House Committee Holds Hearing on the Regulatory Accountability Act

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Witnesses testify on merits of imposing statutory cost-benefit requirements on rulemaking.

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At a House Judiciary Committee hearing earlier this week, members of Congress asked whether federal regulations need greater scrutiny.

Several witnesses testified that they do. These witnesses urged Congress to adopt the proposed Regulatory Accountability Act (RAA) which would codify economic analysis requirements and increase judicial scrutiny on the proposed rules having the greatest impact on the economy.

However, another witness and several members of the Committee cautioned that the RAA would bog down the rulemaking process, delaying the implementation of much needed rules.

The current economic downturn gave urgency to the hearing. According to Representative Lamar Smith (R-TX), the chair of the Judiciary Committee chair and a sponsor of the RAA, “[s]tanding in the way of growth and job creation is a wall of federal regulation.”

The RAA purports to respond to this “wall” by requiring agencies to justify their regulations’ costs and genuinely grapple with public comments submitted to the agency rather than treating the comment process as just “an after-the-fact exercise,” according to Rep. Smith.

Christopher DeMuth, a former head of a White House regulatory review office who is now with the American Enterprise Institute, testified that the RAA is needed because agencies lack sufficient incentives to consider the costs of their regulations. DeMuth claimed that current procedural requirements provide insufficient control over the wide discretion exercised by unelected bureaucratic officials.

In addition, too many regulations impose significant costs or create uncertainty for small businesses, testified Arnold B. Baker, the CEO of a small cement company in New Orleans.

Former Ambassador C. Boyden Gray lauded the RAA. Noting the large number of rules that must be developed by independent agencies to implement the Dodd-Frank Act, Gray favored the RAA’s provisions that would impose on independent agencies the same kinds of analytical requirements that have been imposed on executive branch agencies for the past several decades.

Professor Sidney Shapiro, University Distinguished Chair in Law at Wake Forest University Law School and Vice-President of the Center for Progressive Reform, spoke out against the bill. He argued that regulations’ benefits consistently outweigh their costs, so adding procedural requirements only delays the achievement of needed public value.

The “rulemaking process has [already] become an inordinately complex, time-consuming, and resource-intensive process,” Shapiro said. He claimed that it currently takes agencies up to eight years to complete rules, including judicial review, a length that he believed the RAA would increase up to twelve years.

By prolonging the regulatory process, the RAA would actually increase uncertainty for those needing to make investment decisions, Shapiro said.

He also argued that regulations often increase, not decrease, job opportunities on balance, suggesting that unemployment rates are lower in heavily regulated sectors like healthcare and finance than in unregulated ones.