Spring cleaning for outdated government regulations

Proposed “Regulatory Improvement Commission” would dramatically reduce the burden of compliance with obsolete rules.

Government can be unproductive - except when it comes to making regulations. Image credit: iStockphoto by Getty
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While much of government is often accused of being singularly unproductive, regulation is one arena where production is no problem – and perhaps to the detriment of growth.

Economists Michael Mandel and Diana Carew of the Progressive Policy Institute (PPI) say that nearly 170,000 pages of federal regulations are now on the books, with more piling on every day. Mandel and Carew find that the sheer number of pages in the Code of Federal Regulations grew by more than one-fifth between 2000 and 2011 and has more than doubled since 1975 (when there was a relatively paltry 71,224 pages of rules).

This growing pile of rules has also meant a growing compliance burden for businesses. According to Mandel and Carew, one 2010 government study estimated the direct cost of federal regulatory compliance alone to be as much as $1.7 trillion a year.

Compliance burdens can be especially acute when it comes to the federal tax code. In its 2012 report to Congress, the office of the Taxpayer Advocate named complexity as the single biggest problem taxpayers face. The office also estimated that businesses and individuals spend 6.1 billion hours a year on tax preparation or compliance – or the equivalent of hiring 3 million full-time employees.  The code itself is 4 million words long, says the 2012 report, and the guidance alone makes for a foot-tall stack of paper when printed.

To prune this regulatory thicket and reduce the burden on business, a bipartisan group of lawmakers led by Reps. Patrick Murphy (FL-18) and Mick Mulvaney (SC-5) have recently proposed the creation of a “Regulatory Improvement Commission,” modeled after the successful base closure commissions begun in the late 1980s, to review outdated regulations and recommend their repeal or consolidation.

Based on a proposal by Mandel and Carew, the Commission would first review outdated regulations submitted by the public and by stakeholders and then send to Congress, for an up-or-down vote, a package of regulations recommended for consolidation or repeal. Like the successful defense Base Realignment and Closure (BRAC) commission, the members of the Regulatory Improvement Commission would be appointed by Congress and the President.

The Commission would wage a direct assault on what Mandel and Carew call “regulatory accumulation:”

Over time regulations naturally accumulate and layer on top of existing rules, resulting in a maze of duplicative and outdated rules companies must comply with.

At the state level, Connecticut has already taken the lead with a similar approach to outdated state regulation. In late 2013, Governor Dannel Malloy announced Executive Order 37, which would allow the public to submit comments on any regulation more than four years old and advocate for its repeal or modification. To make the task of finding and commenting on regulations easier for citizens, Gov. Malloy also posted all state regulations for the first time online.

While the best regulatory improvement of all would be comprehensive tax reform – the prospects for which are uncertain – the Murphy-Mulvaney legislation could go far in the meantime to ensure that regulatory burdens don’t unduly drag down the economy. Moreover, regardless of the up-front costs of this bill, it would no doubt more than pay for itself by freeing up resources that businesses were otherwise spending on regulatory compliance.

The common sense Murphy-Mulvaney bill would preserve the regulations necessary to protect the public and carry out the will of Congress. It would also eliminate the dead weight of outdated federal rules now burdening businesses and the economy – and it would do so through a bipartisan, streamlined process that is ideally suited to the polarized environment of today.

While the proper size of government has been the object of fierce contention across the ideological spectrum, this proposal would shrink government’s footprint in a way that all sides would agree will lead to more growth, more jobs and more efficient governance.

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