A “Great Stagnation” for Bureaucrats

Call it the “Great Stagnation,” “productivity slowdown,” or just the “new economy” — according to some thinkers and analysts, America just doesn’t churn out novel products like it used to. But from sanitizing wands to self-heating jackets to artificial intelligence itself capable of inventing things, any slowdown appears to have abated . America’s producers and entrepreneurs are doing just fine. It’s government regulators that haven’t caught up.

America’s regulators, sprawled across hundreds of federal buildings, have increasingly struggled to come up with new rules that mitigate a pressing public issue and deliver large benefits far in excess of costs. America’s army of bureaucrats can overcome this rulemaking rut, but only by focusing on one of the largest purveyors of externalities: the federal government itself.

Researchers and agency watchdogs have watched with dismay as the quality of proposed rules and regulatory actions has deteriorated significantly over the past couple of decades. Even as President Trump leads a deregulatory drive, downright-ludicrous bureaucratic actions proceed unchecked. The Food and Drug Administration (FDA), for instance, has completely gone off the rails and is forcing vaping producers to submit to an onerous premarket review process despite e-cigarettes’ proven ability to wean smokers off cigarettes.

The FDA is demanding mountains of paperwork, despite extensive existing evidence that vaping products are 95 percent safer than traditional cigarettes and are nearly doubly as effective for smokers looking to quit smoking than traditional cessation methods such as nicotine patches or gum.

Expensive application and evaluation requirements will likely mean higher e-cigarette prices and the delayed introduction of life-saving products to market. But the FDA believes that regulatory benefits outweigh costs, citing an “epidemic” of teenage e-cigarette usage. Yet the agency fails to acknowledge that there are far more adult e-cigarette users (often trying to wean themselves off of cigarettes) than teenage users. Thus, the most consequential regulation to come out of the Trump administration likely imposes substantial net costs, leading to higher smoking rates and a greater number of premature deaths.

A lengthy review process may have been needed years ago, but today, there is an abundance of information from which the FDA can draw from about these products.  The FDA isn’t using best practices or the best science for approval of these products.

Regulation didn’t used to be this costly or pointless. In 1973, the Environmental Protection Agency (EPA) kickstarted a mandatory phaseout process of lead in gasoline. This was done in response to extensive research by the federal government documenting the deleterious impact of lead on IQ, behavioral development, and nerve health. Unlike many recently proposed or enacted regulations, there was a compelling economic case for regulation. No single motorist incurred much of a cost from their vehicle alone emitting lead and boycotting leaded gasoline wouldn’t do any individual driver much good.

By the 1970s, lead in the air was a pressing problem that was difficult to avoid. Through successive phase-downs, the EPA rid fuels of the noxious element and reduced blood lead levels nationwide by about 40 percent in the first decade of regulation. By the late 1980s, the amount of lead in gasoline was only about 1 percent of the level it had been at the start of the rulemaking process. An ex post analysis by the EPA indicated that yearly nationwide benefits exceeded costs by a ratio of 10 to 1 by 1985.

Bureaucrats plucked some of the last low-hanging fruits of regulation more than thirty years ago, and today, government officials have to resort to increasingly creative accounting methods to get benefits to outweigh costs. For example, rulemakers have used “break-even analysis” to justify rules if “one [catastrophic terrorist] attack [is] prevented every 350 to 730 years.”

But all is not lost for regulators, if they know where to probe. The federal government is by far the largest imposer of net costs on the general public, with an array of government projects producing vast amounts of pollution with little benefit. For instance, at least 900 (70 percent) of the 1,300 contaminated Superfund sites spread out across America are military facilities. Expanding these sites and openly burning hazardous waste creates serious health problems for those involved, and poisons entire communities near military waste sites.

If environmental regulators took a harder line on the Pentagon and forced the military to clean up its act (and its sites), health outcomes would likely improve considerably without many of the corresponding costs typically attributed to regulations. Unlike business-centric regulation, there’s little prospect of any party going out of business or terminating staff if a government actor is regulated more tightly. And unlike with businesses, the Pentagon has plenty of money that could be repurposed toward mitigating pollution.

The government’s role in pollution extends far beyond the Pentagon. Indiana University and Texas A&M researchers found that publicly-owned power plants, hospitals, and water utilities were 15-20 percent more likely to have violated federal air and water standards than comparable private businesses.

If regulators devoted their energies to combating federal malfeasance, bureaucrats could finally reclaim the high ground of protecting American households without red-taping businesses out of existence. Innovative governance can bring immense benefits to the American public, if government officials know where to look.