Obama needs to go one step further in his regulatory review

According to an article in The Wall Street Journal, it appears that President Obama is making a move to court the favor of business. The administration is allegedly going to review all regulations to determine whether the regulations have a negative impact on business.

Sounds good on the surface, but if the federal government is going to apply a cost-benefit analysis to rules already in place, it is more than likely can to conclude that it will be a lot costlier to government to remove the rule versus keeping it. After all the notices of inquiry, notices of proposed rule making, economic impact statements, review of consumer comments, final rulemaking, and publications in the federal register, which agency is going to conclude that it was wrong to put a rule in place?

No. These agencies will apply public choice theory and not rule against their own self-interest and their self-interest is to stay relevant by implementing a lot of non-relevant rules.

If Mr. Obama were serious about implementing rules that do not hurt business, he would not have abandoned the previous administration’s market failure test for agency regulations.

On January 18, 2007, President George W. Bush signed Executive Order 13422 which required agencies to identify specific market failures such as market power, externalities, and lack of information when determining if regulations were warranted. On January 30, 2009, within days of his inauguration, President Obama, without any detailed explanation, signed Executive Order 13497 which revoked Mr. Bush’s executive order.

If Mr. Obama really wants to not only appease business, but flex his centrist muscles, Mr. Obama should put back in place the market failure test. A market failure test forces the national government to look at the economy and commerce and an agency’s impact on both. A market failure test would require agencies to marginalize their self-interest (admittedly difficult). A market failure test falls more in line with the Constitutional mandate that government regulate commerce. A cost benefit analysis that would undoubtedly factor in government costs and benefits would not do any of the above.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in Economy, George Bush, Obama, Political Economy and tagged , , , , . Bookmark the permalink.

One Response to Obama needs to go one step further in his regulatory review

  1. Kenneth Ciszewski says:

    What about social costs? The Bush criteria doesn’t mention those, and I don’t know if the various agencies look at those, but market failures alone shouldn’t be the reason for not having regulations. Public and personal safety, lack of exploitation of the public by business, and social costs (like pollution!!!!) should also be considered and balanced against the business cost of regulations.

    Frankly, business gets the regulations it deserves. If business treated both customers and employees with reasonable fairness, there would be no need for regulations. All too often, business is only looking at its own interest. There are those who argue that the sole interest of business should rightfully be that of profits for its owners/shareholders, but look where that has led–pollution, unsafe work places (like coal mines), unsafe food, poorly made products (like the GM cars of the 1980s)–the list goes on.

    Admittedly, regulations can get bureaucratic and can go too far some times, but these are usually in response to business abuses.

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