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The problem of regulatory accumulation

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Stone walls cannot a prison make
Half so secure as rigmarole.
– C.S. Lewis, "The Prudent Jailer"

The Mercatus Center at George Macon University has published a new working paper by Patrick A. McLaughlin and Richard Williamson on the subject of regulatory accumulation. McLaughlin and Williamson’s work dealt with federal regulations, but their work is obviously applicable to state regulations, too.

What is regulatory accumulation? It is all those new regulations being added to "the enormous stock of previously existing regulations" like bales of straw tossed on a laden camel’s back. As McLaughlin and Williamson write, "as the quantity and scope of regulations grow, so does the degree to which they can negatively affect people and the economy."

The good news on the problem of regulatory accumulation is it can be dealt with:

regulatory cleanup may positively affect international competitiveness, entrepreneurship, and safety. The existing stock of regulations is so large that any regulatory reform effort that focuses only on new regulations while ignoring the accumulated stock, as several executive orders, guidance memos, acts of Congress, and bills currently under consideration do, is bound to miss significant opportunities to improve the US economy via regulatory cleanup.

One reason the stock of regulations grows, as John Hood explained in a June 2013 Business North Carolina column, is that "once enacted, regulations fade into the background. Only affected parties tend to pay attention to them. However vestigial or counterproductive, they linger."

They and their effects not only linger, they compound. Recent John Locke Foundation analysis of academic research on state economic growth showed that studies of state regulatory burdens were more likely to find negative effects on the economy than studies of state taxes were.

The North Carolina General Assembly and Gov. Pat McCrory took a laudable stride in addressing regulatory accumulation through the Regulatory Reform Act of 2013‘s periodic review and sunset provisions. As I explained in my Spotlight paper on the subject, sunsetting with periodic review occasionally brings these enacted regulations back into the foreground:

The presence of a sunset law makes the necessary but tedious process of revisiting old ideas more manageable by shifting the assumptions. Without sunsetting, all rules and programs are assumed to continue on indefinitely, 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.

That paper includes a future reform that would get at the thicket of accumulating rules. It is a "sunrise" rule called regulatory reciprocity:

Even if periodic review were in place, there would be no cap on the total stock of state regulation. An idea promoted by consumer reporter and Fox Business Network host John Stossel would require agencies to trade in old rules for every new rule.

If North Carolina were to adopt a form of the "Stossel Rule" — "For every new rule, repeal two old ones" — it would reduce the total number of regulations over time. A policy of regulatory reciprocity would also introduce opportunity cost to agency rulemaking, as agencies would have to consider the tradeoffs of creating a new rule. It could also lead to a voluntary speeding up of a periodic review if one were in place; i.e., an agency might face internal pressure not to wait the full ten years to report its "unnecessary" rules if identifying and culling them now would clear the path for a new rule it considered necessary.

Regulatory reciprocity would address the total stock of state regulation, and if calibrated toward trading in like rules for like (i.e., major rules for major rules), it would furthermore address the net economic impact of the state’s cumulative regulatory burden.

A prison of rigmarole

A popular term for regulation is "red tape," which conjures up the image of the businessman bound in sticky immobility. While that image is not practically inaccurate, it is not exactly historically accurate, either.

Out of curiosity (why tape? and why would it need to be red?), one day I looked up the origin of the term, which I relayed in a previous newsletter. As explained in the Online Etymology Dictionary, "red tape" is (emphasis added)

"excessive bureaucratic rigmarole," 1736, in reference to the red tape formerly used in Great Britain (and the American colonies) for binding up legal and other official documents.

Research shows how too much of this rigmarole effectively holds a state’s economic potential captive. That’s why Republican leaders’ work on regulatory reform — successive reform bills in each of the past three years — is so important, and why it should continue.

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Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As Director of Regulatory Studies at the John Locke Foundation, Jon gets into the weeds in all kinds of policy areas, including electricity, occupational licensing, hydraulic… ...

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