North Carolina’s regulatory environment has improved steadily in recent years. The General Assembly under Republican leadership has passed Regulatory Reform Acts annually since 2011.
This effort is making North Carolina a national model for other states seeking ways to boost employment and job creation by giving risk-takers and job creators ever more room to move. Still, more work remains.
- The vast majority of studies of the effects of government regulation conclude that it harms economic growth.
- Economist Clyde Wayne Crews Jr. estimated that federal regulation cost American consumers and businesses $1.88 trillion in 2014, in terms of lost economic productivity and higher prices.
- Economists John W. Dawson of Appalachian State and John J. Seater of N.C. State found that, thanks to increasing red tape and regulation going back to 1949, the U.S. economy is only about one-fourth the size it could be.
- They computed the opportunity cost of federal regulations to be $277,100 per household and $129,300 per person. So without overregulation, the average household would have living standards enjoyed now by only the top echelon of society.
- Those estimates are for federal regulations. What about state regulations?
- A 2015 study by economists at Beacon Hill Institute at Suffolk University asked that question. Economists estimated that the burden imposed by state regulations in North Carolina on the private sector in 2015 was up to $25.5 billion. That is for just one year.
- The John Locke Foundation’s First in Freedom Index ranked North Carolina’s regulatory freedom 36th out of the 50 states — eighth out of the 12 Southeastern states.
- Areas for improvement identified by the Index include: restrictive certificate-of-need regulations, state benefits mandates on private health plans, burdensome insurance regulations for automobiles and homes, and extensive occupational licensing rules.
- In 2013, the General Assembly enacted a significant reform for administrative rules: sunset provisions with periodic review. By March 2016, over 6,000 total rules had been reviewed. Over half were retained, about one-third will undergo the readoption process, and 11 percent will be removed.
- The next step in reform could be a red tape reduction effort, such as seen in British Columbia (B.C.).
- In 2001, B.C. struggled to emerge from its “dismal decade.” Leaders saw that B.C.’s regulatory burden was strangling the province’s economic growth, so they committed to reducing it by one-third in three years. By 2004 they had cut out so much red tape they had reduced overall regulation by an astonishing 37 percent.
- Part of this reform involved giving up two to five old regulatory requirements for each new one. After reaching their goal, they capped it with a policy of no net increase in regulatory requirements (so any new regulation would require giving up an old one).
- So B.C. not only succeeded in reducing red tape, they also sustained their success. That’s what inspired Canada’s Red Tape Reduction Act of 2015, which requires the Canadian government to get rid of at least one regulation for each new one introduced.
- Another reform North Carolina leaders should consider is adding sunrise provisions to complement sunset provisions. Sunrise provisions affect new regulations before they are adopted.
- Regulations are basically laws made by executive agencies, using powers given them by the legislature. This makes sense when regulations are minor, but what if they’re not?
- Agencies are staffed by bureaucrats who are not directly accountable to voters, and regulations are much easier to institute than laws. As a result, over 99 percent of proposed regulations in North Carolina ultimately come into effect, whereas fewer than one in five bills do.
- Because they are accountable to the voters for passing laws, legislators should have a direct say over regulations with major economic implications for the state. Regulations that meet a certain threshold for economic impact(an example could be $5 million over a five-year period) should require approval from the General Assembly before they can be implemented.
- Regulatory compliance is more expensive for small businesses, which make up 98 percent of North Carolina employers. The federal government and most U.S. states have adopted small business flexibility analysis to help mitigate this cost disparity. North Carolina is one of six states without it.
- There are roughly 25,000 individual regulations in the 30 Titles of the North Carolina Administrative Code. That’s a breeding ground for compliance problems and overcriminalization.
- Furthermore, especially in crafting regulations, mens rea protection gets overlooked. Mens rea is common-law protection for someone who may break a law unwittingly, without meaning to.
- Enacting a default mens rea statute would mean that mens rea is considered present in a law or regulation unless lawmakers or regulators deliberately stipulated strict liability.
- Set up a Red Tape Reduction initiative like British Columbia’s, including capping overall regulations once the reduction target is achieved.
- Require any proposed regulation that would have major economic impact on the state to receive direct approval from the legislature before being implemented.
- Enact small business flexibility analysis and default mens rea statutes.