Rethinking regulatory reform in the Internet age

Rep. Issa advocates for applying evidence-based thinking to regulatory reform.

As the cover story of a February issue of The Economist highlighted, concerns about an over-regulated America are cresting in this election year, with headlines from that same magazine decrying “excessive environmental regulation” and calling for more accurate measurement of the cost of regulations. Deleting regulations is far from easy to do but there does appear to be a political tailwind behind doing so.

As a legislator and chairman of the Government Oversight and Reform Committee, it’s fair to say that Representative Darrell Issa (R-CA) been quite active in publicly discussing the issue of regulations and regulatory burdens upon business. As a former technology entrepreneur, and a successful one at that (he’s the wealthiest member of Congress) Rep. Issa does have first-hand knowledge of what it takes to run a business, to bring products to market, and to deal with the various regulations.

In a wide-ranging interview earlier this summer, Rep. Issa commented on a number of issues related to open government and the work of the committee. When we talked about smart disclosure and the reforming the Freedom of Information Act, I posed several questions about regulatory data, in the context of its role in the marketplace for products and services. Our interview on regulation is below, followed by a look at how his office and the White House are trying to use the Web to improve regulatory reform and involve citizens in the debate.

What role does the release of regulatory data from the various agencies, in the form of smart disclosure or other directions, have in creating market transparency, bringing products to market or enabling citizens to understand the quality of said products? What is the baseline for regulation? For instance, after flying a lot recently, I’ve felt grateful the FAA had regulations that meant my flights would be safes when I flew back and forth across the country or ocean. There’s some baseline for the appropriate amount of regulation but it’s never entirely clear what that might be.

Rep. Issa: I’ll give you a good example of why regulations that you believe in, you don’t believe in. Do you believe it’s dangerous to have your cell phone on as you’re going across country?

My understanding is that it is extremely likely that many people’s cellphones have been, in fact, left on while they fly cross country or while they take off and land. The probability of people not having switched them off is high. To date, I have not heard a documented case where a switched on cellphone interfered with the navatronics of the plane. [See Nick Bilton’s reporting on the FAA and gadgets in the New York Times.] That logically suggests to me that it’s not as much of a risk as has been posited, but I haven’t seen the data.

Rep Issa: So, on a regulatory basis, your country is lying to you. I’m making the statement as I’m asking the question. Of course your country’s lying to you about the risk. Of course there’s a valid reason to turn off your cell phone: it’s so you won’t be distracted while they’re telling you where the exit is. So rather than say, “Look, we have the right to have you shut off your cellphone and we believe that for safety purposes you should do it, but let’s not kid each other: If you’ve got it on final so you can get your emails a little earlier by 30 seconds and you don’t mind your battery going dead a little faster, it probably has no real risk.’

The fact is your government has regulatory power to regulate an action for which they don’t actually have a good faith belief it’s causing damage. Just the opposite: they have the knowledge that these units are on all the time by accident, in people’s luggage, and our planes still don’t crash.

My problem with regulations is they need to have a cost benefit. And that cost benefit, the burden has to be against the regulator, not for the regulator. So when the EPA says, “You need to take the arsenic out of water,” as they did a number of years ago, and it sounded great, but the number was arbitrary and they had no science. And what ended up happening in New Mexico was that people’s small water districts went out of business. In some cases, people went back to taking what was ever in their well and you go, “Well, why didn’t they have a number that they could justify you absolutely had to have otherwise it was hurting you?” Well, the answer is because they never did the science, they just did the regulations.

So where does the balance lie, in your opinion?

Rep Issa: When it comes to individual liberty, I try to be as absolute as possible. When it comes to regulatory needs, I tend to be as limited as possible, both because of people’s liberty, but also because government has a tendency to want to grow itself. And if you let it grow itself, one day you wake up like the frogs that were slowly boiled because they were put in the water and didn’t notice it getting warm until they were cooked.

When I’ve traveled abroad, I’ve heard from citizens of other countries, particularly in the developing world, that one of the things that they admire about the U.S. is that we have an FDA, an EPA, an FTC and other regulatory bodies which they see holding our quite powerful corporations to some level of account. What do role those institutions have in the 21st Century to hold private interests, which have incredible amounts of power in our world, accountable for the people?

Issa: I gave you the EPA example because there was a debate that ultimately the EPA won on arsenic to the detriment of whole communities who disagreed, who said, you haven’t made the case as to why you picked a particular level. They all supported the idea that water should be clean. The question is at what point of the cost-benefit was it the right level of clean. And I remember that one.

Let me give you one in closing that’s probably perfect. Today, the FDA is unable to ensure that generic cancer and antibiotics are in sufficient supply, which was one of its mandates. And as a result, there’s a whole bootleg market developing — and the left and the right are both concerned about it — for both cancer and antibiotics because there’s a shortage. But the FDA had a regulatory responsibility to ensure that the shortage didn’t occur and they’re failing it. So the FDA has a job it’s not doing.

Additionally, people are traveling to Europe and other places to get drugs which are saving lives because they’re getting approved in those countries quicker. These are western countries with the equivalent of FDA, but they’re getting approved quicker and clinical trials are going better and moving over there.

So when we look at the FDA, you’re not attacking them because you think you shouldn’t have the Food and Drug Administration dealing with particularly the efficacy of medicines, but because the FDA is falling short in the speed to market, getting longer and longer, meaning people are being denied innovative drugs.

Can the Web help with regulatory reform and e-rulemaking?

Representative Issa, whose committee heard testimony on regulatory impediments to job creation last week, is not alone in the U.S. House in his interest in streamlining regulations. This week, Speaker Boehner and his caucus have been pushing to “cut the red tape” limiting or loosening regulations on small businesses until unemployment falls to 6%.

The administration has not been inactive on this front, although it’s fair to say that House Republicans have made clear that its progress towards regulatory reform to date has been unsatisfactory. One early case study can be found in FCC open Internet rules and net neutrality, where was used to collect public feedback for proposed rules. Public comments on were officially entered as official comment, which was something of a watershed in e-rulemaking. The full version of the final rules, however, were not shared with the public until days after they were voted upon.

In January 2011, President Barack Obama issued an executive order focused on reforming regulation regulatory review. One element of the order was particularly notable for observers who watch to see whether citizen engagement is part of open government efforts by this administration: its focus upon public participation in the regulatory process.

As I’ve written elsewhere, this order is part of a larger effort towards e-rulemaking by the administration. In February 2012, relaunched with an API and some social media features, with an eye towards gaining more public participation. This electronic infrastructure will almost certainly be carried over into future administrations, regardless of the political persuasion of the incumbent of the Oval Office.

This summer, Cass Sunstein, the administrator of the Office for Information and Regulatory Affairs in the White House, asked the American people for more ideas on how the federal government could “streamline, simplify or eliminate federal regulations to help businesses and individuals.”

As the Wall Street Journal reported last year, the ongoing regulatory review by OIRA is a nod to serious, long-standing concerns in the business community about excessive regulation hampering investment and job creation as citizens struggle to recover from the effects of the Great Recession.

It’s not clear yet if an upgraded will makes any difference in the quality of regulatory outcomes. Rulemaking and regulatory review are, virtually by their nature, wonky and involve esoteric processes that rely upon knowledge of existing laws and regulations.

In the future, better outcomes might come from smart government approaches, through adopting what Tim O’Reilly has described “algorithmic regulation,” applying the dynamic feedback loops that Web giants use to police their systems against malware and spam in government agencies entrusted with protecting the public interest.

In the present, however, while the Internet could involve many more people in the process, improved outcomes will depend upon an digitally literate populace that’s willing to spend some of its civic surplus on public participation in identifying problematic regulations. That would mean legislators and staff, regulators and agency workers to use the dynamic social Web of 2012 to listen as well as to broadcast.

To put it another way, getting to “Regulations 2.0″ will require “Citizen 2.0″ — and we’ll need the combined efforts of all our schools, universities, libraries, non-profits and open government advocates to have a hope of successfully making that upgrade.

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