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E-MailMark J. Costa is Chairman and Chief Executive Officer of Eastman Chemical Co., and Chair of the Business Roundtable Smart Regulation Committee. This post is based on a February letter from Business Roundtable. Additional posts addressing legal and financial implications of the Trump administration are available here.
In a February letter asking the White House to act on regulatory issues “of top concern” to our CEO members, Business Roundtable made another important but little-noticed request: Reform the federal regulatory process.
“While addressing existing regulations that are unduly burdensome is vitally important to help jump-start American business investment and job creation, Business Roundtable believes that fundamental regulatory process reforms are key to ensuring long-term success,” I wrote as the Chairman of the Roundtable’s Smart Regulation Committee.
President Trump sounded a common-sense message when talking about his reform plans, noting that regulation should have a beneficial effect for workers and consumers. The business community shares this view, believing that regulation should first and foremost ensure the safety of our people, but without unnecessary delays and burdens that can stifle the growth and job creation that allows us all to prosper.
In the long run, improving the regulatory process has the potential to produce as many benefits for the American people as acting on individual regulations. A streamlined regulatory process would contribute to broader economic growth and the creation of high quality jobs—two primary goals of the Business Roundtable.
Beyond helping create growth for large corporation, this benefit will be particularly valuable for small business in two ways. First, our small businesses are overwhelmed by regulatory burdens with limited to no resources to manage them. Secondly, the growth enabled at large corporations will have a multiplier effect for small businesses, as large companies create roughly 10 small business jobs for every direct job. Thankfully, the Trump Administration and Congress are already taking serious steps toward enacting such reforms.
A recent survey of Business Roundtable CEOs reinforced the issue’s importance to the U.S. economy. When asked for best ways to create a positive environment for their company’s growth, 27 percent answered “regulatory reforms”—the second highest response, following tax reform (52 percent). Sustainable growth that benefits every segment of the economy is the business community’s goal and it is clear the regulatory process in this country is making that more difficult.
Compliance with excessive regulation places demands on resources that could otherwise be directed to new facilities, expanding into new markets, or research and development—the source of innovation that drives economic growth and long-term job creation. More importantly, we waste an incredible amount of time navigating complex regulatory bureaucracies with over-lapping jurisdictions, delaying the benefits of any stimulus from the government in tax reform of infrastructure investments.
The American people want government to move quickly in creating a stronger economy with higher-quality jobs. As America’s business leaders, we believe strongly that there is a more efficient and effective approach to accelerating the economy and protecting workers, the environment and consumers. We also believe the process could be smarter and that the best rules:
- Achieve regulatory goals efficiently;
- Encourage good performance;
- Eliminate duplication, overlap and bureaucratic clutter;
- Consider the best ideas solicited from stakeholders; and
- Include plans to assess the effectiveness of rules after they have been implemented.
The February letter detailed process reforms that would go a long way toward achieving those goals. Many could be accomplished through immediate administrative actions to improve the efficiency and effectiveness of the existing regulatory process.
For example, the administration could encourage early public engagement in rulemaking through greater use of advance notices of proposed rulemaking. It could also require agencies to post online current information on all potential regulations, including expected timing and associated benefits and costs.
Independent regulatory agencies have a major impact on numerous sectors of economy, e.g. communications, financial services and energy infrastructure. President Trump should do everything within his authority to expand Executive Order 12866’s requirement for a cost-benefit analysis to major rules to those agencies.
Americans have consistently listed the economy and job opportunities as their top concerns. At the same time, the government has often made compliance with regulation a drawn-out, overly burdensome process. Fortunately, policymakers have recently begun to address this conflict. Through executive orders and other actions, President Trump has already sent a clear message that regulatory reform is a White House priority. In his first weeks in office, he ordered a 60-day freeze on rules carried over from the Obama administration to ensure they serve the broad public interest and will not unduly harm economic growth.
The President has also required agencies to remove two regulations every time they propose a new one. This has the dual benefit of removing regulations that are no longer relevant and maintaining or reducing the cost to the U.S. economy. Some have decried this “one-in, two-out” approach, but in one form or another, it has been used effectively in the United Kingdom, Canada and other countries.
More recently, the President required Executive Branch agencies to name a Regulatory Reform Officer and create reform task forces to review regulations that eliminate jobs or inhibit job creation; are outdated, unnecessary, or ineffective; and impose costs that exceed benefits.
Congress also recognizes the importance of process reforms, demonstrating its seriousness with a bipartisan vote to pass H.R. 5, the Regulatory Accountability Act in the early days of the session. This bill, backed by the Business Roundtable, includes provisions to codify common sense process reforms, including early engagement and transparency and accountability initiatives.
The Q1 2017 CEO Economic Outlook Survey that identified regulatory reform as an effective way to create a positive business environment also reported a notable jump in CEOs’ optimism about the economy. Plans for hiring and capital investment over the next six months rose sharply, and CEO expectations for sales also jumped.
The optimism is easily explained. The White House and Congress are focusing on a growth agenda and regulatory reform is playing a central role in their policy initiatives. With stronger growth comes more jobs and higher wages, as we build an economy that better serves all Americans.
