The deregulatory agenda should be replaced with a regulatory improvement agenda.
The U.S. Department of Commerce recently issued a report on “reducing regulatory burdens” in the U.S. manufacturing sector. The report’s emphasis on regulatory burdens highlights an ever-present need to search for ways to improve regulations. But if the recommendations of the report are not questioned, the public will lose the benefits of regulations without knowing what those benefits are.
The Commerce Department focuses only on half the story of regulation—the costs—and ignores the other half—the benefits. The Commerce Department’s report cites a 2014 report by a business group that estimated the direct regulatory costs faced by manufacturers at $138 billion a year, in addition to “indirect negative effects on the U.S. economy such as reduced innovation and global competitiveness, lost investment, and significant job losses.”
But the Commerce Department fails to take the benefits of regulation into account. In 2012, the U.S. Office of Management and Budget estimated that annual benefits of major federal regulations from 2001 to 2011 amounted to $141 billion to $691 billion, while the annual costs were much less—only $42 billion to $66 billion. The idea that the indirect effects of regulation are wholly negative also contrasts with a substantial academic literature by authors Nick Ashford, Michael Porter, and others on the positive indirect effects of regulation.
In suggesting that “agencies should adopt the practice of working together with the regulated community,” the Commerce Department errs again. Regulators already work with regulated parties to craft better regulations. The manner in which the Commerce Department makes this recommendation also ignores that the purpose of regulations is to achieve public good. All parties must be at the table, and to deal with the regulated community only is a dead end.
Most poignantly, the Commerce Department ignores the so-called reinvention era of the 1990s, when regulatory improvement efforts produced regulatory streamlining, more efficient permitting, simplified reporting, more flexible regulation, and voluntary programs. We can resume this process of improving, not removing, the regulations needed to protect the environment, public health, equity, fairness, and other public goods.
Even many voices in industry acknowledge that regulation is not nearly so bad as its critics suggest. The Commerce Department gives this away in one surprising sentence in its report: “Through submitted comments, industry expressed clear support for the need to protect the environment, human health, and worker safety.”
Just as regulatory benefits massively outweigh regulatory costs, the real story about regulation is not that businesses hate it. Rather, the truth is that they just want actual unnecessary, adverse economic impacts to be lifted. Government’s task is not to remove regulations but to find consensus on how to improve them.
Many inefficiencies in the regulatory system arise not because of something inherently negative about regulation, but, instead, because the system has been under constant challenge and is terribly under-resourced. If businesses can be made to understand this, they might be convinced to support the provision of greater resources to agencies, rather than continuing to weaken them. They might be more inclined to look for ways to reduce the burden of regulations while increasing their effectiveness.
Overall, policymakers should take seriously concerns about regulatory burden but use industry’s complaints to help build a path forward to a better system. Irresponsible deregulation is not the solution.
A recent regulatory negotiation illustrates how government can make regulation better. The newly reauthorized Toxic Substances Control Act (TSCA), a law that aims to protect the public from dangerous chemicals used by businesses, contained a mandate for the U.S. Environmental Protection Agency (EPA) to conduct a regulatory negotiation about the reporting of chemical data on inorganic byproducts recycled by manufacturers. TSCA aims to promote the dissemination of relevant information. To fulfill the law’s purpose, rules should require more and better information, not less.
During negotiations earlier this year, industry raised a series of complaints about regulatory burdens. Environmentalists listened to business complaints about the reporting process and suggested that reporting burdens could be reduced while actually improving the information produced.
TSCA currently requires manufacturers to report on downstream processing, but environmentalists argued that the downstream processors could be required to provide that information instead. Switching the burden to those downstream processes would relieve manufacturers of having to gather information they do not have at their fingertips or may not be able to acquire.
Admittedly, the environmentalists’ approach would impose a new requirement on downstream processors. But a standard form could be created that follows the chemical through the supply chain. The burden would be minimal and processors would only have to fill in the information that they have readily at hand. Nothing is stopping EPA from designing a system that tracks chemicals effectively and in real time—one that would also be minimally burdensome to use.
Industry representatives to the EPA negotiations, however, have insisted on reducing TSCA reporting altogether. Their unvarying posture of only seeking to reduce needed information raises the question of whether they represent the interests of industry as a whole. Those who sell toxics do have a different perspective than those who simply use them. More scrutiny on chemicals might worry sellers about reduced sales and increased liabilities, in addition to presenting concerns about confidentiality. But many other businesses have no problem with society’s having greater knowledge about toxic chemicals and where they end up. Many other businesses are champions of change. They do not wish to use toxics if they do not have to, and they are willing to comply with reasonable reporting rules.
With a large and growing population of green leaders committed to environmental responsibility, a negotiation in which participants work to construct the system that best provides protection with the least unnecessary adverse impact is feasible. Government officials should call for the convening of responsible actors and the resumption of a search for consensus on how regulations can be improved.
A renewed focus on the development of better rules is a much more appropriate response to complaints about regulatory burdens than any attempt at wholesale deregulation. Anyone who has worked with the many responsible and ethical people in industry will have confidence that, in the end, reasonable improvements can be made. Regulatory improvement, not regulatory repeal, should be the core aspiration of a healthy democracy and the hope of the nation’s political leaders.
The photograph of the Commerce Department’s building has been altered for size and is used under a Creative Commons license.