Setting a Regulatory Budget

Ezra Klein ponders a rule to prune back regulations:

Mark Warner is pushing a proposal to apply the logic of Pay-Go to regulations: The legislation "would require federal agencies to identify and eliminate one existing regulation for each new regulation they want to add."

There's a part of me that finds this intuitively appealing. Government is worst when it's not regularly pruned. That goes for the defense budget, which politicians are too scared to touch, the tax code, which they're too intimidated to touch, and usually goes for entitlements, though Medicare got a pretty good overhaul in the health-care bill.

Warner's argument is that regulations belong in that class, and he's almost certainly right: There's not an obvious process for clearing the brush away. But it's not clear to me that his solution -- a one-in, one-out rule -- makes sense either. You can see the unintended consequences flowing in all different directions, from a preference for bigger, blunter regulations so you wouldn't have to identify as many to remove to an incentive to solve problems by spending money rather than promulgating rules (i.e., you can pass a regulation saying coal plants can't do something or you can pass a law paying them not to do something).

To my mind, this is a feature, not a bug.  Congress is far too prone to pass legislation forcing private companies to pay for something that would never be undertaken if the voter had to pay for it.  But the voter does pay for it--indirectly, through lower growth and lost opportunities.  Take the Endangered Species Act, which is supposed to protect species on private land.  But of course, if you find an endangered species, the thing to do is get rid of its habitat right away, because if anyone else finds your endangered species, you my substantially lose the use of your land.  If the government were paying for endangered species, on the other hand, people would be searching assiduously for snail darters and spotted owls.

Ah, you'll say, but we could never afford to do that.  My answer would be that if this is true, we don't actually care very  much about it, do we? If we only want things when we can stick other people with the bill, then we probably shouldn't have most of those things.

Don't get me wrong: there is a place for regulation in our society, in controlling negative externalities like pollution, and in managing the interaction of 300 million people.  But we already have a lot of regulations.  I feel we could probably get it done with the same number of regulations we had, carefully budgeted for maximum effect.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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