Research & Commentary: Tennessee Looks to REIN in Cost of State Regulations

Published February 9, 2018

A new bill recently introduced in Tennessee could dramatically change how the state enacts new regulations and manages state spending. Across the country, state and federal bureaucracies have dramatically increased their power over the past few decades. Regulations crafted by the numerous departments and agencies of executive branches have had wide-ranging impacts on businesses nationwide and are increasingly affecting economic growth and job creation.

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

In an article from the Wisconsin-based MacIver Institute, Scott Manley, senior vice president for Government Relations at Wisconsin Manufacturers & Commerce (WMC), the average U.S. business spends $9,991 per employee each year to comply with regulations. For smaller businesses – those under 50 employees – the cost grows to $11,724. WMC estimates the impact of regulatory costs annually equates to $14,842 per U.S. household, more than the cost of food, clothing, and health care combined.

Tennessee’s proposal would 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 more than $1 million over three years. Wisconsin passed a similar law in 2017.

The Tennessee version of the bill requires regulatory agencies to submit an economic impact analysis of the rule being proposed to the government operations committees of the state’s Senate and House of Representatives. If this analysis determines the rule creates more than $1 million in implementation and compliance costs over a three-year period, the agency will not be allowed to implement the rule without the approval of legislators or lowering the proposed impact of the rule. The legislature is also able to request information about how the agency conducted its analysis or request its own additional independent analysis.

There is no bill better suited for cutting back the scope and power of government than a REINS Act-style bill. It 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.

The following documents examine REINS Act legislation in greater detail.

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.

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.

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.

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.

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.

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.

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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