The current political argument over deregulation needs reframing.
THAT regulatory reform has fallen prey to America’s binary political culture is a shame.
Conservatives have long employed bywords—like House Majority Leader Kevin McCarthy’s “metastasizing bureaucracy”—to depict a hulking Washington stomping on the rights and freedoms of its constituents via rapacious over-regulation. They preach the need for “regulatory relief” and, more recently, the “deconstruction of the administrative state,” as White House Chief Strategist Stephen Bannon put it.
Liberals, somewhat justifiably, condemn Republican efforts to abrogate vital environmental rules. But in their desire to appeal to a broad base of supporters, top Democrats push their case past its logical bounds—from being against crude environmental deregulation to being against all efforts to reform the regulatory system.
Neither of these positions make much sense. Conservatives conflate dual federalism—the Constitutional notion that states and the federal government have separate, clearly defined powers—and over-regulation. Criticism of the Obama administration for executive overreach is valid, but gets wrongly mixed in with (also valid) concerns that a flabby, labyrinthine regulatory system is impeding economic growth.
To understand over-regulation, consider the fact that there exists no streamlined process to revisit old regulations. Once rules or laws are enacted, it is politically and logistically burdensome to turn back. The lack of a straightforward roll-back process incentivizes lawmakers to ameliorate problems with old laws by passing new ones. All of this exacerbates one fundamental problem: that of complexity.
Complex, oftentimes silly, laws aren’t just fodder for trivia games; in aggregate, they increase the cost businesses must incur in order to follow the law. Such “compliance costs,” in turn, depress growth. Moreover, new regulations can crisscross with old, forgotten ones, creating peculiar legal grey zones.
James Madison understood the dangers of a regulatory patchwork slapped together by politicians—relegated to the realm of arcana. Madison wrote in Federalist No. 62, “It poisons the blessing of liberty itself … if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.” A fresh approach is needed.
Regulatory policy should instead be thought of like tax policy. The distinction between tax cuts and tax reform, which refers to an overhaul of the entire tax code, is a useful starting point. The failure of George W. Bush’s tax cut programs—which had been purported to pay for themselves—showed that tax cuts are a viable measure only if they are utilized as a cog in a larger machine, as in Barack Obama’s stimulus package or Ronald Reagan’s Tax Reform Act. Likewise, regulations should only be repealed in the pursuit of a larger, clearly delineated policy vision.
One critical caveat must be underscored: repealing regulations is not an end in itself. Want to loosen up lending to stimulate the economy? Fine, but ensure banks keep ahold of adequate capital as a fail-safe. Want to extricate industry from soaring compliance costs? Fine, but do so in a responsible fashion that doesn’t dirty streams and befoul air.
A bipartisan coalition of senators and congresswomen serious about a regulatory overhaul would be a boon for America. Both stand to gain. Conservatives can reduce the role of government through a holistic simplification, and liberals can further enshrine the most effective regulations. For instance, the Dodd-Frank Act could be distilled from thousands of pages to dozens, with the law’s framework preserved alongside its most efficacious regulations. Regulatory reform need not fall into the predictable left-right mold. Here’s to hoping that an intrepid group of lawmakers will find a way to circumvent the present regulation bifurcation.
