The Senate's First Tentative Step Toward Regulatory Reform

by David A. Ridenour

(This opinion editorial by the Vice President of The National Center for Public Policy Research appeared in the July 13, 1995 issue of the Washington Times.)

This week, the Senate resumes debate on a comprehensive regulatory reform measure that environmentalists and consumer advocates claim is "dangerous" and "extreme." The bill is neither: It is a modest, tentative first, step toward a less expensive, more effective and less intrusive system of regulation.

Sponsored by Senator Robert Dole (R-KS), the Comprehensive Regulatory Reform Act of 1995 would require, among other things, that agencies conduct cost-benefit analyses before imposing new regulations. What this means is that federal agencies would be required to demonstrate that the benefits of imposing a new regulation -- that is, the number of lives saved, injuries averted, etc. -- outweigh the costs of the new regulation. The bill goes one step further: Once an agency demonstrates that the benefits of a regulation do outweigh the costs, it must also
show that it is the least costly means of achieving the desired result.

Here's what else environmentalists and other members of the regulation lobby say about Dole's bill:

* Claim: The measure would be both expensive and bureaucratic. It would require cumbersome and costly additional studies before new regulations can be made, threatening to bust the budget.

This claim is, as Patrick Buchanan might say, one of the greatest acts of political cross-dressing we've seen in some years. Since when has the regulation lobby been concerned about the cost or bureaucratic red tape of any government action? They didn't seem too concerned about it when they lobbied for the Endangered Species Act over 20 years ago. But perhaps that's just because most of the costs of the Endangered Species Act are paid for out of the pockets of individual property owners and consumers, not out of the federal treasury.

There is an element of truth, however, to the claim: The Dole proposal would increase regulatory costs in the short-term -- to federal agencies. According to a Congressional Budget Office estimate, the cost of the new cost-benefit analysis and review provisions of the bill would be between $160 and $200 million per year. But at the same time, regulatory compliance costs -- those expenses paid by average Americans to comply with the federal government's regulatory mandates -- would decline because the bill would permit unnecessary and/or unjustified regulations to be scrapped. Regulatory compliance costs currently run at $850 billion per year, or $6,000 per family. A reduction in compliance costs of just 1% would save $8.5 billion -- 42.5 times the added expense to federal agencies. Further, since the measure would apply the brakes to unwarranted regulations, agency administrative expenses could actually decline over the long term.

* Claim: The bill would cripple agency (and environmentalist) efforts for quick approval of new health, safety and environmental regulations.

Good idea, but alas, not true. Under the compromise reached between Senators Robert Dole (R-KS) and J. Bennett Johnston (D-LA), a new regulation can be exempt from the cost-benefit analysis procedure if the appropriate federal agency "finds that conducting cost-benefit analysis is impracticable due to an emergency that is likely to result in significant harm to the public..." (S622(f)(1)(A)). As the bill provides no definition of what would constitute "good cause," this is an enormous loophole through which virtually any regulation could pass. If the Senate ultimately approves S. 343, this provision will likely be challenged by more regulatory reform-minded House members when the bill goes to conference.

* Claim: The measure would hurt minorities because the special circumstances of minorities -- who are at higher risk of exposure to hazardous substances -- would not be given adequate weight. Further, many regulations needed to protect minority populations simply could not pass rigid cost-benefit analysis tests because these tests weigh only economic factors, not social or ethical ones.

An interesting story, to be sure, but made out of whole cloth. The Comprehensive Regulatory Reform Act would require agencies to identify levels of risk "to the general population and, where appropriate, to more highly exposed subpopulations." The bill further stipulates that the term "benefit" be defined as a "reasonably identifiable significant incremental favorable effect that... the rule is designed to produce, including social and economic benefits..." In other words, social
factors will also be weighed.

* Claim: The regulatory reform measure would have immediate, catastrophic effects on human health and safety. Tragedies such as the e. coli bacteria deaths would be common place.

What the regulation lobby doesn't seem to realize -- but most Americans do -- is that people injured on the job or poisoned by tainted restaurant food are every bit as much victims of our regulatory system as small businesses, landowners and who must cope with the red tape monster. Take the e. coli bacteria example that the regulators are fond of bringing up. In January 1993, two children died and another 500 people became ill after eating beef tainted with e. coli bacteria. This wasn't meat that was slaughtered in someone's backyard and served direct to the public, but meat that had been given the U.S. Department of Agriculture's stamp of approval. The regulatory system failed not because there weren't sufficient safeguards, but because government does not currently set the kind of priorities that a realistic system of cost-benefit analysis would enable.

The truth is, the regulation lobby will always be able to produce "victims" to press their case for additional regulations because there is no such thing as a risk-free world. But it is important to realize that the victims were not spared even though there are now 64,914 pages of regulations on the books, backed up by close to 130,000 federal bureaucrats. Indeed, because agencies are not currently required to set priorities, federal agencies may be part of the problem. Spending countless man hours enforcing such silly regulations as OSHA's ban on gum chewing by roofers means these resources can't be used elsewhere -- where there are real risks.

Despite the fact that the Comprehensive Regulatory Reform Act has been significantly watered down -- so much so that some conservative groups are calling it a "setback" for regulatory reform -- Senate Democrats will try to water it down further, and, if that fails, filibuster it. After the Senate battle, should the bill survive, it will then likely face a presidential veto. If President Clinton and Senate allies can't bring themselves to support this very modest proposal to put the federal government's affairs in order, their claim to want to "reinvent" government will be exposed for what it is -- a public relations gimmick. Its time to put up or shut up.