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Tad DeHaven (email@example.com) is a budget analyst at the Cato Institute and co-editor of downsizinggovernment.org.
Fear the Regulatory Cliff, Too
Much attention has been focused on the economic risks posed by the approaching fiscal cliff. Yet fiscal policies are not the only way the federal government diverts private-sector resources to achieve its own goals. Regulations, which dictate what employers, workers, and consumers can and cannot do, can have as large an effect on the economy as taxation and spending. Americans should be aware that we are headed for a regulatory cliff as well.
As Sen. Rob Portman (R-Ohio) highlighted in an August op-ed piece for The Wall Street Journal, the Obama administration has explicitly postponed several multibillion-dollar regulatory decisions until after the election. These include environmental regulations tightening ozone air quality standards and cooling water intake standards at electric utilities, Department of Labor rules on investment advice, Department of Transportation regulations requiring rearview cameras in new vehicles, and numerous regulations resulting from the Dodd-Frank and Affordable Care acts.
The Obama administration published a record-setting average of 63 final rules with impacts of $100 million or more annually in its first two years. The 2010 midterm elections seem to have imposed some restraint on its regulatory agenda, with the pace slowing to an annual average of 44 major rules since then. (That is about the same as the average of 45 major rules per year issued by Presidents George W. Bush, Bill Clinton, and George H.W. Bush, although much higher than President Reagan’s 23.)
The recent restraint is just the calm before the storm, however. The Office of Information and Regulatory Affairs (OIRA), which reviews all significant executive branch regulations before they are published, has a large backlog. While OIRA typically reviews regulations in fewer than 60 days on average, currently more than 70 percent of the regulations under review have been sitting at OIRA for longer than 90 days, and about 10 percent have been there for more than a year. This backlog is unprecedented.
Not only are fewer regulations emerging from OIRA review, but they are being submitted at a pace that is about half of that during Obama’s first three years. Given that the White House has not published a semi-annual agenda of upcoming regulations since the fall of 2011, it seems likely we are witnessing an effort to hold off on controversial regulations until after the presidential election.
Regardless of the election’s outcome, a regulatory cliff is coming. If Mitt Romney wins, bipartisan history suggests we will see a midnight rush of lame-duck Obama regulations. If President Obama wins a second term, we can expect to kick off four years of unchecked regulatory growth. Like the fiscal cliff, either scenario could alter how Americans live and work for a long time to come. ρ
Susan E. Dudley (firstname.lastname@example.org) is director of the George Washington University Regulatory Studies Center and a research professor in the Trachtenberg School of Public Policy and Public Administration. Her new book, Regulation: A Primer, co-authored by Jerry Brito, is available on Amazon.com in paperback and Kindle formats.
A Challenge and an Opportunity
Washington has yet to find a way of avoiding the fiscal cliff without adding to our mountain of debt. Political gridlock could lead to massive, abrupt, and across-the-board spending cuts and tax increases, which would throw the economy back into recession. Worse, lawmakers might agree to waive deficit reduction measures, in which case our debt would continue to accumulate, our long-term growth prospects would slow, and we would eventually hit a fiscal crisis.
The United States can and must do better. The fiscal cliff is a challenge, but it is also an opportunity to re-form our biggest spending programs and our outdated tax code. By replacing the sudden and mindless measures of January 1 with a gradual and thoughtful plan to move the debt onto a downward trajectory, we can place the economy on an upward one.
Such a plan must make real choices, carefully balancing short- and long-term economic growth and aligning both sides of the budget closer to the core values of the American people. It should start quickly but phase in slowly to give the economy time to recover, while restoring confidence in our ability to pay back our debt. It should cut spending on programs we don’t need while protecting important investments in our future. And it should reform the tax code to make it simpler, fairer, and more pro-growth.