Research & Commentary: ‘Clean House’ Will Eliminate Unnecessary Regulations

Published October 18, 2018

In far too many states, decades of regulations are blunting business creation and economic vitality.

Unnecessary state regulations have a wide-ranging impact on businesses and decrease economic growth and job creation.

Since 1980, the U.S. economy has been slowed on average by 0.8 percent per year due to the cumulative effects of regulation, according to a 2016 study by the Mercatus Center at George Mason University. The study estimates if the regulatory burden placed on the economy had been held constant at levels observed in 1980, rather than increased, the U.S. economy would have been about 25 percent larger than it was in 2012.

Fortunately, Arkansas is working to reduce its regulatory burden. In a September news conference, Republican Gov. Asa Hutchinson announced the repeal of more than 800 outdated and unnecessary rules and regulations. This effort to modernize and streamline Arkansas’ regulatory system began in 2017 with the passage of Act 781, a bill signed by Hutchinson aptly titled “The Housecleaning Bill.”

The Housecleaning Bill requires all agencies to review and assess every rule and make recommendations for the elimination of specific regulations. Act 781 requires all state agencies to file a report detailing which regulations are outdated, unnecessary, or duplicative. During the most recent review process, nearly 3,400 rules and regulations were inventoried, reviewed, and assessed.

The Housecleaning Bill provides a model that all states should use to clean up their regulatory systems and purge unneeded rules and regulations. To limit and monitor the introduction of new regulations, states should also consider their own version of Wisconsin’s Regulations from the Executive in Need of Scrutiny (REINS) Act. The Wisconsin REINS Act aims to limit the growth of state regulations and bureaucracy by requiring the state’s legislature to give final approval to any state regulation that has an economic impact of $10 million or more within the first two years.

Under the REINS Act, a legislative agency that proposes a regulation costing more than $10 million must modify the rule to lower its cost, withdraw the proposed rule, or ask the Joint Committee for Review of Administrative Rules (JCRAR) to introduce a bill to authorize the rule. JCRAR is also empowered to request a public hearing early in the rules-making process and call for an independent review of the proposed regulation’s economic impact.

The REINS Act gives legislators the authority to limit the power of unelected bureaucrats while leaving agencies appropriate flexibility to implement new regulations. It is important to remember the REINS Act does not prevent agencies from making new regulations; it is designed to ensure that new rules with a major impact on the economy face scrutiny by elected officials, who are accountable to the voters.

For states with burdensome regulations, the REINS Act would pair perfectly with the Housecleaning Bill to give lawmakers the tools to cut back the size, scope, and power of government.

The following documents examine regulator reform in greater detail.

Ten Thousand Commandments 2017
Ten Thousand Commandments is the Competitive Enterprise Institute’s annual survey of the size, scope, and cost of federal regulations, and how the U.S. regulatory burden affects American consumers, businesses, and the economy. Authored by CEI Vice President for Policy Clyde Wayne Crews, Jr., it shines a light on the large and growing “hidden tax” of America’s regulatory state.

Evaluating the Quality and Use of Regulatory Impact Analysis
Jerry Ellig of the Mercatus Center at George Mason University assesses how well executive branch agencies conduct regulatory analyses. “The Regulatory Report Card reveals that the quality and use of regulatory analysis by federal agencies do not live up to the standards articulated in executive orders and guidance the Office of Management and Budget has created for agencies. The average Report Card score for recent regulations barely exceeds 50 percent,” wrote Ellig.

The Cumulative Cost of Regulations
This study for the Mercatus Center uses an economic model that examines regulation’s effect on firms’ investment choices. “Using a 22-industry dataset that covers 1977 through 2012, the study finds that regulation—by distorting the investment choices that lead to innovation—has created a considerable drag on the economy, amounting to an average reduction in the annual growth rate of the US gross domestic product (GDP) of 0.8 percent,” the authors wrote.

Policy Tip Sheet: State Regulations From the Executive in Need of Scrutiny (REINS) Act
This Heartland Institute Tip Sheet examines how implementing a state REINS Act would slow the cost of regulation, which has had a dramatic effect on economic growth and job creation.

Taking the REINS on Regulation
James Gattuso of The Heritage Foundation examines the REINS Act and argues while it does not solve all of the nation’s regulatory problems, it is a commonsense step in the right direction. “REINS would significantly change the way regulations are imposed. Congress would no longer be able to pass hazy legislation and disclaim further responsibility. By increasing Congress’s accountability for regulatory policy, it would end the shell game for responsibility that Members have long played,” wrote Gattuso.

REINS Act, Aimed at Checking ‘Rogue Bureaucrats,’ On Verge Of Becoming Law
Brett Healy of the MacIver Institute examined the Wisconsin REINS Act proposal prior to its passage and explained how it would improve the state’s spending practices while encouraging regulatory transparency.

REINing in Regulatory Overreach  
In this article for the Competitive Enterprise Institute, Ryan Young discusses the federal REINS Act and how it would restore the balance between the legislative and executive branches. “The REINS Act, by requiring Congress to reclaim some of its legislative responsibilities from the executive branch, would partially restore this skewed balance of powers. REINS is a modest reform, which, as currently written, would require four or five extra congressional votes per month,” wrote Young.

REINS Act Stalls in the Senate?
Nick Novak of the MacIver Institute examines Wisconsin’s REINS Act proposals from 2016 and how groups within the state reacted to the proposed law.

Placing ‘REINS’ on Regulations: Assessing the Proposed REINS Act
This article by Jonathan H. Adler of the Case Western Reserve University School of Law examines the  REINS Act and its likely effects on regulatory policy. “It explains why constitutional objections to the proposal are unfounded and many policy objections overstate the REINS Act’s likely impact on the growth of federal regulation. The REINS Act is not likely to be the deregulatory blunderbuss feared by its opponents and longed for by some of its proponents. The REINS Act should be seen more as a measure to enhance accountability than to combat regulatory activity,” wrote Adler.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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