Don't Be Naive About Regulatory Reform

A little serious.

Photographer: Chip Somodevilla/Getty Images

There are few things worse than red tape, and in government there is plenty to go around. That’s why House Speaker Paul Ryan’s latest regulatory-reform plan can’t be dismissed entirely. Just mostly.

Start with the worthwhile stuff. Making agencies coordinate better on rules that overlap is a good idea, as is offering longer public comment periods for the most sweeping regulations. It also makes sense to make routine the process by which agencies review old regulations to ensure they’re still necessary. And wider use of sunset provisions -- regulations that automatically expire unless agencies can show they’re still needed -- could help reduce regulatory overload.

The plan also contains more dubious ideas. It endorses the notion of the so-called regulatory budget -- basically, capping the number of regulations any agency could issue (or requiring that any new rule be accompanied by the elimination of an old one). It’s an appealing concept, and no doubt there are many useless and outdated regulations on the books. But the way to go about pruning them is to judge each on its merits. And if the idea is to reduce regulations, this proposal would have no effect.

It’s also worth noting that the cost-benefit analysis that Ryan is calling for -- and is unquestionably worthwhile -- is already happening. Such analysis of new rules has taken place in the executive branch at least since Ronald Reagan was president, and the Barack Obama administration has been particularly vigilant about it. Ryan would require such analysis by law, and extend it to the handful of agencies (such as the Securities and Exchange Commission) where it is not now the practice.

The trick with regulatory reform -- as with politics, for that matter -- is not to be naive about it. By necessity, the process of rule making straddles the line between the possible and the necessary. Some members of Congress will always be dissatisfied with this or that regulation. That doesn’t mean they should have the right to rewrite or eliminate it. Congress needs to rely on the executive branch to further define and enforce the laws it passes.

That’s why Ryan’s comment when he introduced his plan is so worrisome: “No major regulation should become law,” he said, “unless Congress takes a vote.” Not only does this misunderstand Congress’s role, but it is also tantamount to eliminating all new major regulation.

None of this is to say that Ryan is wrong to focus his attention on a sclerotic and often frustrating rule-making system. Just because people disagree on the value of various costs and benefits doesn’t mean cost-benefit analysis shouldn’t be performed as widely as possible. The goal should always be to base any regulation on the best information available -- and to reassess it as that information changes.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.