America's Regulatory Behemoth Requires Systemic Reform
OCTOBER 01, 1996 by DOUG BANDOW
Mr. Bandow is a senior fellow at the Cato Institute and a nationally syndicated columnist. He is the author and editor of several books, including The Politics of Envy: Statism as Theology (Transaction).
There may have been a revolution in the way Washington works over the last two years, but its effects remain hard to discern. All told, estimates Americans for Tax Reform, government is costing U.S. citizens $3.38 trillion this year. In effect, only on July 3—Cost of Government Day—did people stop working for government. People effectively spent more than half of the year, 184 and a half days, on their jobs before earning anything for themselves.
The burden of direct spending—$2.45 trillion for federal, state, and local governments—is obvious enough. Perhaps more incredible are the hidden costs. Federal regulation, for instance, runs Americans $739 billion annually. Another $196 billion is consumed by state regulation, particularly workers’ compensation laws and an out-of-control tort system. What makes these latter costs so insidious is that the financial bill is rarely known when the legislative bill is enacted. For instance, Congress’s politically popular move to help the disabled, the Americans with Disabilities Act, will cost counties alone $3 billion by 1998.
The overall result is an incredible regulatory sprawl. Last year, report Melinda Warren and Barry Jones of the Center for the Study of American Business, the federal regulatory workforce hit its highest level ever, 130,929—28 percent more than the decade before. The number of pages in the Federal Register, Washington’s compendium of proposed rules, was up an astonishing 68 percent over the same period.
Nor is the problem simply the quantity of regulation. The Independent Commission on Risk Assessment and Risk Management recently criticized federal controls as cumbersome, fragmented, bedeviled by confusion and inefficiency, and subject to a patchwork of inconsistent laws. Some regulations today are not based on realistic high-exposure scenarios, that is, the dosages people face. The language of the Delaney Clause, which bans carcinogenic products, is inconsistent with modern analytic detection methods and current scientific knowledge. And so on. In short, the entire federal rule-making process is seriously defective.
Similarly critical are Heritage Foundation analysts John Shanahan and Adam Thierer, who report in a recent study that the government fails to prioritize risks, recognize that not all risks are avoidable, and understand how regulations can actually cost lives. There are, explain Shanahan and Thierer, real costs and trade-offs associated with every regulatory decision.
This is an insight that many government officials obviously lack. When Congress enacted Corporate Average Fuel Economy standards, it encouraged automakers to downsize their automobiles in order to achieve better mileage. However, since small cars lose when hit by big ones, the result has been increased injuries, and deaths in auto accidents.
Other examples abound. Studies suggest that chlorine carries with it a slight risk of cancer. Therefore, Peru stopped chlorinating drinking water, only to suffer a massive cholera outbreak that killed 7,000 people. Similarly, while the banned pesticide EDB poses a (very low) cancer risk, the food fungus formerly destroyed by EDB presents a greater cancer danger.
Switching from disposable to washable diapers saved landfill space. But doing so also increases pesticide use (to grow cotton), hot water consumption (to wash the diapers), and air pollution (from the trucks of household pickup services). In fact, many forms of recycling offer similar negative consequences. Paperboard burger containers can be recycled, but polystyrene clamshells generate less pollution and use less energy when produced.
There is another more indirect trade-off. As Shanahan and Thierer put it, Wealth is health. A more prosperous society will have better medicine, safer transportation, more durable housing, and less dangerous work. Thus, anything that reduces people’s incomes is likely to, at the margin, make people less safe. In fact, the White House Office of Information and Regulatory Affairs (OIRA) estimates that every extra $7.5 million in regulatory spending results in one lost life as mortality rates rise.
Yet today the government regularly regulates as if money were free and there were no health trade-off. Common are the government rules that cost more than they are worth. Kenneth Chilton and Courtney La Fountain of the Center for the Study of American Business figure the 1990 Clean Air Act amendment governing ozone generates between three and five times as many costs as benefits.
Many rules offer dramatically worse deals. For instance, OSHA controls on benzene would require the expenditure of $168 million to prevent one death. The EPA’s standards for dichloropropane would expend $653 million to avert one death. And OSHA’s regulations on formaldehyde would cost an incredible $119 billion before saving even one life.
Using the OIRA estimate, 22 people are dying for every one saved by the benzene rule. The ratio is nearly 90-to-one for dichloropropane. The formaldehyde rules cause 1,600 times as much harm as good. Shanahan and Thierer suggest another way of looking at the so-called opportunity cost of these controls. In place of the benzene standard, 3,064 police officers could be put on the street. The dichloropropane rule costs the equivalent of 4,353 fire trucks. And pharmaceutical companies could develop 331 new drugs for the money necessary to save one person with the formaldehyde restrictions. Bargains these regulations are not.
America’s regulatory behemoth requires systemic reform. The starting point must be Congress. Lawmakers should stop attempting to micromanage virtually every aspect of society. It is time for them to realize that however imperfect the market, the political process is far more flawed. Even legislation resulting from the best of intentions, like the Americans with Disabilities Act, usually ends up having expensive and perverse consequences.
Congress also needs to stop granting blank checks to agencies to implement legislation. Observes former Senator Malcolm Wallop: We get to vote for senators, congressmen, and presidents. But we have less and less control over our lives because we have no control over the people who make the rules by which we live—about how we make and sell our products, which groups get what preferences, how we can use our land. Legislators need to stop delegating their lawmaking powers to unelected bureaucrats. Congress should allow the relevant agency to draft only a proposed, not a final, rule. Then Congress should have to vote on the measure before it becomes law.
Responsibility is the key to such reform. As attorney Philip Howard put it, When Americans can identify who is responsible for what, sensible decisions will begin popping out of our schools and other institutions like spring flowers after a long winter. While Howard may be a bit too optimistic, he is right about holding lawmakers accountable for their decisions. Today legislators can hide behind faceless bureaucrats. Were the former forced to pass judgment on the latter’s work, this political free lunch would disappear.
Any remaining rules should be flexible and rely on market forces. Government should be made to pay when it imposes unnecessary costs on innocent people—by effectively taking their property through regulation, for instance. More effective cost-benefit studies should be required before regulations can take effect. Officials need to improve their methods of risk assessment and seek to insulate the scientific investigative process from political pressure. Finally, regulators need to set priorities and consider trade-offs.
Regulations can kill, especially when they are formulated as a rash response to hypothetical risks, and divert resources from other activities that would reduce real risks, warn Shanahan and Thierer. The problem of over-regulation is not just the added financial cost, which is huge, but the large number of lives lost. When politicians stand in the way of meaningful regulatory reform, they are not only wasting billions of dollars. They are also killing hundreds or thousands of people—with kindness.