Let’s Make 2023 the Year of State Deregulation

T wenty twenty-three could be the year red tape loses its grip. As governors across the nation announce their agendas, cutting regulatory red tape has emerged as a key goal in Iowa, Arkansas, Nevada, Virginia, and Ohio. Other states should fully embrace this goal and aim to enact long-lasting reforms that pay off for years to come.

Removing unnecessary regulations is an idea whose time has certainly come. With the national economy facing a downturn, state governors are looking for every opportunity to help struggling businesses remain afloat. One key means of accomplishing this is to carefully evaluate whether the government’s rules are accomplishing their objectives without placing undue burdens on businesses.

By some estimates, federal regulations impose nearly $2 trillion in costs on the economy each year. State regulations add even more. The Mercatus Center at George Mason University found that, on average, every state imposes 135,000 restrictions of its own via regulation, on top of existing federal regulations. These state regulatory burdens can quickly add up for businesses and are especially costly to those businesses with a presence in many states.

Because regulatory burdens have long tied up opportunities, states need creative ways to cut red tape. Regulatory sunsets, mandatory cost-benefit analyses, and accountability metrics are three regulatory-process reforms every state should consider to improve their regulatory climate.

States should follow Kentucky’s lead and require every regulation to sunset, or expire, after a fixed period of time. This prevents outdated, contradictory, and unhelpful regulations from needlessly burdening job-creating businesses for decades. And it allows regulatory agencies to renew the most important regulations tailored to target each state’s most pressing problems.

Any business owner can tell you that regulations impose real costs. From paperwork to projects that stall while awaiting government approval to the need to hire lawyers to track every little regulatory change, the price of red tape adds up quickly. But despite knowing this, many states do not require agencies to produce a public cost-benefit analysis of a regulation so it can be publicly scrutinized before it is finalized. States should follow New Hampshire’s lead and require thorough cost-benefit analyses with a special emphasis on the intent of each regulation and its effects on small businesses.

Similarly, many state regulators are not held accountable when the originally projected benefits of a proposed regulation don’t materialize, or when the costs of the same regulation are greater than anticipated. Innovative states should require agencies to include accountability metrics in proposed regulations that trigger automatic withdrawal and revision. For example, when an agency predicts that a regulation will cost 1,000 jobs but save 500 lives over ten years, the agency should have to withdraw the rule if fewer than 100 lives have been saved or more than 1,000 jobs have been lost after ten years.

To ensure that such regulatory-process reforms truly stick, governors should also partner with state legislators to codify them in the law, so that good regulations can quickly be issued while the most burdensome and problematic regulations are kept off the books.

Deregulation lowers the costs of growing a business, hiring new employees, opening new stores, and developing new product lines. When these costs decrease, businesses can grow, employees can earn more, and customers’ needs can be better met. Regulatory-process reform can spread out the benefits of deregulation across the entire economy, so that they aren’t limited to getting rid of a handful of especially egregious regulations.

It is too often the case that politicians enter office promising to “shake up” government only to emerge from office unsuccessful a few years later, having decided to embrace the attitude of the government itself or realized that the hard and unglamorous work of systematic reform will take much longer than they’d hoped.

By embracing regulatory reform, innovative and courageous governors such as Kim Reynolds of Iowa and Sarah Huckabee Sanders of Arkansas are championing small businesses and empowering markets at the expense of entrenched special interests. Cutting red tape will help their states weather the current economic storm and free businesses to thrive for years to come.

— Jonathan Wolfson is the chief legal officer and policy director at the Cicero Institute, where his research focuses on health-care and regulatory policy. Matthew Nolan is the Cicero Institute’s regulatory-policy manager.