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Secretary John Snow
Secretary of the United States Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Secretary Snow,
A few weeks ago, you had asked for our ideas on the next round of tax cuts. I hope what we provided was helpful.
I am writing today to suggest an additional front that the administration could open on the economy: regulatory reform.
Lower marginal rates and a less punitive tax code are critical for economic growth. Likewise, regulatory reform can provide significant benefits to the U.S. economy. Changes in the tax code can promote capital investment, but unnecessary or excessive regulations can thwart investment opportunities. In fact, regulations are often viewed as a hidden tax that costs Americans more than $700 billion annually. Even though the growing regulatory burden affects virtually all aspects of the consumer's life, regulations receive far less scrutiny than taxes or government spending. When examining the potential to promote economic growth, Congress and the administration should not ignore the regulatory burden and the need to employ sound regulatory practices, such as benefit-cost analysis and risk assessment.
Since the 1970s, economists have been reshaping their views of economic regulation. Many previously regulated industries—airlines, trucking, railroads, and, to some extent energy and telecommunications—have undergone the transformation to competitive markets. The general view among economists has been that economic regulation has served consumers poorly and the potential welfare gains of deregulation can be significant. Indeed, one study found deregulation to provide $30 billion in consumer surplus in the transportation sector alone.
The regulatory burden continues to raise concerns. Important sectors of the economy, such as telecommunications and energy, remain mired in regulation. In addition, health and environmental issues have generated a large regulatory agenda that must be addressed, including clean water, clean air, a host of private property issues, and efforts to regulate carbon dioxide emissions. Sound economics and sound science are critical to avoiding unnecessary regulatory burdens. Federal agencies must be held to the highest standards when evaluating regulations. Weak analysis and poorly written regulations can impose tremendous burdens on the economy. Costly regulations founded on poor science can be a significant burden on consumers and producers alike. In an economic slowdown, these are costs we can ill-afford and easily avoid.
The Bush administration has changed the direction of U.S. economic policy. President Bush has proposed and signed into law two of the three largest tax cuts in American history. The administration has waged a somewhat less successful effort to control federal spending, and continued efforts in this area are important to controlling the growth of government. These policies will have a substantial positive impact on long-term economic growth. Regulatory policy also should be viewed as an integral component of economic growth, and regulatory reform should be included in any economic plan seeking to unleash the energy of the private sector and secure our economic future.
If you would like to discuss this further or need additional information please do not hesitate to contact me.
Paul N. Beckner