America’s CEOs applaud President Obama’s initiative to streamline the federal regulatory apparatus, review all existing federal regulation and avoid new regulations that impede innovation, diminish U.S. competitiveness in the global economy and restrain job creation and economic expansion – while providing little or no benefit to Americans.
Business Roundtable urges swift action by both the Administration and Congress to relieve U.S. companies of burdensome regulations that threaten economic recovery and throttle job creation. Restoring American prosperity must be the first order of business for the U.S. government and all of its agencies. A more economically secure and prosperous nation will have greater capacity to bear the cost – and enjoy the benefits – of prudent and necessary regulation.
More than two years after a sequence of crises in the U.S. housing and financial sectors plunged the economy into a deep and profoundly disruptive recession, American families continue to struggle with the painful after-effects of persistently high unemployment and weak job creation.
Against this backdrop of fragile recovery, a government-wide review of regulation must begin with an assessment of the cumulative effect of the total regulatory burden on the macro economy. Traditional cost/benefit analyses do not capture the dynamic impact of multiple new regulations on domestic industries already confronted with weak consumer demand, global competition and rapidly evolving structural changes in the world economy.
Taken individually, a regulation – or even several – may appear to be cost-effective and manageable. However, the cumulative impact of literally dozens of new major regulatory requirements facing all sectors of the economy over the next several years is something entirely different. That is why an evaluation of the total regulatory burden is essential to understanding the magnitude of the problem U.S. businesses face. The costs of regulation stifle productivity, wages and economic growth. By diverting capital away from more productive uses, poorly designed regulations undermine job retention and creation.
Any evaluation of proposed or existing regulation should begin by asking: what are the likely effects on job retention and growth, investment and U.S. economic competitiveness? While these are the right questions in any economic climate, they assume greater significance in the current environment.
The next question should be: is there a smarter, faster, more flexible and less burdensome way of accomplishing the objective? If the underlying statute lacks the necessary flexibility, changes or alternatives should be proposed so that it does.
Finally, reforms to streamline the regulatory process must address the uncertainty and delay imposed by the current system that stymies capital investment in the United States. The overly cumbersome and time-consuming federal permitting process for construction projects and major capital investments by regulated industries, often involving uncoordinated overlapping jurisdiction of disparate agencies, must be rationalized. Permitting delays inadvertently disadvantage U.S. companies, discourage domestic investment and slow the pace of U.S. job creation.
In addition to a broad evaluation of the total regulatory burden, and an appraisal of more flexible alternatives, Business Roundtable recommends the following concrete steps to ensure that President Obama’s Executive Order is effectively implemented:
- Reallocate resources to the Office of Information and Regulatory Affairs (OIRA) within the White House Office and Management. Effectively managing the total regulatory burden imposed on the U.S. economy will demand a higher level of oversight and coordination from OIRA. Individual agencies are simply not in a position to see the aggregate effects of federal regulation. Stronger direction from OIRA, with a focus on facilitating job creation and economic growth and a ‘big picture’ perspective, likely will require additional talent and resources.
- Invite public nomination of regulations for review and modification. In implementing Section 2 of President Obama’s Executive Order, OIRA should seek, or require agencies to seek, public input to help identify candidate regulations for close review and potential modification. In the coming weeks, Business Roundtable will offer the White House and Congress a list of current and proposed regulations that our CEOs believe have the greatest negative impact on economic growth and job creation.
- Practice early engagement with affected sector or companies. Agencies should solicit input from affected parties prior to proposing new or amended rules, and certainly before putting them into effect. Identifying potential unintended or counterproductive consequences before a new regulation is proposed and/or made effective will enhance regulatory efficiency and reduce the burden on business. Business Roundtable commends OIRA for its February 2, 2011 guidance memo directing federal agencies to significantly increase public participation in the rule making process, including by seeking input before a new regulation is proposed.
Review regulatory policy, guidance and interpretation documents issued by agencies to clarify regulations as an alternative to formal rulemaking or, after a rulemaking process is complete. Often these serve as de facto modifications of underlying regulation. They can become the basis of future enforcement actions, and hence, significant costs, yet are not subject to public comment. OIRA should review all significant policy, guidance and interpretation documents, and require public input before they are made effective.
- Identify regulations by affected sector of the economy. Currently, there is no systematic approach for identifying regulatory burden by economic sector – a necessary first step for developing a quantitative picture of the overall regulatory burden on the U.S. economy. OIRA should require agencies to identify affected sectors by their North American Industry Classification System (NAICS) code in any regulation or information collection request sent to OIRA for approval.
Utilize review criteria developed for the Reinventing Government Initiative in 1995. In evaluating existing regulations as directed by Sections 4 and 6 of President Obama’s Executive Order, OIRA and federal agencies should ask:
- Is the regulation obsolete?
- Is the regulation necessary? Could its intended goal be achieved in more efficient, less intrusive ways?
- Are there better private-sector alternatives, such as market mechanisms, that can better achieve the public good envisioned by the regulation?
- Could private business, setting its own standards and being subject to public accountability, do the job as well?
- Make the results of the government-wide review of regulations and the regulatory process available to the public, as indicated in OIRA’s February 2 guidance memo. While increased transparency and accountability are ends in themselves, making the review results widely available will improve the quality of public comment on proposed regulation and the usefulness of public nominations of candidate regulations for review and modification.
- Utilize the authority of the Executive Office of the President to encourage independent agencies outside the official purview of OIRA to adopt the spirit of the new approach to smarter, more competitive regulation.
Successfully streamlining government regulation is not a one-time, simple endeavor. It will require constant vigilance, Presidential direction, engagement by Congress and hard work over many years. It will also require an active partnership with the business community that desperately needs the rules to work in a way that protects the public and allows companies to compete and win in the global economy.