The federal government tends to follow a bass-ackward approach to regulating business activity.
First, it decides what it wants. Then it writes a regulation. Then it does an analysis to justify the regulation.
In other words, a procedure of “ready, fire, then aim.”
This disoriented approach helped to bring about many of the more than 165,000 pages of federal regulations, close to 20,000 added in the past few years, according to the Mercatus Center at George Mason University.
In its attempt to assume the job of “protecting the safety and health of consumers and workers, the federal government places an enormous load on business and industry as well as, often, average Americans,” a report from the Mercatus Center said.
Psychology, economics, and organized science, however, suggest that too many regulations—particularly highly detailed regulations—may make society less, rather than more, safe. In the Center’s study, “Regulatory Overload: A Behavioral Analysis of Regulatory Compliance,” psychologists and economists examined behavioral effects of regulatory overload on business. They discovered that too many and too detailed regulations can reduce compliance, discourage innovation, and fuel uncertainty, “ultimately making Americans less safe.”
A recent example: Automakers were required by the administration to double current fuel economy by 2025. Of course, the specific standard was picked without rationale—after first publicly floating other standards. Cost of compliance will be $8.5 billion a year.
It also will costs “untold numbers of jobs and–most inexcusable—the loss of lives.” Regulations in recent years forced car makers to downsize vehicles to meet standards that increased traffic fatalities by the thousands, according to the EPA’s own Inspector General’s Report.
An Environmental Protection Agency regulation to try to keep soot from power plants from drifting across state lines was suspended by a federal court Jan. 1, as reported by The Wall Street Journal. The court ruling “recognizes the irreparable harm that would have resulted from the short time line for compliance” said CEO David Campbell of Luminant, a Texas power company.
The EPA rule was stayed for the time being. But the court’s stay of the regulation for soot that may waft across a state line disheartened EPA bureaucrats, who couldn’t enforce their regulation immediately. The rule would affect about 1,000 power plants in more than two dozen states. It would have required them to cut emissions of sulfur dioxide by 73 percent—not 72 percent or 74 percent—and nitrogen oxide by 54 percent—not 53 or 55 percent from 2005 levels by 2014. One might well ask who chose and why did they choose such specific figures that could be changed by so many factors during the EPA’s timeline. Ready, fire, aim.
Do more regulations equal more safety? Regulatory overload is assured when too many or too detailed rules swamp business. “The effects of these regulations are reduced compliance, less innovation, and increased uncertainty.
Often regulators “try to address a wide range of industries and situations by writing very detailed ‘command-and-control’ or prescriptive rules,” the Center study said.
The Feds now even have rules to protect the hearing of musicians. Although it is likely too late for the ear-drum-shattering concerts for young people, the Occupational Health & Safety Administration (OSHA) now has rules to protect the hearing of orchestra musicians. The new policy declares that simple earplugs are insufficient. Very quietly, OSHA issued a new regulation. “Employees must use administrative or engineering controls rather than personal protective equipment…”
“The length and legalistic language of the regulations make it hard for businesses to decipher if, or how, these rules apply to them,” said the study.
Take ObamaCare, aka the Affordable Care Act (ACA). A couple of Mercatus scholars, after examining the initial rules, concluded that “the federal government used a fast-track process of regulatory analysis that failed to comply with its own standards, and produced poorly substantiated claims about the ACA’s benefits and costs”—including an upward bias for benefits, a downward bias for costs, and numerous material omissions. Little wonder for a law that contains the phrase “the Secretary [of HEW] shall” 1,563 times.
When regulations are excessive, “especially command-and control rules, businesses may respond by becoming more rigid and reactive.” Businesses become preoccupied with following the rules and fail to pursue innovative solutions. The failure to innovate leads to more mistakes, which leads to more regulations, less innovation, less safety, more mistakes, another round of rules and on and on…
According to Mercatus, “The way regulatory analysis is supposed to work is like this: Define the problem, identify the desired outcome, consider alternatives, assess trade-offs, define and measure progress.”
The failure of the regulation-packed Dodd-Frank law has been that it has been “a massive roadblock to our economic recovery,” said Chairman Spencer Backus (R-AL), House Finance Committee chairman. “Its 400 regulatory mandates create an atmosphere of uncertainty in which innovators and job creators can’t put their ideas and capital to work to better protect citizens and the environment.” “Regulators write ever more and more prescriptive rules,” but expanding the regulatory code has the opposite effect: making Americans “less safe.”
It, too, was a classic case of: Ready, fire, aim.
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