Who creates more problems, lawmakers or regulators?


It’s an entertaining question, brought on by the current debate about extending the payroll tax cut (here we go again!) and the battle between America’s Catholic bishops and the White House over contraception, among other issues.

For me, there’s little doubt that the actions of lawmakers on federal and state levels can create myriad problems, with unpopular and often unintended consequences. Perhaps it’s why Congress currently has the lowest rating in history. I dare say most state legislatures probably don’t get any higher ratings, either.

But it seems to me that when it comes to creating the greatest mess, especially for small businesses, the regulators should be ranked even lower than lawmakers.

At first, the creation of our regulatory system was a good thing — intended to be helpful and solve problems that might not otherwise be addressed — to implement specific policies that protect public health, welfare and safety. But the power and authorities Congress (and state legislatures) has handed to agencies are immense.

They now impact virtually everything we can, or cannot, do in business. As a result, the regulatory process all too often results in rules that fail to deliver the desired objective, fail to meet genuine public benefit needs and result in overreach at its biggest. The E15 ethanol debacle, ordering 54.5 mpg CAFÉ standards and the styrene dilemmas are examples that immediately come to mind.

Truth is, the regulatory process is out of control. Witness the Tennessee Department of Revenue’s claim that a man who built a small wooden boat in his garage with his 7-year-old son is a taxable boat dealer. We’re seeing on the federal and state levels an avalanche of regulations and interpretations that are overly broad and financially burdensome. Moreover, it’s apparent that agencies rush imposition of regulations prematurely, casting to the wind any careful look at other possibilities that could be more efficient, less damaging and more effective — Biobutanol, for example.

Sadly, because agencies have been given so much authority with little real oversight, they’re in a position to simply decide what they want to do, draft some regulation they want, and then undertake some study or analysis that is solely aimed at rationalizing their regulation. In addition, instead of being a critical component of the decision-making process, any required economic analysis is usually done as a postscript, and any negative results are reported as “within acceptable limits” to further justify the agency’s action. Talk about overreach.

The problem isn’t new. Virtually every president’s first executive order after coming into office directs all federal agencies to examine systemic problems and review alternatives to ensure any proposed regulatory benefits come at acceptable costs. Further, the agencies are ordered to conduct comprehensive analyses before developing any final regulations. But all of these presidential orders haven’t changed anything. Fact is, it’s really Congress that needs to make serious regulatory changes. Anything else is lip service.

And in case you wondering, President Obama did follow suit by issuing Executive Order 13563 after taking office. It said, in part: “General Principles of Regulation: Our regulatory system … must be based on the best available science. It must allow for public participation and an open exchange of ideas. It must promote predictability and reduce uncertainty. It must identify and use the best, most innovative and least burdensome tools for achieving regulatory ends. It must take into account benefits and costs, both quantitative and qualitative. It must ensure that regulations are accessible, consistent, written in plain language, and easy to understand. It must measure, and seek to improve, the actual results of regulatory requirements.”

That’s right thinking! So how do you think that’s all working out?


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