Don’t Ignore Costs of Coronavirus Regulation
(Bloomberg Opinion) -- In Congress and the executive branch, U.S. officials are about to face an unexpected dilemma, one that will define a range of domestic policy in the coming years, and that has the potential to redefine how Americans think about the modern regulatory state.
On the one hand, the coronavirus pandemic has made it unmistakably clear that in some areas, the U.S. needs more regulation, especially to protect health and safety. On the other hand, the economic destruction it has caused will require new caution about costly regulatory mandates.
Businesses, large and small, are facing unprecedented challenges. For many of them, survival is at stake, and expensive regulations might prove devastating.
It is almost certain that the administration of President Donald Trump will be keenly alert to the second point, while neglecting the first. There’s also a risk that progressives — including those in charge if Joe Biden wins the White House in November — will be keenly alert to the first point, but insufficiently appreciative of the second.
Over the past three years, Trump’s regulators have kept down the costs of new regulations. On an annual basis, those costs have been far lower than they were under Presidents Bill Clinton, George W. Bush and Barack Obama. (Regulatory costs were not officially documented before 1998.)
The less good news is that Trump’s regulators have also produced unprecedentedly low benefits, a category that includes not only purely economic savings, but also reductions in death and disease. Before Trump, regulators would typically issue lifesaving rules protecting workers in construction, reducing dangerous levels of air pollution or making the food supply safer. Trump’s people have done little of that.
In response to that failure, it is tempting to call for a new burst of regulatory activity, both to soften the impact of the pandemic and to reduce other risks to public health. Some congressional Democrats are talking about increasing inspections and reporting requirements for nursing homes, controls on drug prices, restrictions on stock buybacks and curbs on corporate mergers and acquisitions.
Many progressives think that the argument for much tighter environmental controls has been strengthened, and they would like to see aggressive new restrictions of many kinds. One reason is that they think that regulatory safeguards usually produce desirable redistribution, imposing costs on large institutions (car companies, banks, coal companies, appliance manufacturers) for the benefit of people (investors, workers, consumers, the poor).
That’s too simple. When government imposes billions of dollars in regulatory costs, people are going to have to foot the bill. The costs of goods might go up, and the increased costs will be a special problem for those who don’t have much money. Wages might go down, and people might lose jobs. In many cases, regulations pose particular burdens on small businesses and startups.
These points help explain why both Republican and Democratic administrations have usually proceeded with expensive requirements only after a careful analysis has demonstrated that the benefits would exceed the costs. Which brings us to the current predicament.
A few months ago, it would have been more than plausible to insist that after several years of Trumpian neglect, regulators should be unleashed to use their expertise to protect the public, and particularly the most vulnerable. Something like that remains true.
But in a period when so many businesses are struggling to survive — and when their employees and customers depend on their survival — there’s also reason for caution. On that general point, perhaps, Republicans and Democrats will eventually agree.
What is needed, from progressives above all, is hard thinking about the highest priorities, and about subtle questions of regulatory design. We need to get the biggest bang for the buck, especially in a period in which there aren’t a lot of bucks around. We need to design regulations so as to minimize their potentially adverse effects, perhaps by extending compliance dates (2022, say, rather than 2021), perhaps by giving total or partial exemptions to small businesses, perhaps by thinking creatively about how to create flexibility for startups.
We need to work hard and immediately to cut regulatory sludge — paperwork requirements and administrative burdens that have especially harmful effects on people who are sick, old or poor.
In the midst of tragedy, there is opportunity to rethink the regulatory state in ways that transcend the noisy, stale debates of the last generation.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “The Cost-Benefit Revolution” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”
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