Rand Paul's New Gambit: Sabotage Federal Regs

Rand Paul's proposal that federal regulations automatically expire after 2 years will only increase costs for both government and the private sector.

Rand Paul proposes that all federal regulations should automatically expire or “sunset” after two years. It goes without saying that the idea will never pass Congress. It is little more than an exercise in libertarian idealism: The modern administrative state, made possible by the wide rule-making authority granted to executive branch agencies, is anathema to libertarians such as Paul.  His proposal is deliberately designed to make the whole system unworkable.

If legislation – even legislation that will never pass – is supposed to serve the public good, rather than simply express hostility to big government, then automatic sunsetting is a bad idea.  For one thing, it won’t actually achieve its objectives.  Faced with automatic sunsetting, Federal agencies will simply mark on their calendars to renew their prior regulations every two years.  Individuals and businesses, meanwhile, would need to confirm every two years that the regulations upon which they had previously relied remain in effect.  Automatic sunsetting would do little more than increase the cost of government and the compliance costs of the private sector.

The result would be worse if Paul's proposal actually did cause some regulations to expire.  Take an example from my own field, tax law.  One of the first questions taxpayers face when they start a business is how the profits are going to be taxed.  Will all the taxable income flow through to the owners?  Or will the business be taxed as a separate entity?  Or will it be a mix of both?  These questions used to be decided by a slippery set of factors largely made up by the courts.  In 1997, however, the IRS issued regulations that sensibly allow businesses to decide for themselves how they wish to be classified for tax purposes.  These regulations made taxpayers’ lives easier and, incidentally, made a lot less work for lawyers.

Now suppose that Rand got his way and these regulations automatically expired.  Businesses that had relied on a certain classification would suddenly not know how they would be taxed.  They would scramble to figure out what rules applied and what relief (if any) they could obtain.  The IRS, meanwhile, would need to figure out what rules it was going to enforce.  The only ones who would profit from the ensuing confusion would be the lawyers.

A certain type of libertarian might react: “So what? I don’t like the Tax Code to begin with. Why should I care that Congress makes it even less efficient than it already is?” Call this attitude libertarian nihilism.  The libertarian nihilist hates government so much that he’d rather see it malfunction than work as well as it possibly can.  (Perhaps the libertarian nihilist thinks that the less popular government becomes, the easier it will become to roll to it back. On the contrary, lack of trust in government, paradoxically enough, only increases the clamor for more.)  By definition, the libertarian nihilist wants to make people worse off just to spite the modern state.

Paul’s proposal, wittingly or unwittingly, is an example of libertarian nihilism.  Government agencies such as the IRS do not create their regulatory powers by fiat.  Rather, they get their powers from statutes passed by Congress.  Arbitrarily kill off as many regulations as you like and you’re still going to have statutes on the books regulating all manner of private activity.  The only thing different will be that the interpretation and consequences of those statutes will be even less clear than before.  In proposing to abolish regulations issued pursuant to Congressional mandate, Paul is assailing a symbol of modern government rather than a cause.  He is also conveniently scapegoating another branch of government while giving his soon-to-be fellow Senators and Congressmen a free pass.

Now, perhaps Paul does not mean that all regulations should sunset after two years. Perhaps he would allow regulations that merely interpret statutes to remain in place but force those that fashion brand new rules to expire. There is a legitimate worry here: by delegating law-making power to unelected officials, Congress is abdicating its legislative responsibilities and attenuating the democratic legitimacy of our government.  The problem, however, is that it is notoriously difficult to define where interpretation ends and legislation begins.  The Supreme Court, afraid that it can’t draw the line with adequate clarity, hasn’t enforced the “nondelegation doctrine” (under which Congress cannot delegate its Article II powers to another branch of government) in 85 years.  A blanket attack on all regulation won't work.  If Congress wishes to rein in the administrative state, they will have to do it piecemeal – which is exactly the position that they're in already.