The futility of regulatory reform

Regulatory reform is hot in the halls of Congress. Ever since Republicans took control of the House of Representatives in 2010, there has been a regular litany of hearings and bills coming out of that chamber related to regulation. The Senate joined the regulatory reform party in 2014 and has produced its own share of legislation. Most of these bills would require agencies to perform additional steps when issuing new regulations. Some of these steps may be good ideas, while others are likely intended merely to make it harder for agencies to fulfill their missions. But there are reasons to be skeptical that any of this legislation will make a difference in regulatory decisions.

{mosads}In a recent law review article, my co-author and I look at the history of previous attempts to reform the regulatory process. We look at four major statutes that were passed with the intent of curbing agency regulations. In the late 1970s, Congress considered and then passed the Paperwork Reduction Act and the Regulatory Flexibility Act, which were both signed by President Carter. Two more regulatory reform statutes passed and were signed by President Clinton in the wake of the Republican takeover of Congress in 1995: The Unfunded Mandates Reform Act and the Small Business Regulatory Enforcement Fairness Act both became law by 1996.

The biggest piece of evidence that these statutes haven’t worked as intended is the current activity of the Congress. If prior efforts at regulatory reform were successful in curbing or improving regulation (the intent depends on your point of view), there wouldn’t be such a demand for new regulatory reform measures. A relevant question for supporters of current regulatory reform measures is: “Why would this time be any different?” To answer that question, we look at why the previous statutes have not been successful.

The first two statutes we looked at were passed by a Democratic Congress and signed by a Democratic president. The other two were passed by a Republican Congress, but also signed by a Democratic president. In other words, in order to become law, the regulatory reform bills had to satisfy at least one branch of government that was broadly supportive of the goals of regulation: to protect public health, the environment and the financial system.

In order to gain the support (or at least to avoid the veto) of presidents who supported regulatory initiatives, regulatory reformers added provisions that left implementation of the reforms largely in the hands of regulatory agencies. Agencies have used their discretion to implement these regulatory reforms in such a way so as to ensure that the reforms did not hamper the agencies in their pursuit of their preferred policies. Note that this is not really subversion of the statutes; the statutes never would have passed if the agencies weren’t given these powers!

So what’s a committed regulatory reformer to do? The easy answer is to win elections. Unless supporters of regulatory reform control all three branches of government (likely with a filibuster-proof majority in the Senate) compromises weakening the reforms will be needed to pass the legislation. But with roughly half of the American electorate supporting political leaders who favor regulation, this type of electoral sweep is very unlikely to happen and even less likely to last. Furthermore, even presidents who are not inclined to favor regulation are very reluctant to support laws that curb their authority. In short, regulatory reform has a very steep hill to climb if it is to actually have significant impacts on regulation.

Shapiro is an associate professor and director of the Public Policy Program at the Bloustein School at Rutgers University and a member of the Scholars Strategy Network.