By Cliff Ennico
The White House recently issued an executive order designed to reduce government regulation of small businesses (for the full text of the order, see www.whitehouse.gov/the-press-office/2017/01/30/presidential-executive-order-reducing-regulation-and-controlling).
The purpose of the order is simple: to reduce the number of regulations federal Government agencies issue each year and (eventually) slim down the Code of Federal Regulations (CFR). But will it actually happen?
I doubt it.
Studies show that on average small businesses spend about $12,000 a year complying with federal, state and local regulations. And nobody questions that the CFR has grown out of control: in its paper form, the CFR in 2015 ran to about 250 volumes, each one about one to two inches thick.
Look at your living room wall. Picture it covered by floor-to-ceiling bookshelves spaced about 9 inches apart. Now picture those shelves completely filled with books, no spaces in between. That is the CFR. Each year the federal Government updates the CFR, so each year that entire wall of books goes to a landfill.
No lawyer on Earth (not even me) knows everything in those books. It would take someone years just to read the CFR from beginning to end. It’s no wonder a lot of people think government regulation is out of control.
But is the White House executive order the right approach?
The executive order is deceptively simple, with three mandates for fiscal year 2017:
- Government agencies that want to create a new regulation must identify two existing regulations to be repealed;
- The total incremental cost of all new regulations created by an agency this year, including repealed regulations, shall be no greater than zero, “unless otherwise required by law” or the office of management and budget (omb); and
- Any new incremental costs associated with new regulations must, “to the extent permitted by law,” be offset by the elimination of existing costs associated with at least two prior regulations.
That giant shuffling sound you hear is the sound of junior staffers at every government agency in Washington poring through the CFR and putting yellow stickers next to regulations that can easily be sacrificed if their agency wants to publish a new one.
So, where’s the problem? There are lots of ways to get around the executive order.
First, look at those phrases “unless otherwise required by law” and “to the extent permitted by law.” Simply put, if Congress in passing a law requires an agency to publish regulations and exempts them from the executive order, the agency can blithely ignore the executive order’s mandate. That probably won’t be a big issue under the current Congress, but if Congress changes hands two years from now . . .
Second, while the “total incremental costs” of all new regulations an agency publishes must be zero, there are lots of creative ways to play with that math. For example, an agency could eliminate two old regulations costing $250 each with a new one costing $500 and stay within the executive order’s mandate.
Third, the executive order covers only federal regulations. Most regulations which strangle small businesses are published by state and local governments.
Fourth, the executive order gives OMB very broad authority to provide agencies with guidance on how to comply with the executive order. This guidance must address, among other things, “processes for standardizing the measurement and estimation of regulatory costs; standards for determining what qualifies as new and offsetting regulations; standards for determining the costs of existing regulations that are considered for elimination; processes for accounting for costs in different fiscal years; methods to oversee the issuance of rule with costs offset by savings at different time or different agencies; and emergencies and other circumstances that might justify individual waivers of the requirements of this section.”
In short, more regulations!
Lastly, and most importantly, by taking a “quantitative” approach to reducing regulation, the executive order ignores the “qualitative” side of regulations. While there’s no doubt many government regulations have outlived their purpose, no longer make sense, or otherwise should be eliminated — for plenty of examples of these, see www.dumblaws.com – many regulations are necessary for public safety and order. You wouldn’t want the butcher at your local supermarket to sell tainted meat, or use a scale that’s off-balance.
Some regulation is beneficial, but too much cripples. How much is too much? Ay, there’s the rub.
A better approach to reducing regulation is to reduce or eliminate the agencies that publish them. Congress could, for example, limit the authority of an agency, or “pre-empt” state and local governments’ authority to regulate in a certain area. The federal budget could reduce the size of an agency to the point where staffers would be forced to identify the regulations they feel are most important to enforce and disregard the rest (this is already happening, to some extent, at the IRS).
A smaller federal government will lead naturally to a smaller CFR, and more freedom for America’s small businesses.
Cliff Ennico (email@example.com) is a syndicated columnist, author and host of the PBS television series ‘Money Hunt’. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com. COPYRIGHT 2017 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. @CliffEnnico.