Misguided Case for Regulatory Moratorium

In today’s WSJ, Senator Susan Collins (R-ME) explained why she has introduced legislation that would impose a one-year moratorium on the promulgation of new major rules — those regulations anticipated to cost more than $100 million per year — while exempting emergency and deregulatory measures. Such legislation ” is a common-sense solution that would help create jobs,” Sen. Collins wrote, yet the examples of regulatory excess she cites don’t much help her make her case.

Sen. Collins op-ed opens with a storied example of regulatory excess:

Last year, the Food and Drug Administration issued a warning to a company that sells packaged walnuts. Believe it or not, the federal government claimed the walnuts were being marketed as a drug. So Washington ordered the company to stop telling consumers about the health benefits of walnuts.

It is true that the FDA sent a warning letter to Diamond Food in 2010 accusing the company of marketing walnuts as a drug by highlighting the potential health benefits of omega-3 fatty acids. But adopting a regulatory moratorium would not do anything to help Diamond Food, nor prevent the FDA from taking similar actions in the future. As the FDA made clear, the warning letter was based upon Diamond Food’s alleged violation of existing regulations already on the books. No new rules, major or otherwise, were necessary for the federal government to go after Diamond Food’s marketing claims, and a regulatory moratorium would not keep the FDA at bay going forward.

The other alleged example of regulatory excess cited by Sen. Collins is the EPA’s proposed rule governing emissions from industrial boilers.

Meanwhile, the Environmental Protection Agency proposed a new rule on fossil-fuel emissions from boilers that—by the EPA’s own admission—would cost the private sector billions of dollars and thousands of jobs. The owner of a small business in Maine told me the proposed rule would require him to scrap a new, $300,000 wood waste boiler he recently installed. . . .

According to a recent study by the American Forest & Paper Association, if the rule went into effect as written it could, along with other pending regulations, cause 36 American pulp and paper mills to close. That would put more than 20,000 Americans out of work—18% of that industry’s work force.

Once those mills close, the businesses that supply them also would be forced to lay off workers. Estimates are that nearly 90,000 Americans would lose their jobs, and wages would drop by $4 billion—just because of over-regulation.

Even if one assumes all of Sen. Collins claims about the boiler rule are true, I don’t see how this supports her call for a regulatory moratorium. If the proposed boiler rule would impose disproportionate economic costs in relation to its environmental benefits, as Sen. Collins suggests, then it is a bad idea, and should not be adopted at all. Delaying the rule’s adoption by a year would not make it a better deal. Conversely, if the proposed boiler rule is a good idea, it’s not self-evident that delaying adoption of the rule — and the inevitable litigation that would follow — does much to improve the regulatory climate for investment. Insofar as regulatory uncertainty plays a role in discouraging economic investment, it would make more sense for Sen. Collins to support legislation that either kills the rule altogether. Indeed, legislation directly enacting the boiler rule into law would do more to reduce regulatory uncertainty than Sen. Collins’ proposed moratorium.

According to Sen. Collins:

American businesses need pro-growth economic policies that will end the uncertainty and kick-start hiring and investment. American workers need policies that will get them off the sidelines and back on the job.

Fair enough, but this requires more than a temporary halt to new rules. Kicking the regulatory can down the road does not reduce uncertainty, nor does it improve the investment climate. If Sen. Collins thinks existing and proposed regulations are unduly restricting job creation and economic growth, she should set her planned moratorium aside and deal with the problem directly: Identifying those rules that are unnecessary or excessive and targeting them for elimination. Instead she has proposed a solution that is more symbol than substance.