The right balance on business regulations

Thursday, January 20, 2011; 7:53 PM

GOVERNMENT regulation can be a hassle. Businesses spend a lot of time and money to comply with federal regs, and that's time and money they could have devoted to hiring more workers or investing in new equipment. Often, though, regulation is the best way to produce public goods - clean water is a good example - that private business ordinarily cannot. Many of the risks against which government regulation tries to protect - mine explosions, say, or gigantic oil spills - are also costly, and even deadly. If you doubt it, just recall recent events at the Upper Big Branch coal mine or in the Gulf of Mexico. By its very nature, regulation involves balancing social and economic costs and benefits. There is bitter dispute about where to strike this balance, partly because of competing economic and ideological interests, and partly because it is inherently difficult. But no one seriously denies that, at some point, a balance must be struck.

Reduced to its essence, that's about all President Obama was saying in his executive order on regulation this week. To be sure, some of his administration's actions had led the business community to conclude that the president recognized no cost-related limitations on federal regulation. There have been 132 regulations with benefits or costs of more than $100 million created since Mr. Obama took the oath of office, with the rules implementing health care and financial legislation - and, possibly, carbon limits - still to be written. Feeling besieged, corporate America tilted Republican in the November 2010 election. By announcing that "regulations do have costs" and promising a government-wide "look back" at potentially unjustified rules - and doing so in an op-ed in the Wall Street Journal, no less - Mr. Obama signaled that he has read the election results and heard business's complaints.

On Wednesday came the first concrete result of the president's new emphasis: withdrawal of a proposed Occupational Safety and Health Administration rule that would have required businesses to protect workers from shop-floor noise by changing schedules or installing new equipment rather than by passing out earplugs, as current rules require. Strongly backed by organized labor, the proposed rule had triggered loud business protests, especially from manufacturers, who said it would cost billions and destroy jobs. Now it will be progressives' turn to howl.

In fact, much of the regulatory state consists of independent agencies, such as the Federal Communications Commission and the Federal Reserve, that fall outside the scope of Mr. Obama's executive order. So there is that inherent limit to any potential regulatory rollback. Also, it will take months for the rest of the bureaucracy to produce recommendations for regulatory pruning. We see nothing in his executive order that would skew the analysis against regulation; indeed, it clearly says that the cost-benefit analysis must take account of intangible factors as "equity, human dignity, fairness, and distributive impacts." All the president has done is to promise business another look at the balance government has struck between public risk and private enterprise under current rules. Given the circumstances - which include a stubbornly high unemployment rate - it was an appropriate promise to make.

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