. will need allies. In its earliest days, the Trump administration withdrew from the Trans-Pacific Partnership. Its current threats to leave the World Trade Organization would create a power vacuum that China would be delighted to fill. Gestures such as mutual recognition of coronavirus treatments would help put that process into reverse.   

Trump’s executive order is welcome, but it is just a beginning. The coronavirus outbreak is far from over, and the economic recovery will likely take years. There is much more to do, but at least agencies now have some framework for getting rid of regulations that were likely never needed in the first place.

Ryan Young is a senior fellow at the Competitive Enterprise Institute.

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