Sunday, November 24, 2013

Regulations and sunset provisions

I haven't posted on something like this in a while, but I figure folks may be getting tired of the clothing posts, and it's something that's been on my mind lately, so I thought I'd share. The US Constitution was designed with the idea that laws should be hard to pass--that's why they have to go through both houses of the legislature and the president before they're enacted.  The system of regulations bypasses this safeguard.  Regulations aren't passed by Congress.  Instead Congress authorizes the executive branch to make the rules that it then enforces.  Now, aside from the question of whether that blurring of the Constitutional division is problematic in itself, there's the problem that all the incentive in these regulatory agencies is to create regulations, not limit them.

As Tyler Cowen puts it in his New York Times column:
Many regulations, when initially presented, can sound desirable. The problem is that, taken in their entirety, excess rules divert attention from pressing issues like the need for innovation and new jobs.

Michael Mandel, an economist at the Progressive Policy Institute, compares many regulations to “pebbles in a stream.” Individually, they may not have a big impact. But if there are too many pebbles, a river’s flow can be thwarted. Similarly, too many regulations can limit business activity. When the number of rules mounts, it can become hard for a business to know whether it is operating within the law’s confines. The issue is all the more problematic when federal, state and local constraints all apply.
...
What we need today is the selective pruning of bad regulations. Cost-benefit studies are a good idea, but they tend to be done when we have the worst possible information about the effects of regulations — namely, before the regulations are passed. Furthermore, cost-benefit studies may look only at some of the largest regulations, and not the general problem of regulatory accretion over time.

Better bureaucratic incentives are needed. Agencies are now motivated to generate regulation after regulation, because those are the formal assignments set before them. One possible step forward would be to require agencies to submit plans for retiring some fraction of their regulations over the next few years, and to reward these agencies for seeing this process through.
While that's a good idea, I'm wondering if something more drastic isn't needed. Perhaps what we need is a requirement that all regulations come with a sunset provision, so that they will expire in a number of years.  Such a sunset provision could be applied retroactively by law--all current regulations expire 15 years from their start or 5 years from the date of the sunset law's passage, whichever comes later.  That will give regulatory agencies time to propose and implement new regulations as the old ones expire, which will require them to review their rules and decide which ones they should keep.

In addition, any new regulations must have a sunset provision of no more than 2-5 years (personally, I prefer two, but it may be that five is more workable).  This is too short on its own, which is where we put Congress back in the loop.  Congress can extend the sunset provision on any regulation by ten years, but not by more than ten years, so that any existing regulation will have to come up for review every ten years.  I imagine this will happen in an omnibus bill of all the regulations proposed by the regulatory agencies.  Most of the regulations will pass, but there will always be some that will be removed, or changed, in the amendment process. That's as it should be. The advantage here will still go to the regulatory agencies, since it's harder to remove and change regulations than to put them all in the proposed bill in the first place, but at least Congress will have some say, which will make regulatory agencies more accountable to the elected representatives of the people.

What's needed is some way to prevent regulatory agencies from just reinstating the same regulations as soon as they expire, and thus bypassing Congress.  A provision that a new regulation substantially the same as an expired regulation cannot be instituted for at least five years might help with that.  It can be left to the courts to decide what qualifies as substantially the same. Or some measures could be spelled out in law: for example, the same rules, just with different, or even stricter, numbers, is not substantially different.

So, would this work? Would this help clear away some of the old, ossified regulation while making sure that Congress has more of a say in the rules that do apply?  Or would it be an unworkable mess? Is it politically feasible, or would the groups interested in preserving the current regulatory regime quickly overpower the movement for such a law?  Certainly, I don't think the regulatory agencies themselves are looking for more Congressional oversight, and I'm not sure that any president would agree with allowing Congress to take away much of his influence.

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