Time Essay: The Rising Risks of Regulation

The business of regulating business is one of the fastest-growing areas of government. It is also fast becoming one of the most criticized, even though nobody denies the need for some regulation or the benefits of clean air, pure water, safe products, healthy workers and employed minorities. An alliance of liberals and conservatives now protest that regulation is excessive and the benefits are not worth the price. They have found an ally in Jimmy Carter, who promises to battle regulatory excess as part of his Stage II anti-inflation plan. And not a moment too soon. "Our regulatory system," asserts Assistant Commerce Secretary Jerry Jasinowski, "is out of control."

America's regulatory history dates back to the creation of the Interstate Commerce Commission 91 years ago, and big growth came during the New Deal, when such agencies as the Civil Aeronautics Board and the Securities and Exchange Commission were started. But most of the excesses that are drawing fire were born in the mid-1960s and early 1970s, when the focus turned from industry control to social reform and a large number of new bureaus were formed, including the Environmental Protection Agency, the Occupational Safety and Health Administration, the Equal Employment Opportunity Commission and the Consumer Product Safety Commission.

Certainly, reformers do not want an end to all regulation. But most agree that many of the pre-1960s agencies have outlived much of their usefulness and that their rules, once necessary to curtail the old robber barons, now work to inhibit natural competition and accelerate inflation. These agencies do little if anything to improve the quality of life, and deregulation, as proved by the CAB'S move to free air fares and the SEC's loosening of brokers' commission rates, can quickly and dramatically cut prices.

Where newer agencies like the EPA and OSHA are concerned, even the most ardent deregulators want some rules to remain, admitting that it is impossible to put a dollar price on social welfare. But at the same time they argue that there are now too many silly, contradictory and ineffective rules that snarl enterprise in red tape. Above all, they see a need to identify and enact sensible changes that would allow regulation to achieve much the same social goals in a less wasteful way and with a much smaller damage to other, equally important economic goals, including job-creation.

Often the newer agencies are headed by enthusiasts who see a mission to push new rules without regard to price. As a result, they have made little attempt to apply the most elementary cost-benefit analyses. Cheaper solutions that could achieve the same ends or almost the same ends have been ignored in favor of overkill. America has just not got value for money from its red-tape spending spree.

The full costs of federal regulation are difficult to determine and open to bitter dispute. One of the most widely accepted estimates has been made by Economist Murray Weidenbaum, head of the Center for the Study of American Business at Washington University. He divides the costs into two categories. The first is administrative costs, which consist of visible federal spending on regulatory agencies. These have rocketed from $745 million in 1970 to $4.8 billion this fiscal year. Large as this is, it only hints at the real burden.