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This newsletter recently highlighted the need for a REINS approach in North Carolina — legislation that would restore major rulemaking authority to the legislature so that any proposed regulation that would have significant effect could proceed only with majority support from elected and accountable representatives of the people.

Such an approach could be considered part of a "sunrise" approach to regulation, along with stronger cost/benefit analysis (see the chapter on "The Next Steps on Regulatory Reform" in the John Locke Foundation’s book First in Freedom). Ensuring policymakers do their due diligence before imposing rules is taking a Hippocratic approach to regulation — first, do no harm.

Once a regulation is imposed, however, it can linger. As Pres. Ronald Reagan observed, "No government ever voluntarily reduces itself in size. So governments’ programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth."

Doing no harm with regulation necessarily needs an answer to rules going on in perpetuity. Regulations can outlive their purposes, pose unforeseen negative consequences, or otherwise have a pernicious rather than beneficial effect, but they can persist despite it all because of special interests and the difficulty in revisiting them.

These are not theoretical harms, either; regulations impose real costs on businesses (especially small businesses) and impede economic growth. Culling bad regulations is an important pro-growth policy that will lead to greater job creation, investment, and state revenues as a product of a stronger economy.

"Sunrise" implies "sunset": having government regulations, programs, and agencies conclude after a set period of time unless positive action is taken by the government to reauthorize them.

Periodic review: A robustly effective way for reducing unneeded regulations

Also known as periodic review, sunsetting makes the necessary but tedious process of legislatively revisiting old ideas more manageable by shifting the assumptions. Without sunsetting, all rules and programs are assumed to last for eternity, and it would require the deliberative process of government, with all its factions, to eliminate any of them. With sunsetting, all rules and programs are assumed to end in the near future, so for any one to be re-upped, it must be compelling enough to use the deliberative process of government to keep it.

Reagan was obviously a fan of sunsetting. So was Pres. Jimmy Carter. Sen. Jesse Helms favored it. So did Sen. Edward Kennedy. The idea has a pedigree going back at least as far as Thomas Jefferson, who concluded that the problems of factions, bribery, unequal representation, corruption, and other impediments to good government were so clear as to "prove to every practical man that a law of limited duration is much more manageable than one which needs a repeal."

A bill before the General Assembly, S.B. 32, would bring periodic review to North Carolina and set expiration dates for all rules according to where they appear in the Administrative Code. It would also slate all future rules for expiration 10 years after they become effective, barring readoption or amendment. The House version, H.B. 74, has been changed in committee and would, among other things, institute a three-step process for review.

In 2012 the Mercatus Center of George Mason University conducted a study of different kinds of regulatory review processes used in all 50 states. The study, by College of Charleston visiting scholar Russell S. Sobel and Mercer University assistant professor of economics John A. Dove, looked at regulatory reviews according to source (attorney general, other executive, legislative, or independent), type (legality, authority, efficiency, cost/benefit, etc.), and periodic (agency, non-agency, and sunset provision). They also looked at voter initiatives.

Sobel and Dove found little evidence that the source of the review matters or correlates with reducing a state’s overall level of regulation. They also found weak evidence overall for the type of review, but they did find evidence that government cost/benefit analysis (which measures how regulations affect government budgets, as opposed to economic cost/benefit analysis, which measures how regulations affect the economy as a whole) mattered. They also found some evidence that requiring a cost/benefit review to present alternative scenarios lowers a state’s total number of regulations.

Their findings for sunset provisions, however, were neither weak nor uncertain. As they write,

The final independent variable in the periodic review section, the presence of a sunset provision, is robustly statistically significant — in fact, the most significant finding in our initial results. Sunset provisions are negative and significant in all six different measures of state regulatory climates. The coefficients are sizeable as well, implying that the impact is not only statistically but economically significant. (Emphasis added.)

"Sunset provisions do appear to reduce the total level of regulation in a state significantly," they continue, noting that the finding "appears to hold both for the measures that reflect the flow of new regulations (the final two specifications of rule counts) as well as the remaining measures that more closely reflect the total stock of existing regulations in a state."

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