The Regulatory State: A Modest Reform Proposal

The Mercatus Center has just published a troubling snapshot analysis of the accumulation of regulatory mandates and restrictions since the Carter administration. Other analyses confirm the picture of a burgeoning regulatory state. My own favorite is the Competitive Enterprise Institute’s annual, invaluable !0,000 Commandments Report (link no longer available). But it’s the same picture wherever you look:

  • Regardless of the metric, the regulatory state has grown at a breathtaking rate, for decades.
  • The regulatory state has imposed a heavy toll on the economy. CEI estimates the cost of the “hidden (regulatory) tax” at close to $15,000 for every man, woman, and child in America. Yes, you can quarrel with the methodology. And yes, maybe all that money buys something that’s worth having. But the crucial fact is that regulatory impositions aren’t subject to any kind of budget constraint. So long as a regulation looks like a neat idea and an agency can conjure up some net benefit, it’s all systems go. It’s bound to be the case that there’s altogether too much of this.
  • This growth of the regulatory state has been a bipartisan affair. Control of the White House does not seem to matter. Control of Congress matters less and less.

To borrow Vladimir Lenin’s excellent question: What is to be done?

Libertarians, I take it, harbor hopes of reducing the size of this beast. Even some dyed-in-the-wool technocrats share that aspiration, up to a point. Under Professor Cass Sunstein’s capable leadership at the Office of Management and Budget, for example, the Obama administration implemented an executive order for the retrospective review of regulations (link no longer available), with an eye toward reducing unnecessary costs. OMB has claimed a few billion dollars in benefits. But I bet that a retrospective review of the retrospective review exercise would prove it to be largely pointless. Not totally, to be sure: to the extent that bureaucrats are busy reviewing old regulations, they can’t work on new ones. So there’s an opportunity benefit. But the costs are sunk as soon as products and processes have been designed to conform with official mandates. The big gains, if any are to be had, would come from arresting the adoption of new regulations.

What will fail is a technocratic, across-the-board exercise (better cost-benefit analysis, impact statements, incentive-based instead of command-and-control regulation, and the like). We’ve tried all that, and found it wanting. Rather, reducing the harvest of regulatory destruction would have to be program-specific and arrest big regulatory endeavors—big enough to catch public attention and to make a real difference in people’s lives.

The project would have to be explicitly political, even ideological, by connecting the anti-regulatory agenda to rule-of-law values: no more regulatory crusades without clear legislative authority. And it would have to be aggressively forward-looking—not by promising more “cost-effective” regulations but by yanking proposed regulations. In truth, agencies no longer care whether or not their regs will eventually be deemed lawful. Even proposed or merely threatened regulation will usually induce anticipatory compliance (and turn the “early adopters” into pro-regulatory constituencies). The demand is for a set of credible pre-commitments to not regulate.

Herewith a partial list, for any presidential aspirant:

  • On my watch, the FCC will not regulate the Internet under any Title II or any other provision of the Federal Communications Act. It’s a stupid idea, and we don’t have the authority.
  • There will be no “clean power” plan or regulation for greenhouse gas emissions. Stupid idea. No statutory authority. Good night.
  • We will not regulate fracking. There’s no reason to interfere with the only thing that’s gone right with the U.S. economy over the past decade, despite my predecessor’s best efforts. Also, my administration refuses to push our doubtful statutory authority on this point.

All this could and should be done without elaborate rulemaking, let alone legislation. I’m sure there are other No Más edicts that would restore a bit of lawful government and help to lift the regulatory cloud that hangs over the economy.

Any suggestions? Any takers?

Reader Discussion

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on August 24, 2015 at 10:35:08 am

I would prefer the regulatory clearing of the decks. Issue a cancelation of all prior regulations in 2 years time. And then re-issue over those 2 years all the really important regulations (The 2 year sunset would be clear that as long as it is re-issued after the first announcement it wouldn't be canceled). To make sure the agency doesn't just re-issue all the regulations without consideration, it would be clear that any regulation to be re-issued without changes or with expanded scope would be closely scrutinized. Going forward all regulations might be required to have a built in sunset provision (say a decade or two), in which the agency would re-examine the benefits of keeping it.

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Devin Watkins
on August 24, 2015 at 10:43:06 am

For a "stop-gap" proposal (not a permanent solution):

Take away regulation and rule making powers (of all kinds) from the agencies responsible for inspections and enforcements.

Establish a separate body of professional "Regulation Writers" (with specialty divisions) to which the various agencies submit requests for issuance of regulations, rulings, interpretations. In other words break up the "vertical integration" of the regulatory state. Stop all forms of possible "self-funding" of agency activities (of any kind).

Of course continue the program of examining existing regulations.

But, for the longer term, we will need the "New Court" which has been suggested in prior posts and will be repeated subsequently.

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R Richard Schweitzer
on August 24, 2015 at 10:54:27 am

This is a repeat post (verbatim):

A New Court

Perhaps someone of the competence of Michael Greve might don the mantle of Richard Armey and undertake the design of a Judicial function ancillary to (1) the oversight responsibilities of Congress; and, (2) the “defense funds” suggested by Charles Murray in his “By The People.”

Congress has the powers to create additional courts of particular jurisdiction.
There is, for example, a Court of Claims. There are bankruptcy courts (or courts “sitting” in bankruptcy).

The existing legal system is clogged with matters of the operations of the Federal Administrative State; the blockages of those remedies serve as an instrument for administrative malfunctions of multiple origins.

Congress can create a Court that, upon submissions, can supply what should be the execution of appropriate oversight by Congress – just like “base closings,” that the political process stymies. Such a Court could be given that much jurisdiction and power subject only to legislative “veto” (up or down- no revisions) within a stipulated period (120 days? or the Court’s rule is final, no appeal, equivalent to legislative remedy).

The Court’s jurisdiction shall concern the actual (and demonstratively prospective) effects of the forms and conditions of enforcements (without regard to existing judicial precedents of a general nature) in specific instances. It shall have full
injunctive authority through the District Courts and may suspend or terminate any part or all of any regulations or “guidelines & interpretations” etc.. It may terminate an agency’s exercise of any and all powers, or particular powers, or set enforceable conditions for their exercise; discipline or remove agency personnel, authorities and any contracting parties.

Only Congress, within stipulated periods of time (which might be in different schedules for different determinations) can set aside (but not modify) its decisions.
This Court might be administered in circuits. Conflicts amongst circuit judgments would be resolved by Congressional action.

Most important, parties affected (even prospectively) would have immediate access; an option to by-pass “agency reviews” and the APA (heart by-pass anyone), and apply for injunctive relief.

It will take some time; care for details; but supplant some of the deficiencies in Congress’s responsibilities – and begin to throttle back rampant regulatory metastasis.

It could begin to revitalize our legal system and timely public access for private litigation.

**added:** this answers Quis Custodiet Ipsos Custodes?

If not: Quo Vadis?

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R Richard Schweitzer
on August 24, 2015 at 10:56:42 am

OK, but they will just be reinstated with further "armor."

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R Richard Schweitzer
on August 24, 2015 at 11:06:13 am

Some probably will be, but I doubt all of them will. There are just too many for them to work through all of them at the same time, so they will prioritize.

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Devin Watkins
on August 24, 2015 at 12:18:56 pm

[…] From: Library of Law & Liberty […]

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Image of The Regulatory State: A Modest Reform Proposal « Regulatory Transactions
The Regulatory State: A Modest Reform Proposal « Regulatory Transactions
on August 24, 2015 at 14:49:38 pm

Effective Regulation

Therein lies a clue to the core of these issues (and why they arise).

"Effective" not only infers and implies "purpose" or function; it **requires** them of governments.

The issues then turn on "to effect" (or bring about) *what* results, *what* conditions.
That in turn calls for governance with purposes to attain certain results and create or maintain certain conditions.

We once again have to hear of that chimera "Collective Choice," which does not exist.

If we were to accept the Federal Administrative State as our government to achieve certain purposes (loosely described, of course), create certain conditions (and the relationships necessary for them), effective regulation might be in order; but, where would the knowledge come from (or be found) for those determinations - can it even exist in sufficient forms in a dynamic society. Must we cease the dynamics so such knowledge as exists or can be generated can catch up and become "effective?"

The concept of effective regulation is contrary to the concept of individual liberty.

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R Richard Schweitzer
on August 24, 2015 at 15:50:18 pm

To the contrary, individual liberty is possible only within an effectively regulated capitalist system since there is one essential resource that capitalism requires that it can't produce, the social capital a society needs to function. For more information on the need for effective regulation, please see at 9:25.

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Bruce Levinson
on August 24, 2015 at 16:31:25 pm

'@ B L

The link takes one to You Tube???

The "function of society" is not the objective of individual liberty.

"Social Capital," undescribed, conveys nothing.

"Capitalism" is not a productive "system." It is a resultant condition. It does not "produce" any kind of "Capital." The accumulation of durable, transferable, productive assets is part of the resultant condition - that is the result of the objectives of individuals objectives, not a "designed" purpose of a system.

Individuals do not exist to "form a more perfect society."

The other view seems to be that individual liberty requires the *imposition* of obligations and the delineations of relationships provided by "effective regulation" for the exercise of that liberty.

I demur !

Individual liberty requires freedom for individuals to set their own obligations in accordance with their capacities and limitations and to determine the nature and extent of their own relationships.

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R Richard Schweitzer
on August 25, 2015 at 10:19:33 am

Are you from Minnesota? I’m trashing some old CLE folders and found one about rulemaking throughout the states. Minnesota agencies have to publicize their rulemakings, including sending direct mail notice to people who have asked to receive such notices. Agencies have to draft rationales supporting their rule changes. Most interestingly, no rule change can take effect without the sign-off of both the Governor’s office and the state Office of Administrative Hearings, which operates as a kind of auditor of the process. And if 25 people request it, the agency must defend its propose rule in a public evidentiary hearing convened by the auditor, and submit to discovery and cross-examination.

The Minnesota discussion ends with this quote from West Publishing’s Minnesota Practice, Vol. 21, Administrative Practice and Procedure (1998):

§ 6.01.5 Minnesota Rulemaking Procedures

The Procedures outlined in the Minnesota Act for rulemaking are unique in the nation. Minnesota rulemaking procedures are mind-numbing in their complexity, onerous in their application, and ever-changing. The major distinguishing feature between Minnesota procedure and the notice and comment procedure required by the federal Administrative Procedure Act and that of most states is Minnesota’s reliance upon rulemaking “on the record” of a hearing held before an independent administrative law judge appointed by the Office of Administrative Hearings as the exclusive basis for the final rule. Even in the case of rules which are not “non-controversial,” the final decision is confined to information contained in the official rulemaking record….

Regardless of whether the agency proceeds by way of controversial or non-controversial rulemaking, there are numerous twists and turns before the agency and affected persons can extricate themselves from Minnesota’s rulemaking labyrinth.

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on August 25, 2015 at 10:28:34 am

" since there is one essential resource that capitalism requires that it can’t produce, the social capital a society needs to function."

Contained in this statement is the underlying assumption that government can (and ought to) provide this capital. This is not so; and it is also not so that capitalist economies can not, do not, nor have not provide such capital (whatever such capital may be said to be).

A cursory review of American history should provide ample evidence that the early "capitalist" economy did provide sufficient social capital and a cohesive ethos for not only survival but rather extraordinary growth.

At best, what government may do (and ought not to exceed) is to provide both a function and an associated structure for the realization of those things deemed as worthy social endeavors BY the citizenry. As an example, should the people decide to educate their young, government may create a "taxing" function and a structure for collection and distribution of those monies in order to realize the peoples desire to educate their young.

Gee, it seems as if the early American capitalists did this quite well AND with a far greater diversity of means, methods, and ideological perspective than that which is presently on offer.

Government ought to do only that which the people themselves are unable to do or to enable those efforts which the people may not do as efficiently as a central body may. Yet efficiency is not the goal - it is merely a tool used to assist the people in attaining those obligations which they themselves believe to be proper for a well functioning and sustaining civic association.

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on August 25, 2015 at 17:27:41 pm

For starters, no regulation through administrative adjudication. Under my watch, no agency shall make new rules through adjudication. Any application of administrative force shall be by promulgated rule, with an opportunity for notice and comment at the very least, and enforcement will be in district court, under the regular rules of evidence and procedure.

That means you, SEC.

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Jimmy Conde
on August 25, 2015 at 20:04:12 pm


thanks for the research - it was quite helpful, .really!

BTW: Want your honest opinion here - Do you think that this is sufficient to protect liberty(ies) of the citizenry or may it still devolve into the "Crown's prerogative"?


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Image of gabe
on August 25, 2015 at 23:16:39 pm

The object of the Regulatory State on the Federal Level,coupled with the Anti Trust Laws,is not to protect the consumer or the market but to cement the market positions of the large multi-national corporations who dominate certain markets. Over the past 100 years or so America has come to be dominated by large corporations who,hand in hand with the state,have created a largely Fascist economic system. Large Multinational corporations can afford to hire the lawyers,accountants and regulatory specialists to handle the regulatory system. While small up and coming businesses entering the market place don't have the financial resources to do so and thus are at a marketing disadvantage. In fact,in today's world,many of the Federal regulations are written by corporate lobbyists who often were employed by the government,in one capacity or another,"retired"and then went to work for the same corporations they used to regulate. A good example of this would be the whole "Obamacare" fiasco which was nothing but a welfare program for the Insurance,medical and drug industries. Or the "too big too fail" banks and auto manufacturers who,with the help of government "insiders" looted the Treasury and put an albatross of debt around the necks of the American taxpayer. The American economy,despite its flaws,was built on competition. That world of competition,to a large extent,does not exist anymore. Instead we have the "Regulatory State" that dominates our national economy. To the detriment of the American consumer and the many small,up and coming competitive businesses.

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libertarian jerry
on August 26, 2015 at 07:58:20 am

'@L J, et al.

While it may be a little "off thread:"

Consider the real history of large enterprises in America.
They were once proprietary, their affairs were determined by their principal beneficial owners, who developed their own funding sources. That was succeeded by a financial era when financial institutions evolved to meet funding that proprietary systems could not meet; and financial institutions took over significant (dominant) roles in control determinations for financial objectives. But, they required intermediaries for effective operations and a managerial class evolved. That has been followed by the fragmentation of beneficial interests that pass through the hands of several layers of intermediaries, many of whom have some degree of managerial function (mutual fund managers, pension managers, various "advisors," endowments, money or asset managers, etc.). Those in turn influence the determination motivations of operating managers, but they do not generally (yet) effect ultimate "control."

Meanwhile back at Rancho Federale, another group of "managers," the Administrators have been assembling and politically gaining governmental powers (into the regulatory state) to exercise various degrees of first, influence, then constraints on the determinations of large enterprise managers - which are now approaching levels of controls of those determinations.

So, one way to view the present is as a contest of two sets of managers, with similar motivations to control determinations. However, the methods of rising to status differs, sometimes markedly, sometimes less so.

It is not "Big Business" vs. "Big Government;" it is a contest of the means of management involving those arising through two separate channels of activities.

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R Richard Schweitzer
on August 26, 2015 at 13:37:33 pm

[…] In response to the relentless expansion described in these reports, legal scholar Michael Greve makes several observations: […]

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Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.