Smart Regulation The Problem is the Process


Improving the Regulatory & Permitting Process is Essential

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Throughout his successful campaign for president, Donald Trump repeatedly targeted regulations as an obstacle to growth and jobs.

As President-elect Trump promises to overturn specific regulations, his administration should also consider how we got here — how did the regulatory bureaucracy arise in the first place? In many cases, the problem is the process.

Business leaders strongly believe that regulations serve an important purpose — helping to protect consumers, preserve the environment, and ensure safe workplaces. To be clear, I am not talking about rolling back those protections. I am suggesting a more efficient and thoughtful process for how rules are designed and subsequently evaluated.

Virtually every major business decision is done with a cost/benefit analysis. To meet its obligation to its employees, community and shareholders, a company needs to make sure that the gain from a project or policy justifies what it will sacrifice by carrying it out. While cost/benefit analysis is carried out in various forms in some federal agencies, it is not required of all. This should change. Americans deserve the safety that comes from thoughtful regulation, but they should not see their economic prospects dimmed when a regulation comes with massive costs but only meager benefit.

Consider the case of the “conflict minerals rule,” part of the Dodd-Frank law that requires companies to report their potential use of a variety of rare metals coming from the war-torn Democratic Republic of the Congo. The motivation behind this regulation was good: Preventing local warlords from profiting from rogue mining operations. But the Securities and Exchange Commission admitted it could not determine the potential benefit to the people of the Congo. And just for initial compliance the costs would be $3 billion to $4 billion. And according to independent researchers at the University of Wisconsin and London School of Economics, violence in the region has risen 143 percent since Dodd-Frank was signed. What purpose is being served?

Through generations, societal needs and technology have evolved and so have our regulatory needs. However, as laws and regulations are being developed there should be a harder look at those regulations that are already on the books. Adopting regulations in this way helps ensure we have a single, integrated regulatory framework that is easy to understand and administer rather than a patchwork of laws and regulations with antiquated provisions overseen by multiple agencies. For example, even with all of the laws and regulations that have been developed since 1972 to protect waters of the United States from pollution, somehow the Rivers and Harbors Act of 1899 has managed to remain operative and is one of a myriad of laws that a company has to consider while obtaining permits. An easy way to reduce bureaucratic burdens without comprising public health, safety and the environment would be to ensure the removal of outdated laws and regulations from the books as harmonized, superseding laws and regulations are adopted.

When a business spends significant time and money on a technology or process improvement, it logically reviews its effectiveness after its implementation. Government agencies should also be required to go back and periodically review existing regulations and determine whether they are achieving their original goals and whether they have been superseded. This kind of “retrospective review” would closely involve the public and bring opportunity costs into the discussion. To put this in context, since 2009 over 20,000 new regulations have been put in place, while a meager 179 have been eliminated. Importantly, more than 200 of the 20,000-plus rules are “economically significant,” meaning they each are likely to have an economic impact — a cost or a benefit — of $100 million or more annually.

Reforms are also needed in the permitting process, which is critical to achieving the infrastructure investment that President-elect Trump has high on his agenda. President Trump could also issue an executive order to streamline the permitting process, reducing the inordinately lengthy time it takes to give major projects the go ahead. Doing so would send a powerful message to the country that efficiency in government and accelerating the rate of job creation are fundamental goals of the new administration.

The president’s own Jobs Council recognized the problem in 2011: “The [permitting] process relies on dozens of agencies and authorities with different requirements and little coordination. Successfully working through the permitting process can literally take years.”

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Source: Taking Action, Building Confidence, Oct. 2011

These kinds of improvements to the regulatory process may not be exciting, to be sure, but their potential benefits are great. The next Administration and Congress should certainly examine specific regulations. But at the same time, creating a better, more efficient process will protect the public, safety, health and the environment, while allowing US businesses to expand, innovate, and most importantly, create needed job opportunities for the American people.