Pareto Policy Solutions, LLC

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Pareto Policy Solutions, LLC is a policy analysis and advocacy firm committed to advancing sustainability through “smart” regulation: regulation that rewards, and does not penalize, superior performance.  Often, such actions leverage advances in science and technology and make the regulatory program itself more effective as well as more efficient.

Senate Seeks Reform of Regulation

On February 25th, the Senate Committee on Homeland Security and Government Affairs (HSGAC) held a hearing:  Toward a 21st Century Regulatory System.  Reforming federal regulation is a top priority for the Committee and its Chairman, Ron Johnson (R-WI). 

Aside from Johnson, Senators in attendance included Ranking Member Tom Carper (D-DE), Rob Portman (R-OH), James Lankford (R-OK), Heidi Heitkamp (D-ND), Joni Ernst (R-IA), Kelly Ayotte (R-NH), Cory Booker (D-NJ), and Gary Peters (D-MI). Witnesses included former “regulatory czar” (in the Clinton Administration) Sally Katzen (Podesta Group), Jerry Ellig (George Mason University Mercatus Center), Douglas Holtz-Eakin (American Action Forum), and Michael Mandel (Progressive Policy Institute).

The biggest takeaway from the hearing was widespread interest among the Senators on the topic of retrospective review:  revisiting existing regulations to determine if they should be repealed or altered.  Several Senators conveyed constituent frustration over existing regulations:  Lankford, Heitkamp, Ayotte, Portman, Johnson, and Ernst each provided anecdotes.

Mandel, an economist, described his plan for establishment of a commission to recommend a package of regulations for elimination or improvement.  The recommendations would be sent to Congress for an up-or-down vote and Presidential signature.  His idea has found champions in Senators Blunt (R-MO) and King (I-ME), who plan as early as next week to re-introduce their bill from the last Congress. The bill is likely to include some changes from last year’s version.

Aside from retrospective review, the topic of cost-benefit analysis (CBA) also received much attention.  Every President since Ronald Reagan has required CBA for the most economically significant rules issued by executive branch agencies.  Ellig focused his testimony on the need for better cost-benefit analysis.  His research shows that CBA is not always conducted for major rules and even when it is, it fails to meet basic quality standards.  All of the witnesses were positive toward CBA for major regulations, but differed as to how best to ensure quality.  Katzen felt OMB review is sufficient; Ellig and Holtz-Eakin favored judicial review.

Throughout the hearing, the Coalition for Sensible Safeguards (CSS), a coalition of public interest groups and other nongovernmental organizations, tweeted its own perspective, taking issue with statements from many of the Senators and conveying facts about regulation that portend a vigorous defense of the status quo.  CSS has been the most vocal opponent of changes to the regulatory system, including executive branch oversight of regulatory agencies.  They are spearheading opposition to any legislation seeking to reform the regulatory process.

Unlike the last Congress, reform of the regulatory process is a priority for Senate leadership, and this change in the Senate balance will force President Obama to devote more attention to the issue.  Indications are that this is already happening.  OMB has already reached out to many interest groups on retrospective review in an effort to bolster the Administration’s efforts on this topic.  The Administration has required its agencies to develop plans for retrospective review, and has recommended that agencies create a retrospective review plan whenever issuing a new major regulation.  Business groups and academics have been critical of the Administration’s efforts to date.  As Ellig noted in his testimony, none of the major rules issued in the last year included a plan for retrospective review.

Several bills to reform the regulatory process have been introduced and referred to HSGAC.  It is likely some of these will see Committee action later this year.  As Chairman and Ranking Member of the subcommittee on regulatory reform, Lankford and Heitkamp are likely to play especially important roles.

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