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In response to growing concerns about the effects of regulation on consumers, businesses, and government, AEI and the Brookings Institution have established the AEI-Brookings Joint Center for Regulatory Studies. The Joint Center, which is directed by Robert Hahn of AEI and Robert Litan of Brookings, held its first official conference on October 8 at AEI. The purpose of the conference was to introduce the Joint Center to the regulatory community and the public.
Federal regulation—especially environmental, health, and safety regulation—has grown dramatically in recent decades, whether considered absolutely or as a relative share of the U.S. economy. According to the first comprehensive government report on the costs and benefits of federal regulation, produced by the Office of Management and Budget, the costs of such “social regulation” are roughly $200 billion annually. If the burden associated with paperwork is included, the cost is almost twice as high, or about $400 billion—a sum that exceeds all federal discretionary spending on domestic programs by more than 50 percent.
During the next decade, experts project regulatory expenditures will increase much more quickly than federal spending. As regulatory activities grow, so does the need to consider their implications more carefully. Yet the economic consequences of regulation receive much less scrutiny than do the effects of direct, budgeted government spending. The Joint Center aims to fill that policy need.
The Joint Center will produce four types of analyses: (1) timely, objective studies of a selected number of important regulatory proposals before agencies formally adopt them; (2) analyses of existing regulations with recommendations for modifications, including recommendations to strengthen rules where the benefits appear to justify the costs and recommendations to relax or eliminate rules where the reverse may be true; (3) essays that evaluate the effects of regulatory policies and suggest ways to improve the regulatory process; and (4) an annual report on the state of federal regulation, including an independent assessment of both the total and marginal costs and benefits of federal regulation, broken down into useful categories.
Michael Armacost, president of Brookings, introduced the October 8 event by highlighting the need for the Joint Center. He stressed that the Joint Center will provide objective, independent analyses of the costs and benefits of federal regulations, a function no organization has provided until now. Christopher DeMuth, president of AEI and a fellow of the Joint Center, discussed how the growing consensus among scholars on the effects of regulation could help improve regulatory policy.
In the keynote address, Senator Fred Thompson (R-Tenn.) spoke about the tremendous potential of regulatory reform as well as the political hurdles it faces. Senator Thompson recounted his efforts to pass a regulatory reform bill in Congress to hold regulators more accountable for their decisions while maintaining high standards for the environment, public health, and workplace safety. He emphasized that the purpose of regulatory reform is to ensure that only the best regulations are implemented and that existing regulations are rigorously evaluated and, if necessary, changed.
Robert W. Hahn and Robert E. Litan
Clifford Winston, a fellow of the Joint Center, and Messrs. Hahn and Litan provided examples of the Joint Center’s work. Mr. Winston highlighted the need for agencies to assess the maximum net benefits from a proposed regulatory policy and its alternatives to help determine which policy the agency should pursue. Drawing on a working paper of his recently released by the Joint Center, he showed that the maximum net benefits of current airplane noise regulation are probably negative, demonstrating the difficulty of justifying such regulation on efficiency grounds. Mr. Hahn discussed his new Joint Center working paper, which suggests how agencies could improve analysis of regulations in the Federal Register to make it easier for concerned parties to obtain useful information.
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