News: CJ Exclusives

State reformers moving to sweep away bureaucratic tangle

U.S. economy lost $4 trillion in growth from new regulations added over past generation, but states are slashing red tape

SAN ANTONIO, Texas — President Trump has a strong agenda to cut the red tape restraining the economy, but like officials at the state level he faces an army of entrenched opponents.

Government rules affecting nearly every economic aspect of daily life are written and enforced by unelected, unaccountable bureaucrats who stay in office while elected officials come and go, said Jon Sanders, director of regulatory studies at the John Locke Foundation. Sanders and other regulatory experts addressed the burdens of government red tape this week at the State Policy Network’s annual conference. Regulations impede economic growth through compliance costs, paperwork, mandated purchases, numerous barriers to entry, market uncertainty, and closing avenues to investment and job creation.

“What is happening to us?” Laura Jones, executive vice president of the Canadian Federation of Independent Business, said during a panel debate.

Jones has done extensive research on the cost of red tape in Canada and the United States. She said regulators too often are zealots, citing the case of a California youngster who was told to shut down her lemonade stand unless she installed $2,300 in restaurant-grade equipment to make her refreshment.

Patrick McLaughlin heads the Program for Economic Research on Regulation at the Mercatus Center at George Mason University. Based on research from the center, McLaughlin said the U.S. economy would have been $4 trillion larger in 2012 if the number of regulations on the books had remained where they were in 1980. The $4 trillion amount is equivalent to the world’s fourth-largest national economy.

The Beacon Hill Institute at Suffolk University determined North Carolina’s regulatory overreach put a $25.5 billion hit on the economy in 2015 alone.

James Broughel, a research fellow at Mercatus, said a just-completed study of North Carolina’s regulatory landscape, which will be published soon, found the state has 109,350 regulations on the books. Of the 14 states studied so far, New York had the most at 307,636. Arizona the fewest at 63,919.

There’s a correlation between higher numbers of regulations and blue states. Public health and environmental issues tend to have the most administrative rules in all states, Broughel said.

North Carolina passed a sunset provision with periodic review of rules by the state Rules Review Commission in 2013 to cut archaic and harmful regulations.

McLaughlin told Carolina Journal that North Carolina is ahead of the reform curve as one of the few states he’s aware of with a rules review process. But he warned a commission can lose its way, as happened in Pennsylvania.

“If the goals of the commission change and don’t remain focused on are rules working, are economic benefits being delivered, what are the economic costs, then you may not stay ahead of the game,” McLaughlin said.

Garth Dunklin, chairman of North Carolina’s Rules Review Commission, told CJ  that, as of Wednesday, 11,636 of 19,302 rules subject to the sunset process had been reviewed.

Of that number, 1,465 — 12.6 percent — were killed, and 7,211 (62 percent) were kept intact without change or review. Another 2,960 or 25.4 percent of the rules will be subjected to a formal hearing and readoption vote.

Dunklin calls for reforms to prevent state agencies from retaining regulations without review. House Bill 162 would make that change, and prohibit adoption of any permanent rule if the cost to those impacted would be $100 million or more over a five-year period. A conference committee reconciled differing House and Senate versions of the bill, but the House never passed it.

Jones said her home province of British Columbia reduced its “tangle of rules by 47 percent since 2001. The province transformed from an economic basket case in what she called “the dismal decade” of the 1990s to one of Canada’s leading economic engines today. That was done by requiring two regulations be killed for every new one passed.

McLaughlin said that is a good model for states to emulate, and some are considering it. Others use different approaches.

Idaho passed a constitutional amendment to repeal and repass every regulation annually, McLaughlin said.

Mike Webert, a member of the Virginia House of Delegates, said his state may pass a constitutional amendment during the next session giving the legislature the right to review administrative rules. Repeal would not be subject to a gubernatorial veto.

Webert said rubber-stamp votes often are sought for a state rule to comply with federal regulations. He said he votes no, and demands a fiscal analysis to determine the impact.

Bill Peacock, vice president of research at the Texas Public Policy Foundation, said regulatory inertia must be combated to eliminate rules.

“Regulators like to regulate,” Peacock said. “It’s what they do for a living.”

The crony relationship between special interests and regulators is another barrier to reform, he said. Corporations want to receive benefits from regulators they can’t get from the market, and one way to do that is to have regulators create barriers to entry to keep competitors out.