Where to Begin with Regulatory Reform

C utting federal regulations can feel a little bit like being a mosquito in a nudist colony: It’s hard to know where to begin.

This year’s Ten Thousand Commandments report from the Competitive Enterprise Institute puts the annual cost of federal regulations at $2.1 trillion. That’s almost as large as the entire burden of the individual income tax, and about four times as large as the burden of the corporate tax. It’s greater than the budget deficit, and equals about 8 percent of GDP.

And it’s probably a conservative estimate. The National Association of Manufacturers estimates regulatory costs above $3 trillion. The regulatory state is so sprawling and its effects are so poorly analyzed that it’s difficult to say what its burden is within a trillion dollars.

CEI has published the Ten Thousand Commandments report since 1993, as an annual reminder of government arrogance. God has His rules on two stone tablets, and He only asks for 10 percent of your income. The federal government has its rules in 243 bound volumes, and it took 16 percent of the national income last year and still didn’t come close to paying its bills. And both of those are underestimates, too.

The 243 bound volumes only include the accumulated agency rulemaking published in the Code of Federal Regulations since 1975. They don’t include what the report calls “regulatory dark matter,” such as executive orders and agency guidance, which can often carry the force of regulation despite not being counted as such. The Biden administration’s student-loan program, the largest single contributor to the Congressional Budget Office’s $400 billion revision to this year’s deficit projection, is an example of regulatory dark matter.

As for the 16 percent figure, it only reflects what the federal government collected in revenue. It doesn’t include the hidden taxes, such as inflation and regulation. If considered as a category of household spending, the burden of federal regulations would be second only to housing. Assuming full pass-through of regulatory costs to consumers — and there’s good reason to believe that most of those costs do get passed through to consumers as higher prices and lower wages — each household shoulders $15,788 of the federal regulatory burden on average each year, the report says.

And most of that burden is not imposed in a constitutionally proper and transparent manner. The federal government issued 44 rules in 2023 for every one law that Congress passed. Policy-making today is mostly done by the administrative state, removed from the accountability of elections and in disregard for the Constitution’s separation of powers.

The difference between the political parties is perhaps nowhere as stark as it is in regulation. Under the Trump administration, the Office of Management and Budget coordinated a government-wide deregulatory effort, proceeding from the principle that two old regulations should be abolished for every new regulation issued. The Biden administration’s OMB has been an advocate for greater regulation, publishing “net benefits” for new rules.

The Trump administration considered a regulation with estimated impact over $100 million to be “economically significant.” The Biden administration doubled that threshold, to $200 million, and has still managed to issue more economically significant regulations under the new definition than the Trump administration did under the old one.

The Trump administration required agencies to publish their guidance documents online. The Biden administration reversed that rule. “At this point, most of the 32 departments and agencies that adopted formal guidance document public-fairness and transparency procedures before Trump’s departure wrote new rules to affirmatively disavow and eliminate the nascent disclosures,” the report says.

The ease with which the Biden administration countermanded the Trump administration’s reforms illustrates that electing pro-deregulation presidents is not sufficient to constrain the regulatory state. The report gives some suggestions, guided by the principle of transparency, on where to begin with meaningful and durable reforms.

Simply requiring the government to tell the public what it’s doing and comply with existing laws about regulation would constrain its behavior. The report says, “Congress needs to verify and document that rules and guidance are submitted to both houses of Congress and to the Government Accountability Office (GAO) as required by the Congressional Review Act, and to affirm a stance that rules and guidance not reported are void.” Disclosure of guidance documents should be required by law, with identification numbers just like for rules and statutes.

“Federal agencies cannot reliably perform cost–benefit analysis, for the same reason that students should not grade their own tests,” the report says. Congress should create a regulatory-review office, modeled on the office that already exists for the budget, with a staff exclusively dedicated to analyzing and scoring regulatory actions. Agencies should be given regulatory report cards that include information such as the number of rules emanating from the agency, their economic impact, and their compliance with existing laws.

The report proposes a Regulatory Reduction Commission, modeled on the Base Realignment and Closure Commissions that have successfully eliminated unneeded military facilities. The commission would report to Congress on outdated or redundant regulations, and Congress would then be able to eliminate them by joint resolution.

Above all, Congress must take responsibility for major regulations. A Senate-confirmed official should be required to sign off on any new rules, and Congress should be required to vote on major rules. Bills such as the REINS Act and the Congressional Responsibility Act have already been proposed to achieve those ends. The REINS Act passed the House last year.

In one sense, this reform agenda is a heavy lift. It requires Congress to take responsibility for decision-making, something it has sought to avoid for decades. It requires standing up to an entrenched bureaucracy in Washington that is at this point responsible for more of the daily tasks of governance than elected officials.

In another sense, this reform agenda is simple. Starting with the basic idea of transparency is much easier than going agency by agency and eliminating rules. There is so much low-hanging fruit in the area of regulatory reform that even if the most destructive rules aren’t repealed, major improvements can still be made.

The report says, “Congress needs to take regulatory policy at least as seriously as it takes fiscal policy.” Of course, it doesn’t take fiscal policy that seriously, as the massive deficit indicates.

But think about how much worse fiscal policy would be if the Congressional Budget Office didn’t exist, Congress never even debated spending levels, unelected bureaucrats at several hundred agencies got to decide how much spending there would be, spending once enacted could continue forever, and most of it happened out of public view. That’s what regulation looks like right now. Starting by simply bringing regulatory policy up to the admittedly low standard of fiscal policy would be a giant leap in the right direction.