"A 21st Century Regulatory System"

The White House recently unveiled plans by 30 different federal agencies to make sure that the regulations they enforce are protecting Americans’ health and well-being without imposing unnecessary or excessive costs. 

These agencies will rewrite or remove regulations that have been on the books for decades to achieve their goals at lower costs and abolish regulations that have become obsolete.  Examples of changes now underway include:

  • Removing regulations that require outdated technologies, such as film-X-rays instead of digital.
  • Eliminating the regulation requiring some gas stations to install vapor recovery systems on their hoses, because vapor recovery is now built into the gas tanks of cars, saving gas station owners about $670 million over the next decade.
  • Eliminating 1.9 million annual hours of redundant reporting requirements at the Occupational Safety and Health Administration (OSHA), and harmonizing its hazard classifications with other countries to save $585 million or more per year for employers.

The Administration has committed to completing this thorough review and ensuring that the United States has a regulatory system that protects Americans’ health and well-being, while promoting innovation, competition, and economic prosperity – “A 21st Century Regulatory System.”

Getting rid of outdated regulations and making regulations smarter benefits America.  But abolishing all regulation, even the ones that provide important benefits, is not smart.  Some regulations are critically important for the country and have benefits that far outweigh the costs.

Take the 1990 changes to the Clean Air Act.  The benefits to America have been estimated to outweigh the costs of these rules by a factor of 25.  These rules prevented over 150,000 premature deaths, 86,000 emergency room visits, and 13 million lost work days.  And that’s just for 2010.

Some regulations, by establishing consumer confidence in an industry, can actually make them better off.  It helps the American beef industry thrive, for example, that consumers know that the Department of Agriculture inspects meat for safety.  In fact, American beef producers volunteer for the government’s quality grading system, and pay for the privilege. 

The administration has been smart about regulations.  It conducts a rigorous cost-benefit analysis of individual regulations before they are put into effect and it often opts for lower cost rules when they generate greater net benefits.  If you look at the benefits and costs of major regulations issued by this administration in fiscal years 2009 and 2010, the estimated benefits are over five times larger than the estimated costs.  The net benefits are over ten times those during the first two years of the Bush Administration, and over three times those during the first two years of the Clinton Administration.  

Furthermore, there has been no increase in rulemaking in this Administration.  On the contrary, the number of rules issued in the first two years of this Administration is approximately the same as the number of rules issued in the first two years of the Bush Administration.

Some people are throwing around scary numbers about the costs regulations are imposing on the US economy.  One group is even claiming that the regulations currently on the books cost the U.S. economy $1.75 trillion in 2008.  The Council of Economic Advisers has looked at those claims and the $1.75 trillion figure is utterly erroneous.  In fact, their own data (which come from the World Bank) show that countries with smarter regulations have higher standards of living, and the United States has one of the best regulatory systems in the world.  And beyond that, their number completely ignores the benefits of regulation.

We must do everything we can to streamline regulation and make it smarter.  But we should also not forget that the rules of the road are important for the health, safety and economic growth of the United States.

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