Regulatory Reduction and Benefit-Cost Analysis

In between terrorizing our allies at home and abroad, the new president has signed an executive order aiming for regulatory reform. Here’s the important part:

Sec. 2. Regulatory Cap for Fiscal Year 2017. (a) Unless prohibited by law, whenever an executive department or agency (agency) publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.

Now, this is completely inoperable in practice since the definition of regulation is so loosey-goosey as to be useless. But, hey, let’s try to analyze it anyway. This rule supplements Executive Order 12866. EO 12866 continues a string of EOs going back to Reagan requiring that agency rulemaking be required to pass a benefit-cost test. That is, do the benefits outweigh the costs.

Now, contrary to popular believe, governmental regulation is not meant to keep bureaucrats busy.1 Every Federal rulemaking since the 1980s has been shown to provide a greater benefit than its cost. That’s why we have rules regulating medication, but not herbal supplements. You can’t hurt yourself with them, there’s no real benefit to regulation, and there’s some cost to doing it.

It seems that since 12866 is still in effect, the 2-for-1 special must take that into account as part of the analysis. That is, the lost net benefit from the repealed rules must be part of the cost calculation for the proposed rule. Now, most rules are tailor-made to solve a specific problem with minimized cost and some benefits. Now a rule must provide benefits to cover its cost and two others. That’s an incredible hurdle to overcome.

The Executive Order will not reduce the regulatory burden for anyone, just freeze it in place.

Image via the Trump Executive Order Generator.

  1. Well, it might be at the state level. For instance, Florida requires licensure for interior design. This, obviously, serves no useful purpose.