Cutting Through the Rhetoric of Cutting Red Tape

Regulatory counting paints a distorted picture of the costs and benefits of regulatory action.

Regulation counting has become a cornerstone of U.S. deregulatory policy with the issuance of President Donald J. Trump’s Executive Order 13,771, which requires agencies to repeal two regulations for every one they propose. Trump Administration proponents tout the “two-for-one” order as one of its signature achievements and claim that its deregulatory actions are responsible for record economic growth. Critics have mostly dismissed the two-for-one order as a one-off political stunt.

But both proponents and critics are dangerously wrong. Proponents are wrong because regulatory policy based on regulation counts is likely to be flawed, costly, contrary to statutory command, and damaging to the very economic interests that regulation counters claim to champion. Critics are wrong because they overlook the larger project in which regulation counting is embedded.

The two-for-one order is the product of a larger intellectual project arguing that the sheer quantity of regulations on the books hampers economic growth. Researchers have attempted to establish this relationship by counting regulations and correlating these counts to macroeconomic outcomes like employment, productivity, and competitiveness.

This intellectual project has provided compelling political rhetoric about the perils of regulation for business, and it will undoubtedly be used to support the two-for-one order and agency decisions made pursuant to it on judicial review. In addition, researchers are aggressively marketing the latest regulation counting database, RegData, to state governments as a tool for deciding which regulations to cull.

But regulation counting is deeply problematic. Regulation counting is an irrational and empirically unsound way of understand regulations and their impacts, and it does not accurately measure a construct that can be theorized to cause economic outcomes. Regulation counters commonly claim, for instance, that regulation counts are a proxy for the “costs” or “burdens” of regulation on regulated entities.

Although these claims have undeniable political appeal, a tally of the number of regulations or regulatory mandates on the books simply does not measure the costs or burdens of regulation because a tally does not account for at least nine important features of regulatory law:

Regulation counts do not account for variation in the weight of regulations. For instance, a regulation that requires mine operators to put their correct address and telephone number on forms submitted to the regulator counts the same as a regulation requiring them to maintain elaborate safety protocols for workers in their mines.
Regulation counts do not account for variation in regulations’ scope of coverage. A U.S. Department of Justice regulation provides multiple mandatory criteria applicable to the vanishingly small population of individuals who wish to claim a financial reward for disclosing information relating to the unlawful handling of nuclear materials. These regulatory mandates count the same as those found in Occupational Health and Safety Administration regulations applicable to millions of U.S. workplaces.
Regulation counts do not account for the object of regulatory requirements. Many regulations do not even apply to private regulated entities—rather, these regulations constrain the government’s actions. These regulations require transparency, due process, and fair administration for the benefit and protection of regulated entities. Yet regulation counters add them to the costs and burdens on regulated entities.
Regulation counts overlook structural relationships among regulations. For example, many regulations contain exceptions that limit their applicability, which, in turn, limit their costs or burdens. Others provide alternative means of complying with a primary regulatory command, giving regulated entities greater flexibility and lessening costs and burdens. Some regulations simply clarify other regulations, providing greater clarity and certainty in application of the law for the benefit—and often at the request—of regulated entities.
Regulation counts ignore basic grammatical conventions within regulations. Sometimes the mandatory language in regulations is explicitly negated by words like “no” or “not.” In other cases it is contained in questions—for instance, “Must I do X?”—which are answered in the negative. Regulation counters add these “negative” and interrogative words to the tally of costs and burdens nonetheless.
Regulation counts do not account for enforcement levels. Agencies enforce regulations with wildly varying degrees of stringency and frequency—enforcing some vigorously and regularly, enforcing others with moderate stringency or only sporadically, and leaving many languishing entirely unenforced. Still, all regulations all count the same.
Regulation counts treat conditional benefits as burdens. Many regulations set forth mandatory criteria and procedures for obtaining valuable benefits from the federal government, including grants, loans, leases, and entitlements. These rules need not be followed by those who do not seek the benefits. Entities who elect to follow the rules—for instance, to obtain a mineral lease for oil and gas exploration and development in federal waters—do so voluntarily and for their own often substantial benefit and cannot be properly characterized as burdened by those rules.
Regulation counts do not account for the benefits of regulation that accrue to regulated entities. There is empirical evidence that, in certain contexts, regulated entities benefit from their own regulation—for instance, companies enjoy lower costs of capital in countries with robust securities regulation enforcement. Regulation counts make no attempt to net out the benefits regulated entities enjoy from regulation from whatever costs they may incur in implementing it.
Regulation counts do not account for the source of regulatory requirements. Many regulations repeat verbatim language from the statute authorizing them. Even if these might fairly be said to create costs or burdens on regulated entities, these costs or burdens are not agency-created; therefore, they cannot be corrected by agencies, because agencies are not at liberty to repeal statutory commands.

Taken together, these nine types of mistakes infect regulation counts with two fundamental fallacies that disqualify them as meaningful measures of the costs or burdens of regulation on regulated entities.

First, regulation counts are tremendously inflated. They double-count—and triple-count, and so on—many regulatory requirements; they count subtractions from regulatory costs and burdens as additions to regulatory costs and burdens; and they count outright benefits to regulated entities as costs and burdens on them.

Second, regulation counts are unreliable because they equate qualities or impacts of rules that are wildly incommensurate and aggregate them into a single measure.

Regulation counters like to characterize their methodology as the Moneyball of policymaking, but no self-respecting baseball operations manager would run a team based on metrics infected by these defects.

As a result, regulation counts do not provide a rational basis for regulatory policymaking. Empirical studies employing them to support deregulatory policies should be viewed with extreme skepticism on judicial review. Government officials should be wary of claims that regulation counting will help them achieve regulatory reform. Likewise, political rhetoric deploying regulation counts should be vigorously contested because it crowds out meaningful dialogue over specific social and economic problems and appropriate regulatory responses.