Improving America's Regulatory Climate

August 21, 2014

reg conference

It is my distinct privilege to welcome all of you to the inaugural – and hopefully first annual – Utah “Solutions Summit.”

In future years, the theme of the conference will change, but the purpose will stay the same. We want to bring together Utah’s leaders – in business and civil society and all levels of government - to discuss what we can do together to meet the greatest challenges facing our state and our country.  

This year, we decided to focus on reforming our regulatory system. It’s one of the greatest challenges facing our country, holding back economic opportunity, and stifling American exceptionalism.

When you talk to people in the private sector – whether people in large corporations or very small businesses, non-profit groups, too – that word comes up again and again: stifling.

Government regulations have put up so many barriers that people today sometimes feel like they can hardly move.

And the effects on our nation are enormous. For instance, our economy is becoming less entrepreneurial. Business start-ups have been declining for years. This is dulling our economy’s competitive edge. That may be tolerable for some people fortunate enough to have already succeeded in life, but for young people just starting out, for poor families trying to work their way out of poverty, for middle class families facing increasing uncertainty... stagnancy is crippling.

The United States is facing an opportunity crisis, up and down the economic ladder, and government is too often only making it worse. 

Millions of Americans are out of work – many are long-term unemployed. Yet today one out of three jobs requires a government license – government permission just to work.

And once you do have a job, there are thousands of pages of Don’t do this... Not like that... That’s not approved.

Now, government may mean well... But that’s no excuse for smothering people with so many nagging rules that they squeeze all the adventure, discovery, and freedom out of life. Government has become like one of those “helicopter parents” you see at the park, nervously hovering over their children to make sure they only ever do perfectly safe things and only under mommy and daddy’s supervision.

When we see these helicopter parents – and my kids tell me the really tough ones are called “Black Hawks” – we wince, right? Not only for the parents themselves, who we know are unnecessarily stressed out of their minds. But we feel for those kids, too, who never get to explore and overcome the challenges in life that enable growth and make us all who we are.

That’s what regulations are doing today. Just a few weeks ago, the federal government issued new rules that effectively ban school bake sales. A few years ago, Washington banned the production of incandescent light bulbs. The federal government still regulates how large a toilet tank you’re allowed to have in your house. The city of New York recently banned Big Gulps. Supposedly this is all for our own good – government knows better.

But these and other rules do not protect the American people from themselves – they prevent the American people from being themselves. And they prevent the economy from growing and innovating accordingly. 

This isn’t the so-called Nanny State – that’s an insult to a lot of great nannies!  This is “helicopter government,” hovering over us like an overbearing parent. 

But there are two problems with this arrangement. First, we’re adults. And second, the government is the American people’s child, not the other way around. We created it. We’re supposed to tell it what to do. We’re supposed to define its boundaries.

So we should not see reforming the regulatory system as a kind of ideological revolution. It’s more like giving Washington a badly needed time-out.

I don’t need to recite to you statistics about how our $2 trillion federal regulatory state hurts businesses and holds back our economy. You are the ones who work in those burdened businesses in this sluggish economy, and so you know the problem first-hand.

But there is one statistic worth highlighting. To my mind it’s a key to thinking about solutions to our regulatory problems.

The figure is: 51-to-1. This is the ratio of regulations issued by bureaucrats to laws passed by Congress in 2013.

A lot of people say the explosion of the regulatory state is a usurpation of congressional authority. But it’s more like subcontracting. Congress has given the executive branch this authority for its own convenience.

We get to pass laws and boast that we “did something.” But then if it doesn’t work out, we can join the public in outrage against those incompetent bureaucrats who messed up. 

Seen in this light, helicopter government is actually a win-win for Congress: all credit, and no blame. After all, as legal scholar John Hart Ely put it, “Accountability is pretty frightening stuff.”[1]

But it’s not win-win, is it? Though it may make individual politicians’ re-elections easier, it is corroding public trust in our political institutions. The American people are tired of bad public policies, and their elected officials’ most common response is that it’s someone else’s fault.

So as we think about solutions to America’s regulatory sclerosis, we need to think about more than just better regulations. We need to think about the underlying system, to once again line up the incentives of the policymakers and the public they serve.

And that’s exactly why we’re here today: if Congress ever takes up real regulatory reform it’s going to be because of a coordinated, constant effort from outside the Washington beltway. That includes everyone in this room, because, like most Americans, the citizens of Utah are practical people, who specialize in solving problems, not manufacturing them.

So we’ve got two problems to solve here. First, the cost of regulations to our economy, and second, the dysfunction unaccountable policymaking visits on our society. I’d like to add a third point to consider, as well.

One of the biggest problems with regulations is that they are rarely evenly distributed throughout the economy. Rather, rules are written in such a way that specifically hurts some businesses and helps others. This is not only unfair – it is corrupting. It incentivizes businesses to invest their money in influence instead of innovation.

There is a reason that Washington, D.C. is home to six of the ten wealthiest counties in America today – despite the fact that it produces almost nothing of intrinsic economic value to the economy.

And because all these regulations usually increase overhead costs, they tend to be more easily borne by large, incumbent businesses than by smaller, younger start-ups.

But it’s precisely those new businesses that produce the majority of job creation, and inject into the economy the competitive energy that compels all firms to constantly adapt and innovate.

And as difficult as regulations can be on new or would-be entrepreneurs, they are far more destructive to far more vulnerable Americans, the poorest among us, trapped in the margins of our society.

The only way for individuals and families with low incomes and low skills to climb the economic ladder is to work more, work harder, and acquire new skills. But government regulation of commerce, labor, and education all conspire to pull that economic ladder up out of the reach of the Americans grasping for those bottom rungs. The regulatory status quo is leaving them behind – and we have a moral duty to change that.  

So regulatory reform, then, should have three goals:

  • Freeing the economy from the stifling burdens of helicopter government;
  • Restoring political accountability to the regulatory process; and
  • Restoring equal opportunity for all businesses and all Americans, so that success in America is earned, not earmarked.

And happily, even with the helicopter government hovering overhead, the American people are starting to re-assert their control over their own economy.

Everywhere you look, you see the growth of the so-called “sharing economy.” Companies like Uber, KickStarter, and AirBnB have followed the lead of eBay and Craigslist and found success by tapping into the greatest resource in our entire economy – our people.

Personally, I don’t love the term “sharing economy.” Because in a free enterprise system, every business is in the sharing business – collaborative cooperation for mutual benefit. That’s the definition of free enterprise.

At the end of the day, Uber is no different from 7-11. The genius of the market is that it ties personal success to interpersonal service. It’s part of what has always made America strong and prosperous and exceptional.

But these companies increasingly find themselves the target of regulatory interference, driven by special interests that are trying to use the power of the state to protect their status-quo privileges.

Here we have concrete examples of exactly the kind of start-up capitalism the American people need, and the kind of unfair, un-American regulation we are here today to talk about solving.

So the question before us today is: how do we create a system that provides clear, commonsense regulations that help the economy work while protecting the American people’s freedom to earn their success in the market?

That’s what we’re here to discuss, and I look forward to hearing your ideas.

From my perspective in the Senate, I think accountability has to be a part of the answer. People who face regular election would never support many of the regulations we’re dealing with. And they don’t want to have to.

I think we need to take that option away from them. I think we need to start moving the regulatory process out of the nameless, faceless bureaucracy and back into Congress. Right now, the main reason government imposes onerous regulations is that no one gets fired for it. If Congress were directly accountable for them, you can be sure heads would roll in the next election. That’s where change comes from – by forcing government to work for the people instead of the other way around.

There are a couple of ideas out there to move policy in this direction. One idea is the REINS Act, which I am co-sponsoring along with Sen. Rand Paul.

Another idea that I’ve been working on, which I’ve discussed with some of you and hope to get more input going forward, is a new congressional regulatory budget process.

The idea would be to force Congress to vote every year on the amount of regulatory cost each federal agency could impose on the economy. We could debate it, get input through an oversight process, and force ourselves to prioritize. Which rules are essential, and which are just getting in the way?

Forcing Congress to take ownership over the laws imposed on the American people will improve the incentives for us to finally get those rules right. At the very least, it could bring some valuable discipline to the system and start to clear the brush of outdated and unnecessary regulations.

I’m happy to discuss these ideas more with you throughout the day. But we organized this event to listen. To get this right, we need specialized knowledge about the industries and businesses that actually have to live under all these regulations. And that’s why we invited you all here today.

There is an old saying in politics that you can’t beat something with nothing. It seems to me that those of us who want a better regulatory system have to do more than just oppose the one we have; we need to propose the one we want.

My goal for this conference is to begin a dialogue that can help inform policymakers at every level of government to start defining and refining exactly what a modernized, reformed regulatory system would look like.  Thank you very much.

[1] Quoted in “Congress and the New Administrative State,” The Heritage Foundation.