Perry's Regulation Sunsets Could Mean Bigger Government

In Washington, D.C., every debate is an opportunity for lobbyists and cash-hungry legislators

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My colleague Molly Ball explains why Rick Perry's proposal for a part-time legislature with less staff making lower salaries would likely increase the problem of corruption and conflicts of interest. In fact, many of the reformers who are most intent on cleaning up Washington, D.C. and disempowering lobbyists argue that we need to pay legislators more, in exchange for forbidding them from taking many sorts of jobs after they leave office, and that inadequate funding for their staffs presently makes them reliant on the research and communications machines lobbying shops offer.

What I'm here to tell you is that Perry's proposal to sunset all federal regulations unless Congress voted to extend them would likely have unintended consequences too. Sunset tools, whereby rules or laws expire at a fixed time, began as a way to permit experimentation and prevent rules, once implemented, from carrying on via inertia -- but these provisions have ended up as a way for politicians to collect campaign contributions. If there's just one big fight about whether or not government should implement Rule X, lobbying happens and the matter is decided. Whereas if politicians can arrange it such that the battle over Rule X is re-fought every year, interested parties wind up paying lobbyists and making campaign contributions annually.

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Larry Lessig makes this point in Republic, Lost, his book about the need to reform the way we finance campaigns. Drawing on the work of Rebecca Kysar, he writes:

In the first twenty-five years of the life of tax sunsets, only two were allowed to expire--and one of those was renewed in the next session of Congress, with a retroactive gift given to cover the lapse. The lie to this game becomes clear, Kysar argues, when you look again at the very first "tax extender." For, whatever skepticism there was at the beginning, most economists agree that this Reagan idea was a brilliant one. The tax credit really did produce more growth and revenues than it cost. It was perfectly tuned to induce growth and investment--precisely the purpose any such benefit would have. So once that point had been proven, why didn't Congress just make it permanent? We had run the experiment. The data showed that the benefit made good economic sense. Why go through the game of renewing a good idea every two years?

The answer, Kysar suggests, has lots to do with the nature of the beneficiaries. "The principal recipients of the research credit," Kysar writes, "are large U.S. manufacturing corporations." In many cases, the credit "cuts millions of dollars from the tax returns of a single corporation." So, obviously "these business entities are more than willing to invest in lobbying activities and campaign donations to ensure the continuance of this large tax savings." And they do. And the politicians they make these donations to have recognized this. And the lobbyists with clients eager to ensure that these extenders are extended have recognized this. And these flashes of recognition have now produced one of the most efficient machines for printing money for politicians that Washington has ever created--by focusing and practicing and concentrating the money to inspire ever more tax burdens on those who don't organize well (you and me) so as to fund ever-lessening tax burdens on those who organize perfectly well (the largest corporations and the very rich).

Maybe it's the case that sunsetting federal regulations would be different from sunsetting tax benefits. But I have a suspicion that presidents and legislators would in fact find similar ways to benefit from the practice; that building more fights over regulations into the process won't shrink government, because the incentive will be to make more rules so that Congress can fight over them.

Image credit: Reuters