New CPR Issue Brief: Regulatory ‘Pay-Go’ Caps Protections but Not Harms to the Public

When the government succeeds in protecting the public from harms, is that good news – or something to be atoned for by eliminating other successful protections? If the Department of Labor issues a new rule on construction crane safety, saving dozens of lives each year, should the agency also be required to eliminate an existing safety regulation? A policy of regulatory “pay-go” would prohibit agencies from issuing new rules, no matter how beneficial they are, unless they first identify and eliminate an existing rule that involves greater or equal costs for industry.

It sounds absurd, yet it’s an actual proposal supported by some very powerful people, though it has received relatively little attention. Mitt Romney has pledged in his economic plan to implement such a system (p. 61) if he is elected President, even saying that he’d issue an executive order for it on his first day in office (p. 7). Senator Mark Warner has proposed creating such a system through new legislation, though he has not introduced a bill to do so.

In a new issue brief today, Regulatory ‘Pay-Go’: Rationing the Public Interest, CPR Member Scholar Richard Murphy, CPR Policy Analyst James Goodwin, and I examine the concept, showing how it would undermine the regulatory system’s ability to protect people and the environment.

The story of regulatory protections in the last several decades has been one of remarkable success. Our air and water, for example, are far cleaner, by many measures, than they were just decades ago, and that’s largely thanks to government rules. Regulations under the Clean Air Act alone save well over 100,000 lives every year. And vehicle safety standards have reduced the fatality rate per vehicle mile traveled by more than half in under three decades. Yet despite this progress, work remains in these areas and others: tens of thousands of Americans still die each year from industrial air pollution and from automobile collisions.

Regulatory pay-go would put a cap on regulatory success, blocking rules that are needed to address longstanding threats and new ones. Take the case of Salmonella in eggs, which started sickening thousands of Americans in the 1970s. In 2010, the FDA finally published a regulation requiring egg producers to take a series of steps to reduce contamination. The rule is estimated to prevent 79,000 cases of illness and 30 deaths each year. If regulatory pay-go was in place, the FDA would have to eliminate an existing regulation to implement the new Salmonella rule. Should lettuce be made less safe? How about peanuts? Or should FDA not implement the Salmonella rule at all? There’s no good answer, or sense to implementing such a policy in the first place.

Regulatory pay-go puts a cap on protections, but it imposes no parallel cap on regulated industries’ “budget” for causing harm.  Imagine that industrial-scale farms begin using a new toxic pesticide that is uniquely harmful to the environment and its inhabitants.  Even though this activity increases the total amount of harm imposed on society, no industry would have to account for this increased harm by taking offsetting steps to reduce other harms caused by its activities.  For example, industrial-scale farms would not have to offset their increased pesticide harms by reducing the risk of accidental injuries among their workers or by taking steps to curb their nonpoint source water pollution.

Implementing pay-go without changing the laws – through an executive order, as Governor Romney proposes – would almost certainly violate rulemaking procedures under the Administrative Procedure Act. Under such a program, an agency would likely lack a rational policy basis to support its proposal to eliminate an existing rule, except for the need to clear space in the regulatory budget so that a new rule could be instituted in its place.  Executive orders lack the force of law and thus cannot provide agencies with legal authority to eliminate rules mandated by other laws.  Without this legal support, most rulemaking actions to eliminate existing rules likely would not survive judicial review.

We live in a country where we benefit from incredible health and safety advances in the last decades, but where those protections are still a work in progress. And we live surrounded by new threats and challenges, from water pollution from hydraulic fracturing to rapidly growing imports of food from China of questionable safety. These are challenges for our government, and the last thing it should be asked is to remove existing protections to create needed new ones.