House Republicans Look for a “Better Way” to Encourage Innovation

House Speaker Paul Ryan and other House Republican leaders gathered on the West Lawn of the U.S. Capitol complex today to present the latest plank of “A Better Way,” a conservative policy platform meant to demonstrate the choice voters have before them this fall. The plan focuses on tackling excessive regulations, which are slowing down our economy, hampering our entrepreneurial spirit, and preventing many Americans from rising out of poverty.

The setting for Ryan’s remarks were telling. He stood between the Labor Department and Congress, the administrative state and the legislative branch, one closed-off and unaccountable, the other open and always subject to re-election. The dichotomy is important because for all the attention paid to tax rates and spending decisions made by Congress, the financial and social impact of the regulatory state goes unnoticed and unchecked.

“The truth is, we need rules—clear, firm rules that all of us can live by. The question is, what’s the best way to write them?,” Ryan asked. “To keep our air and water clean, to protect consumers from scams and rip-offs—but also to create jobs and expand opportunity. It does not have to be an either-or. We can have both.”

Unfortunately, right now the regulatory burden isn’t transparent or balanced because the administrative state isn’t accountable. The numbers on regulation speak for themselves. According to data compiled by the American Action Forum, President Obama has issued 591 major rules, 41 percent more than his predecessor during the same timespan.

That comes with real costs. According to analysis by the Competitive Enterprise Institute (CEI), the total federal regulatory cost hit $1.885 trillion in 2015, which amounts to a hidden tax of nearly $15,000 per household each year. Small businesses face a disproportionate burden of regulatory compliance costs, with firms with fewer than 20 employees paying an average of $10,585 per employee, compared to $7,755 for those with more than 500 or more employees. Even when discussed in terms of time rather than dollars, the strain is immense. The total paperwork hours, according to the AAF, was 443,799,422 in 2015, or the equivalent of 221,900 full-time workers purely devoted to rule compliance.

“Clearly, it is time for serious and fundamental reform,” says the report outlining House Republicans’ economic plans. “Every step in the process needs to be revamped: whether to regulate, how to regulate, and follow-up review of regulations. Agencies should write regulations only when necessary, make them minimally intrusive, stay within the legal mandate, and avoid creating barriers for new and small businesses.”

The 57-page report contains more than 100  ideas, including current GOP-sponsored legislation that has passed the House but it sitting in the Senate, but it’s built on three key principles:

  • Our regulatory system should work for us—or even with us—but never against us. It should be collaborative, not combative—focused on the person and not the program.
  • A strong economy and sensible regulation go hand-in-hand. For example, we need to protect the environment, but we can do so in a way that is open, honest, and again, collaborative.
  • Instead of picking winners and losers, government should be promoting competition. This means an end to cronyism and bailouts so we can open up our economy to more innovation and investment.

There are far too many solutions to discuss them all here (but we encourage you to read the plan for yourself), but one foundational idea jumped off the page: Red tape tying the hands of forward-thinkers.

“Federal regulations are inherently backward-looking,” the authors argue. Regulatory programs are designed around the state of the technology when the programs were created, and as a result they can stand in the way of technological advances.”

“The end result can be that technological innovation—which has always been one of America’s strengths—gets slowed down or even stopped by Washington.”

For instance, we’re seeing this clearly now in new businesses that are hungry for startup capital. Currently, the federal securities laws limit the number of investors in angel funds to 100 and contain outdated rules that make crowdfunding near impossible. House Republicans have legislation to dramatically raise the cap for qualifying venture funds and rework parts of Title III to facilitate small business investment and crowdfunding portals.

The economy needs more ideas like this to jumpstart growth. Perhaps more importantly, it needs less regulation in order to grow naturally and organically.