Regulatory reform doesn’t have to sacrifice substantive standards

OPINION:

This year, Congress has made a concerted effort to make regulatory reforms, such as changes to the National Environmental Policy Act (NEPA) and federal permitting reform. One common criticism of such efforts is that they would worsen environmental standards. The logic is that by making the process easier for federal permit applicants, environmental safeguards must go by the wayside. This is not so.

The real problem with NEPA is that the process is long and cumbersome, with many hoops to jump through. It often requires environmental impact statements or assessments, which can take years or even over a decade to complete. The recent reforms, which aim to speed up the process with deadlines, are good. But better would be a process that does not make every applicant, even if they will clearly meet the standards, go through these long and unwieldy procedures. After all, the aim of NEPA is to weed out projects that will have a negative impact on the environment. It is not to jam up every applicant who has a project. A simpler solution would be a general permit structure: Creating an assumption under the law that the applicant is granted. But if the government deems the project violates the substantive environmental standards, it can still proactively deny the permit.

Really, no procedural change in regulatory reform, energy-related or not, requires sacrificing the substantive standards that motivated the law. Sometimes, the most well-intentioned laws with the worthiest goals cause unintended problems. For this reason, it is essential for regulatory frameworks to be consistently reevaluated and, if necessary, reformed to remove inefficiencies and roadblocks.

To provide a simple example that demonstrates the point, in the 1970s, the U.S. passed laws regulating oil, which were designed to prevent oil spills. As it turned out, milk was unintentionally included within the definition of oil, which resulted in milk being regulated according to some of the same standards applied to oil. This created needless inefficiencies in the production of milk, costing consumers $147 million per year. To his credit, President Barack Obama’s EPA ruled to exempt milk, which benefited society. The purpose of the law, to prevent oil spills, was maintained while the unintended inefficiencies were removed.

Obamacare created the inverse of this type of problem. Process for the sake of process loses focus on the nature of what’s being regulated, creating additional inefficiencies. Medical procedures, from a financial standpoint, are reduced to billing codes. Insurance companies or the government will pay according to what code was billed to them. Obamacare increased the number of billing codes from 18,000 to 140,000. The statute also increased penalties for billing errors. The result was that health care providers had to hire additional help to avoid mistakes, which made the cost of operations more expensive, making the cost of health care more expensive. But what was the benefit? The health care industry exists to treat sick or injured patients, yet it must devote resources to complicated billing structures.

Sometimes regulatory reform only needs accountability to accomplish the substantive goals. For example, the Freedom of Information Act (FOIA) was designed to give the public access to public records. However, the government had a problem of not providing those records within the statutorily required deadlines. So Congress passed a law that would allow requestors to take the government to court for delays in production and require government agencies to pay attorney fees if requestors had to take them to court.

Other regulated conduct would also benefit from procedural reforms that would maintain the substantive purpose of the law. For example, IRS non-profit status determinations suffer from similar inefficiencies as NEPA. Non-profits, rightly, can receive tax exemption benefits. And, rightly, the IRS wants to ensure that those who apply for that status meet the standards of an organization that deserves the status. But often, these non-profits have to wait for months or years to be granted non-profit status. This defeats the charitable purpose of tax exemption—that is—to allow charities to easily perform their charity work. This is another example where general permits would work wonderfully.

It is crucial for Congress, and the states, to understand that regulatory reform should be undertaken to make processes more efficient and less costly. Perhaps sunset provisions should be attached to regulatory frameworks to force this to occur. Lawmakers should make periodic reviews of the laws to reduce inefficiency and make sure a law’s impacts align with the law’s purpose. Simple reforms can go a long way.