Conservatives are really good at complaining about what theyre against. Sen. Marco Rubio (R., Fla.) is taking a different tack: hes laying out a thoughtful reform agenda that explains what Republicans could be for. Today, at an event sponsored by Google and the Jack Kemp Foundation, Rubio floated six proposals for restoring economic growth. The most intriguing of these: a "National Regulatory Budget," set by an independent board, that would hold the federal government accountable for the cost of existing and new regulations. Rubios idea tackles the largest, and least-covered, drag on the U.S. economy.
Federal income taxes cost $1.09T, but federal regulation costs $1.75T
In 2010, the U.S. Small Business Administration estimated that the total annual cost of federal regulation was $1.75 trillion. Thats "trillion" with a T. By comparison, the federal government collected $1.09 trillion in individual and corporate income taxes that year. Put simply, the burden of federal regulation on the economy is 61 percent greater than the burden of income taxes.
And that was in 2010, before the two regulatory tsunamis of the Obama presidency: Obamacare and Dodd-Frank, the attempted reform of the U.S. banking system. Obamacare, thus far, has produced more than 20,000 pages of new regulations; Dodd-Frank has produced another 10,000.
Most of Obamas most important new regulations were held off until after the President was reelected; even so, James Gattuso and Diane Katz of the Heritage Foundation calculate that Obama, in his first term, increased the federal regulatory burden by $70 billion.
What can be done to stop this relentless and counterproductive regulatory pile-on? Well, you could repeal or reform big laws like Obamacare and Dodd-Frank. But that would still leave you with a lot of other costly regulations that dont require new acts of Congress.
Case in point: FDA over-regulation of drug development
In 2007, a study of GlaxoSmithKlines diabetes drug Avandia linked the drug to an elevated risk of heart attacks. The FDA responded by severely restricting the use of Avandia, and requiring that every prospective new diabetes drug sponsor conduct massive clinical trials to ensure that these medicines dont suffer Avandias fate.
The downside: these cardiovascular safety studies cost about $300 million each to conduct. Few companies have that kind of money lying around. As a result, the pharmaceutical and biotech industries have largely abandoned research and development of new diabetes drugs, despite the fact that 26 million Americans are affected by the disease. The few companies that persist, like Novo Nordisk, have found their persistence punished, not rewarded, by the FDA.
In 2011, the House of Representatives passed a bill called the REINS Act that would have triggered a Congressional review anytime a federal regulation was estimated to cost more than $100 million. The bill went nowhere in the Senate, but Mitt Romney took up the cause in his ill-fated presidential campaign.
In addition, Romney proposed a "regulatory cap" that would require federal agencies to estimate the cost of any new regulation using a "budget-like process," and only add that regulation to the Federal Register once its costs were offset by the revision or repeal of an already existing rule. (Disclosure: I was a health care policy adviser to Gov. Romney in 2012.)
Rubios proposal: a National Regulatory Budget
Today, Sen. Rubio proposed six ideas for expanding economic growth, including reallocating wireless spectrum, federal R&D reform, trade promotion authority, energy reform, and tax reform. But the most important of these—the one with potentially the most profound impact on the economy—was his conception of a "National Regulatory Budget."
The task of gathering "independent, rigorous, fact-based estimates of the cost of all existing regulations by agency" would be assigned to an independent agency, or to "an existing agency with a record of independence" such as the Bureau of Economic Analysis within the Commerce Department. The new board would have the "authority to compel all agencies to provide relevant information" to the board.
Congress would establish a National Regulatory Budget, say at $1.75 trillion, and then the new review board would have the power to prohibit government agencies from issuing new regulations until their costs were estimated and old regulations with equivalent costs were taken off the books.
New bills should get CBO scores for their regulatory cost
Ideally, this new "Office of Regulatory Analysis" could be hitched to the Congressional Budget Office in order to score new legislation. Right now, the CBO scores legislation to assess its impact on federal spending and tax revenue; the new board could help the CBO also score the regulatory cost of new laws.
But there may be Constitutional complexities in giving Congress the power to govern the regulatory actions of the executive branch. Theres no reason you couldnt have both: an expanded CBO that scores the regulatory cost of new bills, and an executive branch agency that enforces a National Regulatory Budget.
Knowledge is power
One challenge in implementing such a framework is that regulations are not always up to the executive branch. Its of course Congress that passes laws, like Obamacare, that require a certain amount of regulatory action from the relevant executive agencies. In order to enforce a National Regulatory Budget, the executive branch might sometimes run afoul of Congressional statutes that it would otherwise be required to enforce.
Perhaps the way around this problem would be to have the CBO score the regulatory expansion required by a given bill, and then add that sum to the National Regulatory Budget each time a bill is enacted into law.
But it is inexcusable that we dont already require Congress to assess the regulatory cost of new legislation. Take health insurance. Obamacare increases the cost of health insurance in ways that the CBO was never required to score when Congress was considering the bill in 2009. If you have to pay an extra $1,000 a year for health insurance, that is just as harmful to you as a $1,000 tax increase. Costly regulations are even more harmful to you if youre poor, because if youre poor you dont pay income taxes, but the higher costs of goods and services remains a drain on your wallet.
Its high time we did something about this problem, and Sen. Rubio is to be saluted for bringing it to the publics attention. It may not have the right-wing sex appeal of comparing Obamacare to slavery, but it will make a bigger difference in the life of every American.
Original Source: http://www.forbes.com/sites/theapothecary/2014/03/10/marco-rubios-important-new-proposal-for-containing-the-costs-of-federal-regulation/