The movement toward government deregulation of business and the economy got a big boost yesterday from the legal profession, in a report issued by a special commission on law and economy of the American Bar Association.
The report - prepared by a panel of lawyers and economists following three years of study - recommended substantial deregulation of most federally supervised areas of the economy and more reliance instead on competitive market mechanisms, supported by tougher antitrust enforcement.
Areas singled out for deregulation include the airline industry, and oil and natural gas prices which are now subject to controversial federal controls. In the latter case, the report recommends use of taxes to combat the problem of "windfall profits."
It also urged that in the areas of safety and environmental regulation, consideration should be given to ending the sole regulatory reliance on prohibitions and standards as a way of getting things done and the use instead of tax incentives, subsidies and other means as complements or alternatives to rigid standards.
A major theme of the study is that "congressional and administrative consideration of government intervention has been undertaken all too often without adequate analysis and evaluation of the potentially adverse economic impact of the various forms of intervention, both by increasing the cost of goods and services and by impending private initiatives."
By 1977 there were some 85 federal agencies involved in regulating some aspect of U.S. economic or social life, according to the report which notes that more than one-fourth of these were created in the seven-year period from 1969 to 1975.
The cost of federal regulation has meanwhile gone from $2.2 billion in fiscal 1974 to $4.8 billion in fiscal in 1979, an increase of 115 percent over five years.
"In short, government by regulation, in pursuit of a variety of economic and social goals, increasingly controls, restrains and limits many of the productive elements of our society," states the 187-page study, titled "Federal Regulation: Roads to Reform."
John J. McCloy, chairman of the special commission and a partner in the firm of Milbank, Tweed, Hadley & McCloy, stated that in viewing federal regulation a difficult balance had to be struck.
"We must preserve incentives for growth and increased productivity while at the same time protecting important social values and objectives which totally free market operations cannot always assure," he said.
The study was released at the annual convention of the ABA which is currently taking place in New York. It represents a concensus of the views of the commission but has not been adopted as official ABA policy.
The report, however, does not acknowledge the substantial stake lawyers have in the question of federal regulation since they both draft the rules under which the agencies operate and also fight the battles before the regulators.
The main recommendations in the study to speed up and streamline the regulatory process include the following:
Reliance, where feasible, "upon the competitive market as regulator, supported by antitrust laws," instead of intervention by the government into the economy. If there is the need for regulation, first thought should be given to increased disclosure or incentive-based methods "before turning to the classical command and control modes."
Enactment of a new statute to let the President direct certain agencies to take up a "critical" matter before them on an expedited basis, and authority for the President to then modify or reverse these decisions. These "critical" issues would be defined as those the President finds to be of broad national interest and whose achievement may go beyond the narrow goal normally entrusted to the agency in question.
An executive requirement that all federal agencies, before they complete a major regulatory action, should prepare an analysis that would be open to comment by the public and review by other agencies.
Increasing the flexibility of administerative procedures in regulatory agencies, and avoiding time-consuming formal trial-type hearings whenever possible.
Funding by the federal government of increased public participation in regulatory proceedings.
Implementing some kind of "sunset review of different federal agencies, but on a limited basis that would allow the public's attention to be focused on a few manageable targets for reform at one time.
The conclusions of the commission drew some dissenting opinions from several of the panel members.
Rhoda Karpatkin, executive director of the Consumer Union, objected to the proposals for increasing the authority of the President in regulatory matters, because, she said, "it would politicize agency decision-making, when there appears to be a post-Watergate concensus that administrative decisions should be insulated from direct political interference."
Elliot Bredhoff, a Washington labour lawyer, demurred from the commissioner's preference for regulation through taxes rather than through price controls and entry requirements. He said that under these recommendations "consumers can be substantially harmed by unjustified prices which can lead to inflation and windfall profits, and the harm to consumers is not adequately remedied by any tax proposals discussed in the paper."
Copies of the report are available from the ABA's Commission on Law and the Economy, 1800 M st. NW, Washington, D.C.20036.