The regulatory pile only grows.

Photographer: Sean Gallup/Getty Images

5 Smart Ways to Cut Red Tape

Cass R. Sunstein is a Bloomberg View columnist. He is the author of “The World According to Star Wars” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”
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In last week’s State of the Union address, President Barack Obama appeared to get his biggest bipartisan applause for this line: “I think there are outdated regulations that need to be changed. There is red tape that needs to be cut.”

Republican presidential candidates have spoken in the same terms, though more emphatically. One of their most urgent priorities is to reduce the stock of existing regulations, and slow the flow of new ones as well.

Sure, Democrats like regulation more than Republicans do, but with the current focus on economic growth and national competitiveness, there’s both a need and an opportunity for bipartisan agreement here -- if not this year, at least in 2017. (As administrator of the Office of Information and Regulatory Affairs from 2009 to 2012, I saw that Democrats and Republicans often concur on what makes sense and what doesn’t, at least once we cut through abstract rhetoric and look at actual policies.)

Here are five proposals on which Democrats and Republicans should be able to agree:

Require every regulatory agency, by statute, to produce an annual report on its progress in cutting regulatory costs. In 2011, Obama ordered his agencies to engage in a “regulatory look-back,” with the goal of reducing and simplifying national burdens. That effort has produced significant results, with over $22 billion in short-term savings. But far more remains to be done.

Congress should require every agency to act, every year, to cut unnecessary, obsolete, ineffective or unduly burdensome regulatory requirements and paperwork burdens (now in excess of 9 billion hours annually!). In the process, it should direct agencies to quantify the savings, so that they do not list merely symbolic reforms that will make no difference in people’s lives.

Enact into law the cost-benefit requirements that have been imposed by all presidents since Ronald Reagan. In 1981, Reagan issued a historic executive order, forbidding executive agencies from issuing new regulations unless their benefits outweigh their costs, and also requiring agencies to choose the least expensive means for achieving their goals. Reaffirmed by every president since Reagan, these requirements have done a lot of good.

Nonetheless, agencies don’t always obey them, and sometimes they aren’t transparent enough about the costs and benefits of new rules. For example, the Food and Drug Administration could have been much clearer about the effects of its various post-2005 bans on asthma inhalers that emit very modest levels of ozone-depleting chemicals. A congressional enactment would have more weight than an executive order.

Extend cost-benefit discipline to independent regulatory agencies. Reagan declined to apply his 1981 executive order to agencies designated by Congress as having some degree of insulation from presidential control, such as the Securities and Exchange Commission, the Federal Reserve Board and the Federal Communications Commission. His successors have followed him. One reason is that the president may lack the legal authority to do so.

In view of the substantial costs now imposed by such agencies on the private sector, Congress itself should require more discipline from them. A required accounting of both costs and benefits would help to prevent excessive regulatory burdens (including some that might be imposed on small businesses under the Dodd-Frank law).

Control the use of “interim final rules. Under the Administrative Procedure Act, agencies are usually required to propose their rules to the public, and to seek comments before their rules can be finalized. That’s an important safeguard, because public comments often highlight the points that agencies don’t have right, and show how proposals need to be fixed.

In the last two decades, however, agencies have increasingly resorted to regulations with a confusing name: interim final rules. These become final without any public comment, but they are meant to be provisional.

Agencies argue that because of a legal deadline, or some other emergency, they have to act quickly. The result is that they end up finalizing some rules that aren’t clear or that contain real mistakes. And while those rules are supposed to be temporary, agencies rarely revisit them.

Congress or the president should constrain this practice, by authorizing interim final rules only when absolutely necessary (in cases of imminent threats to public health or safety, for example) and requiring agencies to take comments on any such rules and to revisit them within 18 months.

Require “employment impact statements.” Republican presidential candidate Marco Rubio last week called the Environmental Protection Agency the “Employment Prevention Agency.” That’s hyperbole, but it’s fair to ask agencies to estimate the employment effects of rules that are especially expensive (such as those costing more than, say, $500 million annually).

During the Barack Obama administration, agencies have often done exactly that. But Congress has not required them to do so. Nor has any president, Republican or Democratic, explicitly mandated such an assessment.

With the current national focus on increasing employment opportunities, it’s time. If a regulation really would eliminate significant numbers of jobs, the American public should know about it -- and the agency should do whatever it can to reduce that harmful effect.

The left and the right may not agree on Obamacare, climate change or tighter restrictions on Wall Street. The good news is that across ideological divides, there’s a lot of room for bipartisan reform that would significantly cut costs and burdens -- and do so without compromising safety, health and environmental goals.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Cass R Sunstein at csunstein1@bloomberg.net

To contact the editor responsible for this story:
Christopher Flavelle at cflavelle@bloomberg.net