Republicans and Democrats Both Offer Promising Ideas for Economy

Recessions are nasty things, but they have their uses. Downturns force companies to make tough decisions they otherwise wouldn't, which in turn help them get leaner and improve efficiency. Recessions can also force policymakers to think hard about what can unlock economic potential. So it is today. If you look in the right places, something good is percolating in Washington that might actually help the economy.

Ideas are starting to emerge on Capitol Hill from both political parties that would transform the country's regulatory state. The ideas aren't perfect, but they would go a long way toward addressing some of the worst abuses of federal regulation and help unleash massive economic potential.

The first idea is the Regulations from the Executive in Need of Scrutiny Act, or the REINS Act (Washington loves its acronyms). The REINS Act would require that any economically significant regulation--meaning any rule that would have an annual economic effect of $100 million or more--must be sent to Congress for approval.

No one is calling for an end to regulation. These reforms simply build in some practical mechanisms to give voice to popular will and restore democratic accountability.

Every year the alphabet soup of executive branch agencies issues thousands of new regulatory requirements, from the Environmental Protection Agency, the Department of Health and Human Services, the Federal Communications Commission and more. The regulations have a huge effect on economic activity. With the REINS Act, elected politicians will no longer be able to duck responsibility for the new rules burdening the American economy. When an agency turns businesses and communities upside-down, Congressmen can no longer shrug their shoulders and point fingers at others while ducking blame.

Think of the Environmental Protection Agency's proposed rules on industrial emissions, or the Federal Communications Commission's proposed rules mandating so-called net neutrality. Under the REINS Act, regulations of this kind won't advance without the deliberation of a Congress accountable to voters. That's a healthy development. This bill will restore many of the duties and obligations Congress has been offloading to "expert" bodies since the Progressive Era.

The sponsors of REINS are Republicans, but lest you think this is Tea Party-backed GOP flexing post-mid-term muscles, consider another smart idea from across the political aisle. Sen. Mark Warner, a Democrat from Virginia, proposes what he calls a regulatory "pay as you go" system. Sen. Warner's plan "would require federal agencies to identify and eliminate one existing regulation for each new regulation they want to add."

Like the REINS act, this effort would restore some accountability to a regulatory system that too often is, in economist Arnold Kling's phrase, "unchecked and unbalanced." The Warner proposal would force regulators to revisit earlier rules and mandates and pressure them to eliminate harmful and counterproductive regulations. As with the REINS Act, this would be a healthy development.

The stakes for the economy are enormous. Over the last 30 years, the federal government has issued over 100,000 rules. And over 1,000 of those have had an economic impact north of $100 million. The current cost of federal regulations tops $1 trillion. So the economic ramifications of serious regulatory reform are almost impossible to overstate.

No one is calling for an end to regulation. These reforms simply build in some practical mechanisms to give voice to popular will and restore democratic accountability.

Of course, calls for bipartisanship are a hearty perennial in Washington, especially after elections when voters issue a "thumpin'" as they did in 2006 or a "shellacking" as they did in 2010. Everybody finds religion and wants to get along. So here's a chance for real bipartisan reform. Combine the GOP's REINS Act with Sen. Warner's regulatory pay-go proposal and give the economy a win-win boost in 2011.

And for those cynics who think it can't happen, remember that the economic troubles of the 1970s paved the way for an earlier era of bipartisan regulatory reform. The late Sen. Ted Kennedy (of all people) joined with Republican and conservative intellectual leaders to overhaul the nation's air, trucking, rail and other industries. In the same way, the tough economic times today can yield another bipartisan triumph that pays big dividends for the economy.

Nick Shulz is Editor-in-Chief of American.com and the DeWitt Wallace Fellow at AEI.

Photo Credit: Bigstock/OlgaLIS

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