Flying Blind in a Red-Tape Blizzard

Attention, small-government conservatives: Ever helpful, this column has found yet another reason to be unhappy with President Bush. He appears to be the biggest regulator since the Nixon-Ford years.

Last month, George Mason University's Mercatus Center and the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University in St. Louis released the latest of their annual reports on regulation in Washington. (The report, by Jerry Brito and Melinda Warren, is available at Mercatus.org.) Now, these numbers need to be handled with caution. They measure how much money the government's departments and agencies are spending to regulate, and how many people they are employing to do it.

They give, at best, a rough indication of how quickly the regulatory wheels are turning.

The left panel of the chart above tells the story. (The percentage calculations are mine, based on data supplied by the Weidenbaum Center.) From 2001 through 2006, Bush has increased inflation-adjusted regulatory spending by 6.5 percent a year, and increased regulatory staffing by 6.3 percent. You have to go back before President Carter (a deregulator) to find a president who has done as much regulatory spending and hiring as Bush. (Adding the projected figures for 2007 does not substantially change the picture.)

A cruder, but still suggestive, measure of regulatory activity is the annual page count in the Federal Register, where the government publishes proposed and final regulations. Burdensome regulations may be concise, of course, and deregulation can run to hundreds of pages. Still, if the page count moves in the same direction as regulatory spending and staffing, that deepens suspicion that something is really happening. Sure enough, as the right panel of the chart shows, Bush outstrips Carter, the previous record-holder for average annual Register pages.

A new report by Wayne Crews of the Competitive Enterprise Institute, a free-market think tank, estimates that federal regulation now costs the economy more than $1.1 trillion a year. Crews also takes note of one data series that points in a contrary direction: The raw number of final rules published in the Federal Register is down since the 1990s; indeed, it has been declining since the 1970s. "But that doesn't tell you about the costs of those rules," he cautions.

Nor does it tell you about the benefits. Asked about the rising indicators of red tape, the Office of Management and Budget points to its recent draft report to Congress on the costs and benefits of federal regulation. The OMB report finds that the average annual cost of major regulations issued during the Bush years was almost 50 percent lower than in the 1980s and 1990s, and that the average benefits were more than twice as large as in the Clinton years.

Note the word "major": To earn that sobriquet, a regulation must cause an estimated economic impact of $100 million or more. Fewer than 1 percent of regulations qualify, so OMB's figures give an incomplete picture. Moreover, some regulatory economists take the administration's cost-benefit analyses with a grain of salt. "Over the years, I have found that many analyses done by government regulatory agencies have major flaws," says Robert Hahn, the executive director of the AEI-Brookings Joint Center for Regulatory Studies. Agencies, after all, are inclined to produce cost-benefit analyses that justify what they do.

That said, OMB may have a point.

If liberal public-interest groups' portrayals of Bush as the anti-regulatory Antichrist are any indication, the administration may be acting as a stricter gatekeeper than its predecessors did. Even so, the Bush administration may be regulating both more efficiently and more extensively. It may be raising the cost-benefit bar for major rules in such traditional domains as the environment, while also extending regulation's reach.

The only way to be sure would be to analyze the thousands of regulations promulgated in recent years and score them on efficiency and scope. Through a glass darkly, however, it is possible to make out the fuzzy outlines of a familiar Bush pattern.

According to the Mercatus-Weidenbaum report, the bulk of the increase in regulatory spending and staffing is for homeland security: such functions as airport screening (the creation of the Transportation Security Administration alone accounts for 80 percent of the staffing increase under Bush, though only 29 percent of the spending increase), maritime and border enforcement, new air-cargo rules, and so on. Subtract homeland security, and Bush turns out to be as tight a regulator as Reagan was, with annual growth of regulatory spending and staffing at rates of 2.6 percent and 0.1 percent, respectively, through 2006.

Prepare, then, for a shock of recognition: On regulation, as on everything else, the Bush administration's war on terrorism is driving an expansion of government.

Are we getting our money's worth from Bush's security-driven burst of regulation? The answer, unfortunately, is that no one knows. The science of cost-benefit analysis, which took decades to get a handle on economic and social regulation, has yet to find any purchase at all on security regulation. Figuring out whether a 20 percent reduction in particulate emissions makes economic sense is difficult (it depends on many intangibles, such as how much human health is worth), but it is at least roughly do-able, and the government often tries to do it.

Security costs and benefits, by contrast, are notoriously conjectural. We can estimate the cost of an attack on the Brooklyn Bridge, but not the attack's likelihood. Estimating the benefits of security is even more difficult, because averted attacks are generally invisible and because hardening one target may merely displace terrorist activities to others, increasing risk elsewhere.

Those analytical problems are compounded by a strategic one: The greater a potential vulnerability, the less willing security officials are to help economists quantify it. Douglas Holtz-Eakin, who was the Council of Economic Advisers' chief economist in the first two years of the Bush administration before becoming director of the Congressional Budget Office, recalls asking agencies to justify proposed security regulations by providing specifics about threats. "They said, 'There's no way we can disclose that,' " he says. In the government, he adds, "I don't know of any serious thinking about the benefits and costs" of homeland-security regulation.

Jeremy Shapiro of the Brookings Institution notes in a recent paper ("Managing Homeland Security") that since 9/11, federal homeland-security spending has roughly tripled. He writes, "Policy discussions of homeland- security issues are driven not by rigorous analysis but by fear, perceptions of past mistakes, pork-barrel politics, and insistence on an invulnerability that cannot possibly be achieved."

Regulation has been no exception. "They're trying to do pretty much everything everywhere," says Veronique de Rugy, a senior fellow with Mercatus.

Upsetting old structures and balances but not managing to replace them with sustainable new ones—in effect, governing as if in a perpetual state of emergency—has become a defining pattern of Bush's presidency: in foreign policy (notably Iraq and the Middle East), in fiscal policy (unsustainable spending increases and tax cuts), in legal affairs (executive overreach in the handling of detainees).

To the list of the next president's headaches, add untangling and rationalizing the reels of red tape that the Bush years have unspooled.