What Makes for Effective Regulatory Reform?

June 10, 2014

Whether the criticism is aimed at the influence of lobbyists, activist groups or politics, federal rulemaking has been criticized by people of all political stripes. Some argue that regulatory analysis would benefit from policy-neutral experts, while others say that the biggest problem facing efficient rulemaking is the need for accountability.

Sherzod Abdukadirov, research fellow at the Mercatus Center, identifies four criteria necessary for successful regulatory reform:

  • Independent oversight: Reforms that give the agencies themselves authority over compliance are rarely successful. Effective reforms give fully independent, outside parties a check over regulatory agencies.
  • Veto power: Oversight over rulemaking is only effective if the overseer has sufficient powers, such as allowing courts to invalidate rules that do not comply with the law. Only requiring scientific peer review, on the other hand, has less effect, as agencies can ignore those reviews.
  • Broad applicability: Reforms that apply to just a small subset of rules will have little overall effect on the rulemaking process.
  • Expertise: Peer review of economic or scientific analysis is important, allowing outside actors to question judgments within analyses and requiring agencies to defend the quality of their analysis.

Would any recent regulatory reforms that have been proposed in Congress improve the regulatory process? Abdukadirov assesses a few proposals:

  • Congressional approval of major regulations: Requiring congressional approval for all major regulations would place an independent check on regulatory activity and has broad application to all major rules. Its shortcoming, however, is that it does not address the quality of regulatory analysis, and courts might be reluctant to overturn regulations if they were passed by Congress.
  • Establishing oversight of agency analysis: This reform would create an office, similar to the Congressional Budget Office, which would independently evaluate agency economic analysis of major rules, limiting agencies' monopoly on economic analysis. But because it would lack veto power, the office's primary function would be to alert Congress and the public to rulemaking flaws.
  • Extending presidential oversight to independent agencies: Currently, independent agencies are not required to provide economic justifications for their regulations. These reforms would require cost-benefit analyses from independent agencies.

Source: Sherzod Abdukadirov, "Evaluating Regulatory Reforms: Lessons for Future Reforms," Mercatus Center, May 29, 2014.

 

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