Businesswoman being held back by red tape
Gary Waters—Getty Images/Ikon Images
Commentary

Regulations Cost U.S. Business More Than Canada’s GDP

President Donald Trump’s administration has been busy issuing a flurry of executive orders intended to reduce regulatory burdens on businesses that keep them from adding jobs and growing the economy. Perhaps the most important of these is an order directing a 60-day freeze on rules left over in the pipeline from the Obama administration, a requirement that agencies remove two regulations every time they issue a new one, and a cap at zero on this year’s new expenses for consumers and businesses to comply with regulations.

These steps, especially if Congress backs them up with legislation, could do some real good to diminish the overbearing regulatory state in America. Republicans and Democrats alike should support reining in regulations, because the sheer size and attention to detail of today’s regulatory state has a chilling effect on innovation and entrepreneurship, and slows economic growth and job creation.

That’s because federal regulations currently cost roughly $15,000 per household—more than most families spend on housing, food, education, and other essentials. In fact, if it were its own country, the $1.9 trillion total cost of compliance with federal regulations would rank among the world’s 10 largest economies.

When one of these agencies issues a new rule, it’s usually required to publish a draft in the Federal Register and give the public weeks to comment, after which it will issue a final rule. The trouble is that agencies routinely dodge that legal requirement. Agencies go way beyond ordinary rules and turn to other, sneakier instruments such as guidance documents, memoranda, notices, circulars, and administrative interpretations—the list goes on.

We call this “regulatory dark matter,” and recently inventoried it—or as much of it as we could trace, because so much of it flies below the radar. There are at least 600 total guidances deemed “economically significant” that can be located on federal web pages. These guidances are documents agencies produce to clarify how they interpret ambiguous clauses in regulations. But there are thousands of other memoranda, administrative interpretations, and notices that are in effect guidance, yet are harder to find. The Federal Register alone lists over 24,000 “notices” each year. While many are just meeting announcements, lots of guidance ends up there, and more appears in various incarnations on agency subpages linked on their websites. But there is no clear-cut central location for them.

This guidance is consequential for many sectors of our society, ranging from the environment to health care. One such example is the Education Department's transgender restroom letter so widely debated over the past year. Another is the “Waters of the United States Rule” from the Environmental Protection Agency, which expands the Clean Water Act to apply to any land that might at any time be covered by water, including seasonal pools and drainage channels. In addition, some of Obamacare’s major actions—the employer mandate, individual penalty, and declaration that technically illegal individual and family health insurance policies that didn't meet the standards of the law could remain in effect—were not enacted by changing the law or issuing rules, but through Internal Revenue Service and Department of Health and Human Services memoranda.

Agencies have become so non-transparent and unaccountable that they are now democracy’s enemies, not its friends. Congress is at the root of the problem, because it created and delegated power to regulatory agencies in the first place. There is a cardinal rule both parties need to learn: Don’t give yourself powers you wouldn’t want the other side to have. Both sides have regularly violated this principle for decades. Republicans have regretted their short-term thinking for the past eight years, and Democrats are regretting theirs now.

The good news is there are solutions the administration and both parties can get behind: Congress could eliminate regulatory dark matter by requiring agencies to submit things like guidance and, where appropriate, agency notices, memoranda, and administrative interpretations to notice-and-comment. This would allow the public more opportunity to directly weigh in on proposed rules, as many industries do on rules impacting their work. Additionally, accountability could be restored for costly regulation and guidance by requiring congressional votes before they are binding, at least for the dozens of new rules costing consumers and companies more than $100 million per year in compliance.

These are among steps that can reduce the size and scope of a bureaucracy that micromanages everything from AM radio to the size of holes in Swiss cheese.

Clyde Wayne Crews Jr. is vice president for policy at the Competitive Enterprise Institute (CEI), and author of the new study, Mapping Washington’s Lawlessness: An Inventory of Regulatory Dark Matter. Ryan Young is a fellow at CEI.

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