An Environmental Report Card on the 104th Congress

Policy Backgrounders | Energy and Natural Resources

No. 141
Tuesday, January 14, 1997
by H. Sterling Burnett

Regulatory Reform

Almost everyone agrees that the federal regulatory regime is cumbersome and that it produces top-down, one-size-fits-all regulations - regulations that impose enormous costs on businesses, increase the cost of goods and services, reduce economic growth, are unfair to property owners and fail to achieve their goals. For example:23

  • The private sector annually spends more than $668 billion, or more than $6,000 per household, to comply with federal regulations.
  • The government spends billions more to study, produce and enforce regulations.
  • An estimated $1.3 trillion in U.S. economic activity is lost each year due to federal regulations.

If social and environmental regulations were protecting human health or preventing environmental degradation, the enormous costs might be justified. But critics on both the left and the right recognize that many regulations are inefficient and inffective. With the change in the makeup of Congress, many expected fairly radical regulatory change, but it did not occur. Except for the two previously cited provisions contained in the debt limit bill, the 104th Congress was unable to agree on how best to achieve reform and approved only modest steps.

Grade: Incomplete

Cost-Benefit Analysis.

Most regulatory reform bills included cost-benefit analysis components. Almost without exception these provisions were stripped away before final consideration of the bills. The reason was simple: talking about costs in relation to quality of life strikes many as vulgar. Moreover, many people associate "cost" considerations with arguments on behalf of greater corporate profits. In fact, cost simply refers to the forgone opportunities that accompany the pursuit of any activity. That all human endeavors have costs in this broad sense does not mean they are not worthwhile. What an activity costs is simply what is given up to undertake that activity.

"Effective regulatory reform requires careful cost-benefit analysis."

Cost-benefit analysis produces information by comparing various options that may all be beneficial but that cannot all be undertaken simultaneously. Such analysis does not curtail or eliminate the decision-making authority of elected officials or agency bureaucrats; it does produce information that should be incorporated into all public-sector decisions. Effective regulatory reform requires careful cost-benefit analyses before agencies take action or Congress renews programs.

Grade: Incomplete
Bill: B-

Regulatory Review and Sunset Legislation.

Businesses consider it a sound practice to periodically review their activities and goals. Administrative agencies also should periodically review regulations and eliminate or "sunset" outdated or ineffective rules. This would help ensure that as states begin assuming more reponsibility for environmental programs their efforts will not be hampered by outdated federal regulations and programs.

A regulation review provision was part of the debt limit bill discussed above. The House Senate Conference Committee stripped the provision from the debt bill to avoid a threatened presidental veto. The Clinton administration maintained that requiring periodic agency reviews would tie up scarce resources and encourage endless litigation.

While reviews every five to seven years would require agency resources, they likely would save time, effort and other resources now spent complying with archaic rules. Whether the reviews spurred litigation would depend upon whether bureaucrats were willing to scrap outdated rules. Lawsuits probably would notify the defendants that inertia, obstinacy and bureaucratic self-interest had become punishable. More flexible, more carefully tailored regulations would result.

"Fundamental reform is long overdue."

Conclusion. Environmental policy reform is long overdue. The rising mistrust of government corresponds to an increase in both the number and nature of federal regulations, including environmental regulations. It is unfortunate that successful environmental reforms in the 104th Congress were not significant enough to mitigate this distrust.

NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.

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