A Progressive Approach to Regulation?

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After President Obama issued his executive order on “Improving Regulation and Regulatory Review,” many observers were concerned that he failed to provide a sufficiently strong impetus for reformers within the federal agencies to improve or eliminate regulations. While acknowledging that excessive regulation can hamper job growth and innovation, the president insisted that he did not intend to reduce protections for consumers and for the environment. And so he called for various federal agencies to engage in a process of self-review.

Though self-review sounds appealing, it isn’t likely to yield real reform. Many rules and regulations are mandated by Congress, thus giving agencies limited scope for changing them. Moreover, agencies often lack the analytical resources to conduct a thorough evaluation of the economic impact of various regulations.

Then there is a potentially deeper problem. Because federal employees are not randomly assigned to agencies and to enforcement efforts within agencies, one can safely assume that the employees tasked with enforcing various regulations generally consider them defensible. A political appointee assigned to oversee the agency might bring a fresh perspective, but taking on entrenched constituencies within an agency is never easy. The result is a powerful bias in favor of the regulatory status quo.

In “Reviving Jobs and Innovation: A Progressive Approach to Regulation,” Michael Mandel of the Progressive Policy Institute offers a way out of this trap. He calls for the creation of an independent Regulatory Improvement Commission (RIC) devoted to improving the growth prospects of U.S. firms.

Rather than identify a small handful of regulations that make for good applause-lines, the RIC would devote itself to streamlining, consolidating, and eliminating regulations in a comprehensive way, free of the internal agency politics that would hamper a process of self-review. As Mandel explains, this comprehensive approach is more likely to yield economic gains:

Taken individually, most of these rules and regulations were probably reasonable when they were adopted, and they may still be individually defensible now. But the accumulation of regulations has the potential to hamper innovative and growing sectors, in the same way that a big enough pile of small stones can dam up a stream. Indeed, regulatory drag may be one reason why the past decade has seen few breakthrough products, outside of information technology and communications.

After setting broad goals for the RIC, Mandel calls for appointing an independent, politically balanced group that would offer 15 to 20 recommendations for improving federal regulation. Congress would then hold an up-or-down vote on the RIC proposal, with no amendments allowed.

Mandel’s RIC proposal has much to recommend it. Though it is fairly cautious, it does seem like the kind of moderate step that Congress and the White House might be willing to get behind.