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Our good friends at the Mercatus Center recently published another report on America’s morbidly obese regulatory code, which still contains over 100 million words despite President Trump’s attempt to “drain the swamp” with his Executive Order 13771.
The report correctly points out that “regulatory accumulation,” as the authors call it (a malady associated with Mancur Olson’s “economic sclerosis” for some of us old timers), hurts the poor most of all, a point that I make in my book about South Dakota’s long history of relatively high levels of entrepreneurship and light economic regulations. That means that much of the residue of increased income inequality left after proper adjustments by Phil Magness, Vincent Geloso, and others may be rooted more in increased regulation than in market forces. Wouldn’t that be truly ironic, unlike many of the lyrics in the Alanis Morissette song “Ironic”?
The Mercatus report also details two major policy reforms designed to reduce the number of old regulations and slow the introduction of new ones; a regulatory review commission like the military Base Realignment and Closure Commission created in the late 1980s and the implementation of some form of regulatory budgeting.
It concludes, however, that “unfortunately, reversing the growth of regulatory accumulation and avoiding a quick return to a massive regulatory code is not as easy as flipping a switch.”
Why not just flip a switch, though? I envision a law that would automatically cut the oldest 5 percent of the Code of Federal Regulations annually unless some agency proved that a regulation created a net economic benefit to the satisfaction of, say, a majority of 11 evaluators randomly pulled from a pool of 100 or 1,000 pre-qualified experts trained in such analyses. That would be a pricey procedure as such experts do not come cheap, but that is precisely the point!
Such a law would ensure that every regulation was scrutinized at least once every twenty years and automatically eliminate all those that no agency thought important enough to subject to review. As agencies are budget-constrained, they would be forced to prioritize to defend the regulations they really believe are beneficial and would have less incentive to create new regulations just for the sake of covering their backsides or justifying their own existence.
Some people seem to believe that the entire country would collapse without all those sacred words but of course they are wrong as many regulations are dead letters, while others impose costs with little or no corresponding benefit. The key is to identify those and get rid of them automatically, while creating incentives for regulators and the regulated to identify the potentially most beneficial regulations for objective analysis.
This is the sort of “plan” that presidential hopefuls should be thinking about because it aligns incentives with presumably widely shared goals, like efficient government. It also encourages innovation and aids the poor, not through humiliating disincentives to work, but by taking the government’s heavy regulatory jackboots off their necks.
Robert E. Wright
Robert E. Wright is a Senior Research Fellow at the American Institute for Economic Research.
He is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019). He has also (co)authored numerous articles for important journals, including the American Economic Review, Business History Review, Independent Review, Journal of Private Enterprise, Review of Finance, and Southern Economic Review.
Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997.
