Exploring the relationship between regulatory reform in the states and state regulatory output.

Author:Shapiro, Stuart
 
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ABSTRACT

The rhetoric surrounding regulatory reform has long been heated. Supporters talk about making regulation more efficient and regulators more accountable to the public. Opponents blame regulatory reforms for crippling the regulatory process and inhibiting the production of regulations that will protect public health. This Article uses a data set of regulations and regulatory reforms in twenty-eight states to question both of these positions. We find that reforms such as executive review of regulations, legislative review of regulations, and economic analysis have no relationship with regulatory output. Instead, political factors, particularly the control of the state legislature, are a much better predictor of the volume of regulation in a state. If a legislature passes laws that require regulations, there will be more regulations regardless of the procedural hurdles that regulatory agencies face when engaging in the regulatory process.

CONTENTS INTRODUCTION I. THE INTENT(S) OF REGULATORY REFORM A. Public Participation B. Legislative and Executive Review C. Economic Analysis D. Deadlines and Delay E. Studies of the States II. DATA A. Dependent Variable--How Many Rules? B. Independent Variables: Procedural Controls C. Independent Variables: Politics III. ANALYSIS A. Administrative Procedures B. Executive Review C. Legislative Review D. Impact Analysis E. Other Procedures F. Political Variables G. Combinations of Variables H. Combinations of Procedures I. Politics and Procedures CONCLUSION: DOES REGULATORY REFORM MATTER? APPENDIX INTRODUCTION

The 113th Congress has considered nearly three-dozen bills that would change the federal regulatory process. (1) The fifty states have been extremely active in passing similar bills, particularly since the onset of the Great Recession. (2) Many of these bills add requirements that agencies must follow when promulgating a regulation. These bills, often described as "regulatory reforms," are largely a response to claims that regulatory agencies are stifling the economy by promulgating too many regulations that kill jobs and hurt the economy.

But do the regulatory reforms work? What does it even mean for regulatory reforms to "work"? At the most basic level, we would expect regulatory reforms to have a substantive impact on policy decisions made by regulating agencies. By raising the cost faced by agencies to create regulations, regulatory reforms should also dampen the output of regulations. Indeed, opponents of regulatory reforms have made this argument repeatedly. (3) If these reforms perform neither of these functions, then they may serve a political purpose, ensuring that political officeholders pay attention to particular regulations that create dissatisfaction for affected constituencies. (4) Finally, reforms may play a symbolic role imbuing the regulatory process with values such as public participation, democratic oversight, or economic efficiency.

Determining which of these roles are played by regulatory reforms is increasingly important. As legislators and executives enact more and more regulatory reforms, they justify them by arguing that they have a substantive impact on regulations or that they will reduce regulatory volume. (5) This rhetoric is often particularly heated regarding environmental regulations. Once put into place, new regulatory procedures are rarely repealed. If some regulatory reforms are working to curb regulation and others are not, then this will inform the debate over new reforms. If they are instead playing only a political and/or symbolic role, then this should raise questions about their continual appeal.

In this article, we use a unique data set that contains information on the volume of regulation and the varying levels of regulatory procedures in twenty-eight states. The states have been underutilized in the empirical examination of the regulatory process. Much of the extant literature focuses on the federal regulatory process. This literature raises serious questions about the role of regulatory reforms (often called "procedural controls"). However, since there is always just one political context at the federal level, determining the relationship between politics, procedures, and regulatory output is challenging. By looking across twenty-eight states, we hope to cast new insight on how regulatory reforms function in practice.

We find that much of the skepticism about the effectiveness of regulatory reform is warranted and much of the rhetoric (on both sides of the political spectrum) is overblown. The presence of regulatory procedures appears to have no correlation with the volume of regulation. Instead, one can predict regulatory volume (and likely the content of regulations) much more accurately by seeing who has power at any given time. Democratic legislatures pass statutes that require more regulations than legislatures controlled by Republicans. These regulations then get issued regardless of the procedural environment. Regulatory reforms may facilitate control of regulatory agencies by existing coalitions of political leaders, but they are unlikely necessary to ensure this control.

This Article will proceed as follows. In the next Part, we review both the theoretical claims advanced to explain regulatory reforms and the empirical examinations of their actual role. In Part III, we describe our data set. We present the analysis of the data from the twenty-eight states in Part IV. Finally, in Part V, we ruminate on the implications of these findings for future debates on regulatory reform and for political control of the administrative state.

  1. THE INTENT(S) OF REGULATORY REFORM

    The idea of manipulating the regulatory process in order to affect regulatory decisions is as old as the administrative state itself. (6) The Administrative Procedure Act (7) was passed in (1946), in part, as a response to the growth in power of the executive branch during the New Deal. (8) The proceduralization of the rulemaking process picked up steam as a reaction to the boom in social regulation in the late (1960) s and (1970) s. (9)

    The procedures put in place for agencies to follow when promulgating a regulation were regularly justified with high-minded rhetoric and substantive goals. Notice-and-comment rulemaking (requiring an agency to publish a proposed rule, accept public comments, and respond to those comments) was put in place to ensure that bureaucratic decisions would be influenced by public input. (10) Requirements for presidential or congressional oversight were meant to further democratic governance of bureaucratic agencies otherwise sheltered from it. (11) The demand that agencies perform economic analysis on their regulations with large economic impacts was accompanied by rhetoric about the need to make regulation more efficient. (12) Particular interests, especially small businesses, were given procedures all their own in order to make up for disadvantages not mitigated by other procedures. (13)

    Those implementing regulatory reforms, however, may have goals that are more political than substantive. The idea that procedures put in place by legislatures or executives were means of securing lasting political influence for the coalition that enacted them was most prominently put forth by McCubbins, Noll, and Weingast (commonly referred to as "McNollgast"). (14) They argued that enacting coalitions of political actors attempted to ensure that future agency actions comported with the enacting coalition's preference. The political actors did so by creating a procedural environment that would recreate the interest group environment faced by the enacting coalition. Such a procedural environment (called "deck-stacking" by McNollgast) would lead to agency decisions that mirrored the preferences of the enacting coalition. (15) The McNollgast framework was expanded upon by numerous scholars. (16) Huber and Shipan acknowledge that "scholars seem to agree that the use of procedural rather than policy details represents the most important way in which congressional majorities use legislation to influence bureaucratic autonomy." (17)

    The usefulness of procedural controls as a means of controlling bureaucratic discretion has its critics however. Most relevantly, Horn and Shepsle argue that such controls limit agency drift (bureaucratic preferences that deviate from those of the enacting coalition) by empowering future political actors or existing coalitions. These later policymakers may have different preferences than the enacting coalition, leading to "coalitional drift." In fact, the existing coalition may use the procedural controls put in place by the enacting coalition to achieve their own policy goals. (18)

    Legal scholars have posited another impact and possible intent of regulatory reforms. McGarity popularized the theory that regulatory procedures, coupled with "hard look" judicial review of agency regulations, has ossified the regulatory process. (19) Regulatory procedures have raised the costs of agency rulemaking to such an extent that agencies were avoiding issuing regulations and turning to other less burdensome means of setting policy that were free of such constraints (such as enforcement actions or guidance documents). (20) McGarity leaves unanswered the question of whether crippling the regulatory process is the goal of those implementing regulatory reform, but others have made this claim explicit, dubbing the phenomena "[p]aralysis by [a]nalysis." (21)

    In a study of the notice-and-comment process, West noted the work of other scholars who have placed the possible impacts of procedures required of agencies issuing regulations into three categories. (22) Procedures can have the substantive impacts with which they are justified (more efficient regulations, greater responsiveness to public preferences, favoring particular constituencies). (23) Procedures can have a political impact facilitating the influence of...

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