Regulatory “Pay-Go”

by Elaine Schwartz    •    Dec 28, 2010    •    623 Views

Too much regulation? Senator Mark Warner’s proposed legislation is an interesting approach.

Concerned that regulation is “stifling fresh investment and discouraging innovation,” Senator Mark Warner says the incentives have to change. Currently, when federal agencies create new rules, their power expands, their budget grows, and their work force balloons. Burgeoning regulation, he says, pushed us down from #4 to #5 on the World Bank’s “Ease of Doing Business” rankings.

Instead, Warner suggests that agencies create “a credible, quantifiable estimate of the economic impact” for every regulation. Calling it “regulatory pay-go,” his proposed legislation would require eliminating old rules when new ones are added. The net result? The regulatory impact remains constant.

It sounds good to me. Your opinion?

The Economic Lesson

Pay-go refers to pay-as-you-go, a legislative approach that involves budgetary neutrality. New legislation is characterized as pay-as-you-go when it replaces existing spending instead of adding to the federal budget. Social Security is called a pay-as-you-go program because the money collected from current workers is paid to current Social Security recipients.

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