Regulating the Regulators: Assessing the 1997 Regulatory Improvement Act

Commentary by H. Sterling Burnett

In 1997 the federal government, which had demanded that new passenger vehicles come equipped with passenger-side air bags by that year, did an about-face. Until 1997 government regulators claimed thousands of lives would be saved in collisions. They failed to disclose evidence that passenger air-bags could kill infants, children and small adults. As mandated, air-bags were installed. Children died. In response to public outcry, the government announced that with a waiver from the National Highway Traffic Safety Administration (NHTSA), vehicle owners could disconnect their air bags.

Even with the NHTSA's waiver, finding an automotive repair shop willing to do the work is difficult, since shops fear legal liability should future owners be harmed in an accident involving a vehicle with disabled air bags. Those shops that will disable air bags charge as much as $1,000 to do the work; no small sum.

It never should have come to this. At most, the government should have recommended air bags, providing complete information concerning the relative benefits and costs of them - allowing consumers to choose.

In response to this and numerous other examples of regulations that are hazardous to people's health, a bipartisan group of Senators, led by Michigan's own Carl Levin (D) and Fred Thompson (R-TN), have started on the long journey toward regulatory reform by introducing the Regulatory Improvement Act of 1997.

Senate proponents of the Act argue that regulations are extremely expensive. As evidence, they point out that businesses and private citizens spend more than $6,000 per household to comply with regulations including higher prices for goods and services and resources spent on paperwork. In addition, economists have estimated that $1.3 trillion in economic activity is lost each year due to federal regulations.

Of course, if a regulation protects human health or prevents environmental degradation, enormous costs might be justified. Unfortunately, too often there are hidden costs imposed by regulations such as lost human lives. For instance:

  • A Harvard University/Brookings Institution study found that the weight shaved off new cars to meet mandatory fuel economy standards cause an additional 2,200 to 3,900 highway deaths a year ;
  • Harvard University researcher Dr. John Graham did a thorough risk-benefit analysis of many regulations and found that reallocating our limited funds for health, safety and environmental regulations could save an additional 60,000 lives a year.

The Levin-Thompson Regulatory Improvement Act represents a first step at minimizing lost lives due to ill-considered regulations by ensuring that major regulations (those having more than a $100 million impact on the economy) are made only after all relevant information is gathered and publicly disclosed.

The act is basically "right-to-know" legislation. It says first, that citizens have a right to know what regulations are intended to accomplish and at what cost. In other words, the act requires a cost-benefit analysis be completed for all regulations. Cost-benefit analysis provides a useful way to compare various options, all of which may be beneficial in some way but not all of which can be simultaneously undertaken.

Second, the Regulatory Improvement Act says that if regulatory agencies do not use the least costly methods available to fix particular health, safety and environmental problems, the public has a right to know why.

Third, the act says the public has a right to know what the relative risks are that the regulations are meant to reduce, what scientific evidence was used to estimate these risks and what risk the regulations themselves pose. Information on relative risk is critical to making good public policy. By making the science transparent the legislation hopes to head off claims that "junk science" is being used to justify regulations or that relevant scientific data that does not support a rule is being suppressed. By requiring the types of analysis carried out by Dr. Graham, the Levin-Thompson Act hopes to avoid combating trivial risks when substantial harms could be averted using the same money.

Even proponents of the Regulatory Improvement Act see the bill as just the beginning of a longer-term reform effort. For instance, several legislators have argued that Congress should have to review and affirm by vote all new regulations. This reform would increase accountability in two ways. First, regulatory agencies could no longer interpret congressional intent in ways that increase their budgets and expand their power without improving human health or environmental conditions. Second, Congress would be unable to continue blaming regulatory agencies for bad regulations. If costly and ineffective regulations became law, the voters could hold legislators accountable.

Regulatory reform is long overdue. Though the Levin-Thompson bill is only a small step, it is a step in the right direction. The regulatory state was not built in a day; it is unlikely to be substantially improved in two sessions of Congress, much less in one bill. Should the 1997 Regulatory Improvement Act become law, future legislators might be emboldened to give more comprehensive regulatory reform a try.