The case for (some) regulation.

By not distinguishing between good and bad regulations, the GOP could do more harm than good

Jack Faris, president of the National Federation of Independent Business, has a simple message for the 104th Congress. "Our members want the federal government off their backs, out of their pockets, and off their land." Simple enough for you?

It is for Congressional Republicans. NFIB played a crucial role in beating back universal health coverage. Now the small business lobby--with 600,000 members--has a new target: federal regulations. They've asked for a freeze in all new rules, and they are likely to get it. The "Regulatory Transition Act of 1995," sponsored by Rep. Tom Delay (R-Texas), would impose a six-month moratorium on federal regulations, retroactive to last election day.

But don't ask NFIB precisely what this will accomplish. Kim McKernan, the group's chief lobbyist for the House of Representatives, cannot even name a single regulation she'd like to see repealed. "That's what the moratorium is for," she says. "Stop the bleeding. Let's take a look at the landscape and re-evaluate."

Indeed, for opponents of regulation, vagueness is a powerful weapon. Polls show vigorous public support for federal controls on the environment, consumer safety, and food and drugs. Businesses, meanwhile, despise these regulations: They don't want to be told what to do, especially if it costs them money. "Regulatory reform" is the Republicans' magic bullet. Reducing excessive burdens on business, they argue, will create jobs and lower prices for consumer goods. Everyone, they say, ends up richer, safer, and healthier.

But there is no magic bullet. Real regulatory reform--making the process smarter and more efficient, paring out senseless rules and toughening others--would take hard work and political courage. The Republican agenda is old-fashioned laissez-faire capitalism in disguise. Rather than dismantle agencies and provoke a public outcry, they plan to hogtie the system with cumbersome new rules and restrictions. This is a boon to business owners and corporate managers; it's a disaster for the ordinary guy.

Take this moratorium. It's billed as an antidote to red tape, but the volume of paperwork, procedural rules, and sheer mayhem provoked by its implementation would be staggering. Civil servants would be stopped dead in their tracks--whether they explicate tax codes at the Treasury Department, review new medications at the Food and Drug Administration (FDA), or enforce recalls at the Consumer Product Safety Commission. Federal regulators would spend weeks compiling lists of current, past, and future regulations. Millions of Americans who depend on the existing rules will be thrust into a vacuum.

Reagan's Blueprint

Congressional Republicans lifted their blueprint for this wave of deregulation straight from Ronald Reagan. Upon taking office in 1981, Reagan banned new rules for 30 days and issued an executive order forbidding agencies from issuing regulations--large or small--without explicit approval from the Office of Management and Budget. In theory, OMB would amend or reject rules where the costs outweighed the benefits. In practice, wherever possible, it blocked civil servants from enforcing the law.

For example, in the fall of 1981--ten years after Reye's Syndrome was first linked to use of aspirin--the Centers for Disease Control found in four independent studies that children with viral illnesses, such as chicken pox or flu, risked contracting Reye's if treated with aspirin. The FDA commissioned its own study, and concluded similarly. On June 4, 1982, Health and Human Services Secretary Richard Schweiker announced a FDA educational campaign and a requirement that warning labels on aspirin products "be changed to advise against their use in `children with flu and chicken pox.'" As required, he submitted the rule to OMB's Office of Information and Regulatory Affairs (OIRA). OIRA sent the rule back for further study, objecting that the risk of fatalities had not been conclusively proven. In 1983 The Wall Street Journal revealed that OIRA took its cues from the Aspirin Foundation of America, which thought the label would hurt business.

With the FDA paralyzed, public interest groups took the matter to court, a regular event in Reagan's first term, and the administration drew a stem rebuke. "All scientific evidence in the record points to a link between [aspirin] and Reye's Syndrome," the U.S. Court of Appeals for the District of Columbia wrote in 1984. "The pace of agency decision-making is unreasonably dilatory." The warning-label rule took effect in June 1986, but the four-year delay had taken its toll. The advocacy group Public Citizen estimates 3,000 children contracted Reye's Syndrome in that time, a third of whom died; many of the surviving children suffered permanent brain damage.

Disabling the full body of federal regulations was a big job. What couldn't be done through OMB, or with political appointees, was a job for the Task Force on Regulatory Relief. Directed by Vice President Bush, the task force directly solicited industry wish lists of regulations they wanted delayed or eliminated. Three months into the administration, it had already blocked 34 regulations on auto compaines alone--on bumpers, pedestrian safety, fuel economy standards, and lead-reduction standards for fuel, among others. As Gareth G. Cook reports in this issue, Reagan was particularly solicitous of Detroit in thwarting air bag requirements. "Federal regulations," Reagan told a gathering of auto executives during the 1980 campaign, "are the cause of all your problems."

If Reagan had pushed regulators to be smarter, not slower, or more results-oriented, he might have left a legacy of real reform. Pragmatists might even have forgiven some excesses if he had rationalized the system, consolidated overlapping programs, and tightened loopholes. Instead, Reagan (and Bush after him) ignored real problem areas, sought political points with ignorant denunciations of the regulatory state, and took credit for new legislation while subverting it behind the scenes. By 1989, regulatory spending was at an all-time high and public confidence in the system was at an all-time low. According to a 1988 Times-Mirror poll, 67 percent of Americans agreed that government was "usually inefficient and wasteful."

The Past is Prologue

Republicans aren't about to let a bad idea get in the way of good politics. And as with "Star Wars" and tax cuts, they're eager to mimic Reagan on regulatory reform. Same industry backscratching, same populist veneer, same half-baked solutions. But you won't hear the same anti-government rhetoric this time. "Of course we're going to protect people," says Rep. David McIntosh (R-Indiana), chairman of the Subcommittee on Economic Growth, Natural Resources, and Regulatory Affairs. "That's our job." "Let there be no mistake," echoes Sen. Bill Roth (R-Deleware), "we need a clean environment, safe workplaces, and safe medications." These men pay attention to the polls. In 1994, Times-Mirror found that 82 percent of Americans believe "there need to be stricter laws and regulations to protect the environment." Similar sentiments are found on regulations of medications, food and water, and consumer products.

But scrutinize the proposed "reforms" and you'll find nothing of the sort. It's sabotage in disguise. Take cost-benefit analysis, the core of their strategy. "To free Americans from bureaucratic red tape," the Contract With America states, "we will require every new regulation to stand a new test: Does it provide benefits worth the cost?" But cost-benefit analysis, an essential element in private sector strategic planning, is an empty concept in government regulation. "Benefits" and "costs" of any act depend entirely on the perspective of the analyst. In 1981, Bush sought repeal of a Department of Agriculture requirement for labels on meat products that contained crushed bone, arguing that it cost "the economy" $500 million a year. That figure was an industry estimate of lost revenue, the cost of throwing away meatless carcasses instead of grinding them up and adding them to the pile. But if informed consumers choose not to buy $500 million worth of crushed bone, is that the fault of the regulation or the virtue of a free market? The Department of Agriculture hadn't even banned this sketchy food-product; it simply insisted that Americans be aware that their "prime ground beef" was, in fact, "prime ground beef--with tasty bits of crushed bone."

Of course, in the hands of a dispassionate analyst, cost-benefit calculations can be a useful tool. Indeed, federal agencies already conduct them, and OMB still reviews regulations and haggles with agencies to make them as efficient as possible. But the Job Creation and Wage Enhancement Act, outlined in the Contract and now working its way through committees in the House, requires that such data be published, subject to judicial review, and approved by a peer review panel. This panel must consist of experts with "recent professional experience" in the area of regulation. "There is no prohibition," an OMB Watch report points out, "on industry scientists or representatives, or those with a financial interest in the regulation, serving on the peer review panel."

The real boondoggle is judicial review. Aggrieved businesses already have the right to challenge regulation. And a vast majority of regulatory decisions are appealed in courts--including 80 percent of the Environmental Protection Agency's and 96 percent of the Occupational Safety and Health Administration's. The Job Creation and Wage Enhancement Act would allow companies to bring lawsuits before agencies reach their decision--meaning all their data and analysis can be challenged in court. When regulators seek to act on an "emergency," this too becomes a question for the courts--a prescription for endless delay. While seeking tort reform that would dramatically decrease the rights of individuals to sue businesses, Republicans seek regulatory reform to enhance the hand of business in blocking measures for public health and safety.

The Republican agenda contradicts itself. It claims to seek efficiency, but would produce the opposite: more meaningless paperwork, more rigidity, more gridlock. Unless the public eases its demand for basic safeguards and quality-of-life measures (which it won't), politicians in the pocket of big-spending lobbies like the NFIB will face a contradiction that no amount of maneuvering can reconcile. Establishing community standards, by definition, involves infringing, at times, on individual interests. Of course small business wants government "off their backs, out of their pockets, and off their land." This simplistic demand can't--and won't--be met. If anti-regulatory politicians weren't so adept at masking their intentions with vague language and euphemisms, this would be abundantly clear.

Who's to Blame?

When political leaders lie to the public, it is the fault of these leaders and the fault of those who let them get away with it. You can blame the Republicans for their scandalous dishonesty. But you must also blame the people who ought to know better. In a January 23 editorial, The Washington Post cautioned that Republicans were planning a "systematic assault on regulation" and that "sorting all through this is going to take a while." "Considering all that's at stake," they concluded, "it should." Considering all that's at stake, where has The Post's coverage been? At press time, Cindy Skrzycki, the regulation beat reporter, had written fourteen stories since election day. Not one offered serious analysis of the effects of regulation. A 625-word profile of McIntosh, the upstart freshman representative leading the charge on regulatory reform, offered breezy assessments of his political style. The day before, McIntosh's subcommittee had held day-long hearings. "He used the hearing," Skrzycki reported, "to rail against the Clinton administration's `insincerity' on regulatory reform. `President Clinton is having a love affair with federal regulations,' he said." Thanks. But what about his proposals and their effects? And for background, how about his work on Dan Quayle's Council on Competitiveness, the Bush administration's equivalent of the Task Force on Regulatory Relief? McIntosh, the Council's executive director, developed a reputation as a fierce ideologue, fighting a worldwide treaty on rare species, as well as EPA limits on sulfur dioxide and lead battery incineration.

The Post isn't the only news source missing the story on regulations. There has been no shortage of committee hearings or new legislation in the last several months; still, none of the country's top newspapers or magazines have given this subject much attention. The stories that are written, for the most part, are vague and superficial. The Los Angeles Times compared the FDA to a pendulum--"either it swings too far in relaxing its standards ... or it swings too far in the other direction by being too tough." And The New York Times offered this gem: "Critics [of a regulation bill] say the legislation would tie the regulatory process into knots of scientific review, economic analysis, legal challenge and political gridlock. But advocates say the bill would guarantee simplicity and common sense where now there is obfuscation and red tape." This is accurate so far as it goes, but without providing details--concrete examples of regulation's real-life benefits and real-life flaws--it's almost entirely without value.

Even after House Speaker Newt Gingrich labeled FDA chief David Kessler "a thug and a bully," the coverage was barely palpable. The Wall Street Journal reported Gingrich's ties to pharmaceutical companies and The Post probed the efficacy of the "Cardiopump," a device Gingrich chided the FDA for not having approved. But what about the efficacy of the agency itself? Gingrich called the FDA "America's leading job killer," with the EPA "a close second." He suggested replacing the agency with biomedical "entrepreneurs" (in other words, self-regulation). This is the Speaker of the House toying with abolishing the FDA. Isn't that time for a hard look at the agency? Why does it cost an average of $230 million to get a drug from the laboratory to the drugstore? Why can't terminal AIDS and cancer patients smoke marijauna without risking arrest? Do other countries manage drug regulation better? According to a recent study by Public Citizen, the FDA deserves some credit; over the last 22 years, the U.S. has been forced to recall dramatically fewer drugs (9) than France (31), Germany (30) and the United Kingdom (23). The point isn't that newspapers should rush to the FDA's defense, but that it should do whatever possible to keep this debate grounded in facts.

If newspapers fail in their neglect of this subject, other media overemphasize regulation. Network TV news, and news "magazines" in particular, sniff out malfeasance like blood hounds and ignore the bigger picture. They demonize regulators and turn flukes into scandals. ABC News's John Stossel built a career on this tabloid-style "consumer advocacy." Then, last year, he switched course and broadcast a special asking "Are We Scaring Ourselves to Death?" which not-so-subtly argued that the FDA, EPA, and Consumer Product Safety Commission caused more trouble than they were worth. Stossel trotted out horror story after horror story, but never put regulations into context and offered no practical suggestions. In recent speeches to libertarian groups, Stossel made his facile argument explicit, endorsing "self-regulation" of industry. Federal health and safety regulations, he said, "don't make life safer. They make life less safe." If his simplistic analysis didn't so closely resemble that of the Speaker of the House of Representatives, we might have less cause to worry. Indeed, Stossel's farce will likely be repeated in scores of committee hearings in the months to come.

The impulse to sensationalize regulation, on one hand, or to virtually ignore it on the other, is not hard to understand. Readers slogging through this article can attest to the subject's tediousness. And unlike financial affairs--an equally complicated subject that draws enormous attention in newspapers--the constituency for regulation stories is not as easily defined. But although the politics of regulation can be mind-numbing, their real-life implications are enormous. Casting stories about regulation as a struggle between anti-regulation reformers and pro-regulation defenders of the status quo is inaccurate and irresponsible. And educating the public has never been more essential.

What, then, should journalists be reporting? In three words: examples, examples, examples. The scope of federal health and safety regulations is enormous; it consists of thousands of employees spanning dozens of agencies. Some regulations set unrealistic goals and ought to be reined in. Other regulations are aimed in the right direction, but just don't get the job done. Still others are too feeble, held back by timid lawmakers wary of offending a powerful interest. The point is that only by elucidating the real benefits and drawbacks of specific regulation will we make progress toward what should be a universal goal: providing basic protections in the most efficient way possible. While expressing strong support of regulation, Times-Mirror found, 63 percent of respondents also think "government regulation of business usually does more harm than good." Americans don't dislike regulation; they just want it done more effectively.

Getting it Right

Regulatory reform, it is important to understand, is not an oxymoron. In his 1993 book, Breaking the Vicious Cycle, Stephen Breyer points to the illogic of a regulatory system that has been built, not by master plan, but by a series of responses to individual crises. Even if each regulation is sensible and well enforced, it may not make sense in the larger context. "Rules designed to limit zinc in water," Breyer offers for example, "raise the cost of using regular diapers, encouraging the use of disposable--and doubtfully `recyclable'--diapers, which are a major contributor to landfills." While the National Highway Traffic and Safety Administration vigorously regulates safety, its fuel economy standards have been an incentive for automakers to build smaller cars, which are in fact less safe.

Often, poor communication within an agency, or between different agencies, lends the regulatory system a random quality. Breyer points out that, at one point, the EPA's Office of Solid Waste and Emergency Response had classified as hazardous waste certain elements found in chlorofluorocarbons (CFCs). Resulting rules severely discouraged the recycling of refrigerators, which contain CFCs. Meanwhile, another EPA department, the Office of Air and Radiation, was urging that refrigerators be recycled to save the ozone layer.

As another example, take meat supply oversight. The FDA checks live animals in farms or pens, but the Department of Agriculture assumes control once they reach the slaughterhouse. The two share oversight at retail outlets--with jurisdiction over different products--but only the FDA can conduct inspections. The EPA, meanwhile, determines "tolerance levels" for pesticide residues in food. But--the loop closes--the FDA checks for chemicals in the tissue of livestock. Even within individual agencies, as Breyer points out above, coordination among departments can be non-existant. "I've been in meetings," says Gary Bass, director of OMB Watch, "where business comes into EPA and says, `Look, we'll give you more information than what you're requesting, if you just get all your different offices--the air office, the water office--if you get your act together and collect it uniformly.' And you look around the room and you see the officials; they don't have the authority to talk cross-program."

The irony of Republican reforms is that they extol the values of the free market, competition, and common sense, but would make regulatory bureaucracies even more top-heavy, cumbersome, and inefficient. "What the legislation on Capitol Hill is designed to do," says Joan Claybrook, president of Public Citizen, "is to dismantle these programs through gridlock. To put forth so many costly, unnecessary red tape requirements that the decision maker could never make a decision." This worsens the bureaucratic snarl that drove 68 percent of Americans in 1994 to think "dealing with a federal government agency is often not worth the trouble," up from 58 percent in 1987.

Real reform often requires giving regulators more flexibility, more authority to set guidelines and to use common sense to judge whether they are being met. As opposed to "command and control," "performance standard" regulation is often far more effective. In 1985, the Monthly ran a story headlined, "Why Regulators Need a DON'T DO IT IF IT'S STUPID Clause." The reporter detailed a six-year, multi-million dollar battle over a harmless pile of lime in Minneapolis. The EPA had determined that any material with a pH higher than 12 is hazardous. And though the 75,000 tons of lime could have been useful in any number of ways--lime is commonly used in agriculture, construction, and even pollution control--its designation as hazardous meant no one could touch it. Republican measures would make the problem worse. When an agency is in perpetual threat of a lawsuit--not just over a decision it makes, but over any of the evidence it uses to make that decision--it will become sluggish, documenting each step with reams of paperwork, avoiding exposure to criticism. Agencies will become timid, afraid to make decisions. This strategy runs counter to public interest, but, in the long run, it hurts "special interests" (like small business owners) even more. Ask your local shopkeeper what he dislikes most: being told what to do, or not knowing what's legal or illegal. I suspect you'll find that it's not Orwell's world he fears, but Kafka's.

The last thing the system needs is another layer of checks and balances, analyses and judicial review. "The less his power," Woodrow Wilson wrote of the civil servant in 1883, "the more safely obscure and unnoticed does he feel his position to be, the more readily does he relapse into remissness." Although bureaucrats get the blame for this rigidity, often the fault is with the laws themselves. To assert authority, Congress often steps further than it should. The Delaney Clause of the 1958 Food Additive Amendments to the FDA legislation prohibits any carcinogenic additive to food, regardless of the concentration or risk involved. And the Solid Waste Disposal Act states that waste may contain "no migration of hazardous constituents." Both of these examples, Breyer writes, "seem to instruct the agencies not to permit addition, removal, or packaging of or by any substance that contains even a single molecule of an offending chemical, however large the cost or small the risk." The most egregious examples of this trend come from the Reagan years, when Congress was rightly suspicious that the executive branch would do as much as possible to subvert the intent of the law. The 1986 Safe Drinking Water Act requires all water to be purified, regardless of its initial level of safety, and that any synthetic substance in water, regardless of its concentration or health effects, be treated. In Anchorage, Alaska, city officials found themselves in violation of an Act provision that requires a 30 percent reduction of waste, because there wasn't enough waste in the water to remove. In other words, the water was too clean to comply with the law. Rather than spend $160 million on a new wastewater treatment plant, the city arranged for local fish-processing plants to dump fish entrails into city sewers so the city could remove them, and meet the standard.

Finding problem spots, though, is the easy part. Good regulations are often more difficult to identify, since their effectiveness gives the impression of normalcy. Regulators are easily blamed--either for being too cautious or too lax--and rarely receive credit for doing their job effectively. Manufacturers eagerly take credit for initiatives they've been forced into. Catalytic converters are a good example. Auto companies fiercely resisted pollution control devices, estimating they would cost about $3,000 per car. General Motors testified in 1973 that the requirement could lead to a "complete stoppage of the entire production ... with the obvious tremendous loss to company shareholders, employees, suppliers and communities." When the EPA stood firm, General Motors introduced the converters, touting its technological prowess and environmental sensitivity. The year after the converters were made standard, hydrocarbon and carbon monoxide emissions from new cars were cut in half. In 1995, the typical new car emits about one percent of the pollution of 1970 models, made before the first real Clean Air Act, and the cost per car is several hundred dollars. Same with lead in gasoline. Industry fiercely resisted the restrictions initially, but the increase in cost per gallon of gas has proven to be merely one penny. Now, with lead effectively eliminated as an air pollutant, oil companies beat their breasts with pride. In the late fifties and early sixties, the sedative thalidomide was licensed and marketed in several dozen countries. Between 1959 and 1961, pregnant women using the drug across 20 countries gave birth to 10,000 babies with serious, identical, and rare deformities. As the news began to spread, an American pharmaceutical company had an application pending with the FDA to market thalidomide in the U.S., but a skeptical FDA had not signed off. There are many variations on this story: isoproterenol inhalers, used to relieve asthma, caused 3500 deaths in England and Wales in the sixties; practolol, an anti-hyper-intensive, caused a number of cases of permanent or near-permanent blindness in England in the seventies. Of course, the tragedies that led to broadening the FDA's mandate are noticeable as well, providing proper reminder that a company's market incentive to test a product goes only so far. In 1976, the agency was given authority to regulate medical devices after the Dalkon Shield, an intrauterine contraceptive, was proven responsible for 18 deaths and 66,000 miscarriages.

Cars, drugs, and medical devices provide the most dramatic stories, but much of the success in regulation is in the commonplace. To appreciate the work of the Consumer Product Safety Commission, glance over the "recalls" page in Consumer Reports each month. In the January 1995 issue, you'll see that Krups blenders have blades that can break apart and embed slivers of metal in food. A new model of orthodontic pacifier can break apart and choke babies. And a new model of a wooden bunk bed can trap a child's head and lead to strangulation. Even when companies issue voluntary recalls, the pressure applied by the CPSC--and its authority to levy fines--is no small factor.

Although you're not likely to hear this from Republican "reformers," often the problem with regulation is that it's too weak, not too tough. The Federal Aviation Administration, for example, has been rightly chastised for its "tombstone mentality," failing to institute reforms until a tragedy--or series of tragedies-sparks public opinion. As early as 1980, for example, the National Transportation Safety Board was urging the FAA to require crash-resistant fuel lines and tanks on commuter aircraft, a precaution the agency postponed for nearly 15 years. And the need for tougher requirements for de-icing was evident as early as 1982, when 78 people died when an Air Florida jet with iced wings crashed just after takeoff from Washington, D.C. The FAA waited ten years--and for 23 more ice-related accidents--to take action. In both cases, administrative delay--due to unnecessary cost-benefit analyses and industry resistance--was at the heart of the inaction.

Although the first round of regulatory "reform" is well under way, the heartening news for citizens interested in honest dialogue on regulation is that much of the Republican agenda is long-term. In the next several years, committees in the House and Senate will go after regulation of food, drugs, air, water, and work safety. Journalists will have a peg, if they want it, for lengthy discussion of every link in the federal regulatory chain. And despite a less than auspicious start, the new majority party could translate their fervor into genuinely improving the system. Watch out, though. They could make it much, much worse.