Enquirer editorial

This article first appeared in The Enquirer on July 25, 2010.

In civics lessons on "how a bill becomes law," we sometimes hear this catch-phrase to describe the process: "The president proposes, Congress disposes." What we seldom hear is the third part of that formula: "The rule maker imposes."

The reality of our system is this: Congress and the president don't have the final word, not by a long shot. Unelected bureaucrats in federal agencies do. In drawing up the regulations to implement a new law, they decide how it will actually work - whom it will affect, and how.

It is a reality we can't afford to ignore, especially with the monumental pieces of legislation passed this year - health care reform and, last week, financial reform - that will have profound effects on the American economy.

The rulemaking process, studies have shown, often adds billions to the real price tag of legislation through hidden costs to businesses and consumers.

This often is what's commonly known as "red tape" - requirements that are not really in the law, but in bureaucrats' interpretation of how the law should be applied.

So the stakes are high. Congress should exert more control over the rulemaking process - and have the courage to take responsibility for the rules that are created.

As the analysis on today's Forum cover shows, Congress' goal in its financial-reform legislation was to curb practices that contributed to the 2008 financial meltdown. To do that, it addressed banking fees, mortgage rules, hedge funds, Wall Street governance, proprietary trading, credit rating and more.

Whether those are the best fixes is subject to debate. But it is to an extent an empty debate.

That's because the 2,319-page bill gives 10 regulatory agencies the power to write the new finance rules - including, incredibly, some of the same agencies that were criticized for allowing the economic meltdown to happen.

As the Wall Street Journal reported late last week, the final product, including how strict the rules will be and who will be governed by them, will be the result of an intense, complicated negotiation and lobbying process that in itself will cost tens of millions of dollars.

"The shape of the reform won't be known until the regulators have spoken," banking law expert Satish Kini told the Journal. And that might take several years, during which time major financial institutions will have to play a long-term guessing game. It's nuts.

Why should this concern taxpayers?

They cost us money. This hidden federal "regulatory tax" costs American people more than $1.1 trillion a year, according to a study commissioned by the Small Business Administration. This is over and above what we pay in taxes, and comes in the costs of complying with measures that aren't even in the laws themselves.

They are inefficient. Regulatory agencies naturally tend to write rules that will increase their power and keep them in business, perpetuating and growing their bureaucracy.

They create uncertainty. Economic experts say the long delay and unknown details of final regulations forces businesses to postpone decisions on employment and expansion. That's especially harmful right now, delaying the nation's recovery. "The uncertainty is impeding investment and hiring," writes Stanford University economist Michael J. Boskin.

They usurp representative government. The real decision-making is turned over to agencies that Congress has no authority over, with entrenched bureaucrats that even presidents can't control. The health care reform law, for example, turns over power to the department of Health and Human Services to decide what kinds of health insurance plans are acceptable.

Rep. Geoff Davis, R-Hebron, says this practice "lets Congress off the hook" for the actual regulations - which often suits Congress just fine.

Regulation-writing agencies - the federal government has more than 50 of them - do play a worthwhile and necessary role. They translate Congress' sometimes vague, confusing language into specific directions on how to follow the laws it passes.

But the regulators are unaccountable to Congress and the people. There is little to stop them from going beyond the law, imposing costly mandates on the private sector that Congress did not intend.

The U.S. Environmental Protection Agency has issued its own finding that carbon-dioxide emissions harm public health, giving itself power to regulate carbon - unauthorized by Congress. The regulations that the EPA is developing could affect businesses, schools, residences and the products we use at a cost, some economists estimate, exceeding $400 billion a year.

The growth in federal rules has exploded in recent decades, making dealing with government almost impossibly complex, especially for small businesses. In 2009 alone, new rules formulated under the Bush and Obama administrations added more than $13 billion a year to Americans' costs - the highest one-year total since 1992.

In 1970, the Code of Federal Regulations (CFR), which lists all existing federal rules, contained about 55,000 pages. By 2009, the CFR had grown to 163,333 pages.

Legislation proposed by Davis, called the REINS Act, would require Congress to actively approve any major new rule (one with $100 million or more annual economic impact) proposed by a federal agency before it can be enforced. While it may have little chance of success, with lawmakers in both parties having a stake in keeping the status quo, it's an idea worth discussing.

Some regulatory relief may come from the Obama administration itself.

The little-known White House Office of Information and Regulatory Affairs (OIRA) is in a powerful spot. It reviews proposed rules and has the authority to reject them. It has faced numerous attempts over the years to weaken or even eliminate it.

But President Obama's appointee to head OIRA, former law professor Cass Sunstein, is a strong advocate of cost-benefit analysis who's shown a willingness to dump rules that don't make financial sense.

That process should be encouraged, and Congress should require all agencies to submit cost-benefit analyses to OIRA.

It also should consider requiring a "sunset" date for regulations, at which they must be reauthorized. Otherwise, regulations tend to accumulate, piling on each other, sometimes counteracting each other, as people forget why they were originally imposed.

The rules shouldn't rule. The people should.

Regulations costing millions of dollars are created without congressional approval

Baltimore Sun 

By Jeff Rosen and Susan Dudley
 
August 9, 2010

Every year, more than 60 federal agencies issue thousands of new regulations covering every sector of the American economy. The Small Business Administration estimates the cumulative costs of these regulations at more than $1 trillion annually, or more than $10,000 per household per year. These regulations are legally binding, yet they emerge from unelected officials in regulatory agencies; Congress never has to vote to approve them.

Over the last few decades, on average, between 30 and 40 of the new final regulations issued each year have been considered "major," with impacts of more than $100 million. In the past year-and-a-half, federal agencies have issued 94 major final rules (59 in 2009, and another 35 already this year). The costs of many of these are measured in the billions and even tens of billions of dollars.

For example, last year the Department of Energy issued costly regulations restricting certain kinds of light bulbs, as well as standards for clothes washers, while the Department of Interior issued rules on alternate energy uses of the Outer Continental Shelf. The Department of Transportation issued a $10 billion rule requiring railroads to use "positive train controls," and another $1 billion rule requiring stronger car roofs (despite the DOT's analysis indicating the benefits would not justify the increase in consumer prices). This year, the DOE added another rule setting standards for pool heaters and water heaters, while DOT and the Environmental Protection Agency issued a $60 billion regulation increasing auto fuel economy, and the Federal Aviation Administration issued a $7 billion rule to change aircraft equipage requirements. And the EPA issued rules to begin to regulate most of the economy to try to limit global warming.

Regardless of whether these rules are good or bad, there is no question they involve very significant costs for our economy, possibly slowing the recovery and hindering job creation.

Moreover, the Obama administration's current "Regulatory Agenda" identifies almost 4,000 regulations under development, 191 of which involve more than $100 million each. The costs of these mandates sometimes dwarf the budgets of the regulatory agencies that produce them, yet these "off-budget" rules are not subject to the same scrutiny as on-budget spending. Congress had to vote to approve the nearly $13 billion used to fund the Department of Labor in 2009, for example, but did not vote with regard to any of the 10 major final rules the department issued in the last year and a half. Throughout our government, regulatory agencies cannot hire staff or spend money without approval from Congress, but they routinely issue regulations that impose huge costs without any congressional approval.

Our government was built on the dual principles of separation of powers — with "all legislative powers … vested in a Congress of the United States" — and checks and balances. Over the last century, Congress has delegated more and more legislative authority to the Executive Branch, but it need not give up accountability for these administrative laws.

A procedural change where Congress would have to vote to approve high-impact regulations could restore a system of checks and balances to federal regulation. Sixty-eight members of Congress have proposed legislation that would accomplish this, requiring congressional approval under expedited procedures before major regulations can go into effect.

Critics of the bill, known as the "REINS Act," are concerned that Congress would not have enough time to vote on every major rule, and that the requirement would produce gridlock. However, over the last 18 months, Congress has found time to enact 210 new laws, including 58 votes to name Post Offices and other federal buildings. Surely a Congress that has time to vote on the names of 58 federal buildings could make the time to vote on 59 important federal regulations that have the force and effect of law.

Not only would this give Congress more accountability and control over the implementation of the legislative powers it delegates, but it would encourage fuller transparency and informed debate on these significant regulations that have the power of law.

Susan Dudley, former administrator of the Office of Information and Regulatory Affairs at the White House Office of Management and Budget under George W. Bush, is director of the Regulatory Affairs Center at The George Washington University. Jeff Rosen, former general counsel and senior policy advisor at the OMB, is a partner at Kirkland & Ellis LLP.