War on Regulation Coming to the States? Why IPI’s Plan For Centralized Regulatory Review Isn’t What We Need

One of the most powerful sleights of hand achieved by Republicans during the last election cycle was their renewed declaration of war on regulation. It’s no secret which of their interest groups are most passionate about this aspect of their agenda. Tuesday's LATimes previewed a plan by the Chamber of Commerce, to be announced today, to further unleash its lobbying legions against regulations as soon as the new congress is anointed. But it's unlikely the Chamber will get too specific on which popular regulation it wants to kill, just as Republicans have neglected to specify which budgets will be cut. First build to a fever pitch and then—only at the last minute, mind you—admit the substance.

No surprise there. As the Chamber and John Boehner know all too well, dead regulations, just like specific budget cuts, inevitably generate mourners. West Virginia’s Senator-elect Joe Manchin may have shot a mock-up of federal climate change legislation in a campaign ad, but ask his constituents whether the Mine Safety and Health Administration should get more authority to prosecute the people who caused the Big Branch mine disaster and you’ll get a different answer. Or consider the strident demands of businesses along the Gulf of Mexico shore that the Obama Administration lift the drilling moratorium. Then imagine how they will react when there’s another spill and federal inspectors are implicated in the negligent operation of the rig that produces it.

Even as the Chamber is working on erecting new barriers to needed federal regulation, a new academic report out today Tuesday will, I fear, suggest yet another theater of war for industry: the states.  The 441-page report comes from the Institute for Policy Integrity at the New York University School of Law, the brainchild of cost-benefit analysis enthusiasts Ricky Revesz and Michael Livermore.

The report contains an exhaustive review of regulatory review policy in the 50 states (and DC and Puerto Rico), rightly noting that regulation in the states has long gotten surprisingly little attention and analysis. The states were judged on several good criteria: for example, that regulatory review should not unnecessarily delay or deter rulemaking and should promote transparency and public participation. But the report also advocated the troubling notion that economic analysis, if done right, is the key to reaching all the right policy outcomes.

The Institute took the states to task for bungling their own regulatory efforts, accusing them  of “largely flying blind” and producing—heaven forfend—“under-analyzed” rules that accumulate economic and social effects and end up having a profound impact. But the evidence for such a scenario is scant. The history of the last several decades of regulatory progress instead is one of incremental but successful protections that cleaned our air and water and that have put stunningly few companies out of business.

The Institute urges governors to “tighten up wasteful rules” by issuing an executive order modeled on the federal order that established the Office of Information and Regulatory Affairs (OIRA). In essence, 52 OIRAs would bloom, to be known as “Offices of Regulatory Effectiveness.” It would be their job to hold agencies feet to the fire by compelling the performance of cost-benefit analysis, requiring consideration of “all feasible alternatives” suggested by stakeholders, and allowing anyone to petition to get a rule cancelled or modified and requiring the agencies to respond rapidly to those requests. We know from experience that these policies sound efficient but are in fact a big win for industry, which can overwhelm the public interest community and the regulators themselves with irrelevant information and unreasonable demands. The model executive order presented in an appendix to the Institute’s report has some useful features, including provisions requiring agencies to be more transparent in their deliberations, but those ideas are not worth the trade-off of giving industry a ready-made “little OIRA” home to lodge its complaints.

Undoubtedly, academia will hold a series of symposia on these recommendations, and we'll continue analyzing the ramifications of institutionalizing a federal regulatory review process that has proven so hostile to consumer, worker, and environmental protections throughout its 40-year history. (OIRA was born in 1980 with the enactment of the Paperwork Reduction Act, but the traditions of cost-benefit number crunching and paralysis by analysis go back to the Carter and Nixon administrations.) Suffice it to say for now that however well-intended, the Institute’s report is far more of a problem than a solution in a key respect.

The Institute has chosen to condemn state government in the harshest terms, further undermining the public’s respect for government and detracting from efforts to explain why regulation, far from being “under-analyzed” and “economically ruinous,” is absolutely necessary to prevent future oil spills, keep poisoned food off the shelves, forestall mine explosions, and outlaw shady financial practices. The Institute has also chosen to offer supposedly neutral solutions like the substitution of “expert” judgments by “objective” government “effectiveness” officials, policies supported by special interests who know they'll have a better shot if they go around state agencies that protect people straight to the economists who focus on costs rather than benefits. When these solutions are superimposed on underfunded regulators who lack adequate enforcement authority and are already subject to relentless administrative challenges by regulated industries, the result is not neutral but disastrous. The Institute's recommendations are for an ideal, non-existent world, not for the world we have today; in reality they run the risk of slowly destroying government in an effort to save it.