Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
415892583
label
Regulatory Reform, 4/29/92
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
415892583
contentType
document
title
Regulatory Reform, 4/29/92
citationUrl
identifierLocal
13810-008
collections
Records of the White House Office of Speechwriting (George H. W. Bush Administration)
Speech Backup Chronological Files
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
415892583
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
62cb14c2afd3dd72
ocrText
Originally Processed With FOIA(s):
foia Number:
S
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Speech File Backup Files
Subseries:
Chron File, 1989-1993
OA/ID Number:
13810
Folder ID Number:
13810-008
Folder Title:
Regulatory Reform, 4/29/92
Stack:
Row:
Section:
Shelf:
Position:
G
26
22
4
7
COMPETITUE am count
The 1989 Federal Delineation Manual and burdensome 404 permit
process have created a profusion of regulatory nightmares. Cases
range from millions of dollars tied up in now useless land to
public projects delayed indefinitely. The following is a short
list of some of the more outrageous cases.
1)
Handicapped Shelter Bogged Down.
A non-profit
organization, Reach, needed to build a new shelter/workshop
to serve the mentally handicapped. The City of Juneau, Alaska
wanted to donate some unused low-land by the city airport that
was ideally situated for easy access by the handicapped.
Because the Corps and EPA would not grant a waiver, the
facility could not be built until private donor was finally
found who gave a parcel. Ironically, the second parcel was
as wet as the first. But because it had been tilled, the corp
did not delineate it as a "wetland."
2) Wetlands More Important than National Defense. When the
Air Force wanted to make sure the U.S. has the latest
technology to detect incoming Soviet planes by building a new
Back-scatter Radar installation on 73 acres of Alaskan wetland
, they too had to go to the Corp for a permit. The Fish and
Wildlife Service (FWS) submitted 25 pages of environmental
reason for why the wetlands were more important than the radar
system. According to the FWS, the new spirit of glasnost
diminishes the threat of Soviet attack and therefore
preserving every acre if Alaskan wetland is more important
than additional national security. Never mind that the
remaining 170 million acres of Alaskan wetlands would remain
in pristine condition.
3) Life Savings Down the Drain. Three years ago Irma &
Joseph Phillips invested their savings in 44 acres of farmland
in Maryland. They wanted to build a retirement home on part
of the land. To pay for their dream home, the Phillips wanted
to subdivide most of the land and sell it. The Corps declared
their 44 acres a jurisdictional "wetland" and forbad the
Phillips from building until they had explored "practicable
alternatives" to development. Because the Phillips sold their
house to buy the property, they became homeless when they
could proceed with their plan. Fortunately, their daughter
and her family invited them to move in until the situation can
be resolved.
4) Turning Civil Engineers into Criminals. William Ellen
is appealing a felony conviction (and 6 months prison and one
year supervised release including 4 months home detention and
60 hours of community service) for failing to get the
necessary wetlands permits. He was the construction manager
on a project to convert a 5000 acre track of forests in
Maryland known as Tudor Farms into a bird sanctuary by
creating new habitats, such as ponds. The corp notified him
that one part of the tract was a "wetland." He brought in
bull dozers to create roads and ponds in other parts of the
land that appeared dry at the time, but under the broad test
set out in the current delineation manual, all of the land
could be deemed a "wetland." The process of grading the land
with a bulldozer is considered "filling" by the Corps.
5) $2 Million Misdemeanor. The owner of Tudor Farms, Paul
Tudor Jones, II, was sentenced to 18 months of probation and
fined $1 million and an additional $1 million in restitution
on a misdemeanor charge of negligent filling of a "wetland."
He was also forced to turn over 2500 acres of the farm as a
permanent nature preserve under a conservation easement and
prohibited from hunting migratory waterfowl anywhere in the
U.S. for 18 months.
6) Don't be a Hero. On July 13, 1989, John Pozsgai was
sentence to 3 years in prison and fined $200,000 for filling
in 14 acres of an unofficial dumping ground next to an auto
salvage yard. Press articles speculate that Pozsgai received
particularly harsh treatment because he fought the Corp and
the Justice Department suits.
7) Bird Sanctuary Blocked. Steve Lathrop bought one of the
worst areas in Granite city, Ill known as "Dobry slough". The
area -- which had a creek on it -- was previously used as an
illegal dumping ground and had become a local hang out for
vandals and thieves. As part of the development project,
Lathrop built a crude dam to created a two acre lake that
provided a bird habitat and storm water flood control. In
Dec. 1990 the Corps issued cease and desist orders pending the
Corps' determination whether there was a loss of wetlands.
This order prevents Lathrop from making improvements to the
damn that are necessary to prevent it from overflowing and
flooding the surrounding neighborhood. Lathrop may have to
file for bankruptcy without completing the housing project.
8) Loss of Homeless Habitat. In Juneau Alaska the St.
Vincent de Paul society was delayed one year in building an
addition to their homeless shelter because the Corps declared
a .14 acre lot a wetland., Two car dealerships sit across the
KEMP
street, a plumbing and heating store to the South, and a
storage business to the North. The homeless shelter is
virtually in downtown Juneau surrounded by concrete. The Fish
and Wildlife service claimed that the lot supported "various
birds and wildlife."
9)
Economic Revitalization Swamped in Red Tape. In 1984 the
City of Hampton, Va., broke ground on the Hampton Roads
Center. This integrated business, research, educational and
recreational community was to be the crown jewel in the city's
economic revitalization project. On Aug, 13, 1990, the
project was brought to an abrupt halt when the Corps
determined that the site constituted a jurisdictional wetland.
The Hampton Roads Center site is located on some of the
highest ground in the city. The City of Hampton has invested
$12.8 million in the Hampton Roads Center, but was told on
Jan. 23, 1991 that the Corp. personnel were "not optimistic
a permit application is attainable."
10) Development Stopped. E.S.G. Enterprises, Inc. assembled
922 acres in Chesapeake, Va. in 1984. After six years of
investment and approved rezoning by the Chesapeake City
Council the Corps of Engineers declared the area a wetland,
freezing $20 million in property.
11) Are they Really Wetlands? Various estimates have been
made about scope of the wetlands under the current delineation
manual. Some surprising examples have been given:
-- Some counties in Illinois could be 2/3 wetland.
-- 80% of Houston, Texas is a "wetland."
-- Up to 40% of California could be considered a wetland.
-- The Dept. of Agriculture reported that up to 70 million
acres of farmland would be considered wetland under the
'89 manual.
The practical effect of declaring these areas "wetlands"
is to stop development and limit farming.
12) $1 Billion In Law Suits Against Government. The New York
Times reports that there are already over $1 billion in
takings claims against the U.S. government. The broad
definition of "wetland" under the current delineation manual
makes it likely that this number will increase. In addition,
the denial of any use of the land by the administering
agencies (the Corp, EPA, Fish and Wildlife Service, and USDA)
makes it more likely that a court will find a "taking" of
private property.
APR-29-1992 10:08 FROM FDA-OFFICE OF EX. AFFAIRS TO
912024566218 P.01
OFFICE OF POLICY
Food and Drug Administration
Facsimile Transmission Record
Telephone (301) 443-5004 IMMEDIATELY if re-transmission is necessary.
TO: Bob Simon
FROM: Bill Hubbard
(202) 456 - 6218
=
Food and Drug Administration
Facsimile Phone Number
5600 Fishers Lane - Rm. 14-105
Rockville, MD 20857
Fax. No. (301)227-6777
Number of Pages
(Not including
cover page)
THIS DOCUMENT IS INTENDED ONLY FOR THE USE OF THE PARTY TO WHOM IT IS ADDRESSED
AND MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL, AND PROTECTED
FROM DISCLOSURE UNDER APPLICABLE LAW. If you are not the addressee, or a person authorized
to deliver the document to the addressee, you are hereby notified that any review, disclosure, dissemination,
copying, or other action based on the content of this communication is not authorized. If you have received
this document in error, please immediately notify us by telephone and return it to us at the above address
by mail. Thank you.
APR=29-1992 10:08 FROM FDA-OFFICE OF EX. AFFAIRS TO
912024566218 P.02
DDI
DDI is an anti-viral drug approved in October 1991 for the
treatment of AIDS [more specifically, for people who cannot take
the only other approved drug, AZT]. It was approved within 6
months of the application's submission to FDA by Bristol-Myers,
using a prototype procedure of the accelerated approval process.
The approval was based on the drugs effect on increasing a
laboratory measurement that measures infection fighting cells
(CD4 cells), also known as a "surrogate endpoint". Since then,
thousands of patients have been able to take advantage of the
availability of DDI.
DDC
DDC is also an anti-viral drug, developed by Hoffman-LaRoche, for
the treatment of AIDS. Because it also helps prevent the AIDS
virus from destroying the CD4 cells, DDC is a good candidate for
approval using the new accelerated approval process announced
earlier this month. In fact, the FDA expert Advisory committee
that reviewed DDC's application last week, recommended approval
of DDC, when administered in combination with AZT, under the
accelerated approval process.
OTHER CANDIDATES FOR ACCELERATED APPROVAL
FDA has already identified a number of other drugs for serious
and life-threatening illnesses that are good candidates for
earlier approval using the accelerated approval policy. These
include drugs for a variety of diseases such as AIDS and cancer.
Because the accelerated approval procedures will permit the
acquisition of information about a drugs effectiveness sooner, it
will not only permit faster approval, but patients will
ultimately have access to the drugs months, or even years sooner.
THE WHITE house
washington
April 28, 1992
MEMORANDUM FOR MOLLY OSBORN
FROM:
SHANE SCHRIEFER
SUBJECT:
CABINET ATTENDING
ROSE GARDEN EVENT
APRIL 29, 2:00 p.m.
Secretary Card
Secretary Franklin
Secretary Martin
Secretary Watkins
Director Darman
Administrator Reilly
Administrator Saiki
Richard Breeden
VP
Boydon Gray
Boshin
on stage
Withdrawal/Redaction Sheet
(George Bush Library)
Document No.
Subject/Title of Document
Date
Restriction
Class.
and Type
01. List
Attendees to the Regulatory Reform ceremony; Social
n.d.
P-6, (b)(6)
Security numbers. (1 pp.)
Collection:
Record Group:
Bush Presidential Records
Office:
Speechwriting, White House Office of
Series:
Speech File, Backup
Subseries:
WHORM Cat.:
File Location:
Regulatory Reform 4/29/92
Date Closed:
11/29/2004
OA/ID Number:
07572
FOIA/SYS Case #:
Re-review Case #:
2004-2265-S
P-2/P-5 Review Case #:
MR Case #:
Appeal Case #:
MR Disposition:
Appeal Disposition:
Disposition Date:
Disposition Date:
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P-1 National Security Classified Information [(a)(1) of the PRA]
(b)(1) National security classified information [(b)(1) of the FOIA]
P-2 Relating to the appointment to Federal office [(a)(2) of the PRA]
(b)(2) Release would disclose internal personnel rules and practices of an
P-3 Release would violate a Federal statute [(a)(3) of the PRA]
agency [(b)(2) of the FOIA]
P-4 Release would disclose trade secrets or confidential commercial or
(b)(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
(b)(4) Release would disclose trade secrets or confidential or financial
P-5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
(b)(6) Release would constitute a clearly unwarranted invasion of
P-6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
(b)(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed of
(b)(8) Release would disclose information concerning the regulation of
gift.
financial institutions [(b)(8) of the FOIA]
(b)(9) Release would disclose geological or geophysical information
THE WHITE HOUSE
WASHINGTON
April 27, 1992
MEMORANDUM FOR THE PRESIDENT
THROUGH:
DAVID DEMAREST
FROM:
JOSEPH P. DUGGAN Dro 15
SUBJECT:
REGULATION REFORM CEREMONY
I. SUMMARY
On Wednesday, April 29, in the Rose Garden at 2:00
p.m., you will describe the progress made under the 90-day
regulatory moratorium. In the audience of 200 will be the
cabinet, presidential appointees, regulators from
independent agencies, businessmen, and trade association and
think tank representatives.
II. DISCUSSION
The remarks (12 minutes, on cards) state your
philosophy of what type of government regulation is
appropriate, describe the successes of the moratorium, and
lay out how the Administration will regulate in the future.
(Duggan/Simon)
April 27, 1992
Draft Four
Dereg
PRESIDENTIAL REMARKS:
REGULATION REFORM CEREMONY
ROSE GARDEN
WEDNESDAY, APRIL 29, 1992
2:00 P.M.
[Acknowledgments] A warm welcome to the White House for all
of you -- especially the many grass-roots fighters for economic
freedom who have travelled long distances to be here. You honor
us with your presence. I appreciate all your efforts for
fundamental reform of government regulation. Regulation imposes
a hidden tax on all Americans. This reform is one of the top
priorities I stressed in my State of the Union message, and it is
a vital element of government reform -- one of five key issues on
our national reform agenda.
Remember, the early residents of the White House were men
like Jefferson and Madison. They were freedom fighters, they
were revolutionaries. Two hundred years ago they unleashed
forces of social and economic freedom that gave the world a whole
new way of thinking about man's relationship to government. They
made the United States a haven for the poor and the oppressed --
a land of opportunity. 11
Our system did not promise material well-being, but it
guaranteed personal freedom. In just one century's time,
millions of poor people came here from every corner of the Old
World. And because America empowered them to use their God-
given talents to the fullest, people who came to our shores with
nothing but faith and imagination made us the richest nation on
2
earth -- in a poet's phrase, the New Colossus. 11
When a great economic shock hit the world six decades ago,
our governing elites turned too readily to projects of social
engineering. They embraced the notion that human actions, human
choices, could be organized to good effect through bureaucratic
blueprints. They began a cycle of rule by bureaucracy.
Social engineering posed a challenge to our precious
heritage of limited government and the rule of law. It veered us
away from the tradition of the accountability of citizen
legislators. Our Congress shirked its own responsibilities while
embracing many premises of the command economy. Congress passed
laws mandating Americans to dance to the tune of arbitrary social
and economic goals -- and left the details of the choreography to
a new class of bureaucrats. 11
Under the rule of bureaucracy, we felt the growing burden of
regulation's taxes in disguise. And we learned some hard
lessons. We learned that lonely keepers of the flame of economic
HY-ek
freedom -- men like the late Friedrich Hayek -- were right. The
era of bureaucracy and regulation produced one example after
another validating Hayek's observation: Rule by bureaucracy
undermines the true rule of law and runs headlong into the iron
law of unintended consequences. 11
Inflexible safety rules can undermine safety in unforeseen
ways: If government mandates make ladders more and more costly
to consumers, for instance, more people will turn to cheaper
substitutes. They'll climb on chairs and step-stools -- which
3
are far less safe. Command-and-control environmental rules
actually can harm the environment. Consider the case of used
motor oil: Today it has some market value -- just enough to
provide collectors an incentive to haul it away for free and sell
it for reuse. But if onerous bureaucratic handling methods are
imposed, collectors may refuse to haul it away unless they are
paid to pick it up. To avoid paying to have it hauled away, some
people may simply dump it into the trash or into storm drains
that feed our streams and lakes.
I could go on all day with examples of inflexible rules that
impose hidden taxes and costs on society. I could cite any
number of abstract rules in collision with human reality: How
highway fatalities can increase and American auto workers can
lose jobs when Congress tries to legislate the fuel efficiency of
our cars. How a regulation system, plump with noble intentions,
can keep life-saving drugs and medical devices from patients who
need them. 11
But we're here today for another purpose. We're here to
mark that the era of unaccountable government and unreasoning
bureaucracy is coming to an end. A new American revolution is
under way -- and you and I and millions of like-minded people are
leading it. 11 Reforming regulation is a huge and time-consuming
task -- presiding over the Task Force on Regulation during the
1980s was, for instance, one of the most important assignments
President Reagan gave me when I was Vice President. But today
regulation is facing a heightened public concern, and a growing
4
public impatience. This is helping us accelerate needed reforms.
In my State of the Union Address, I lit a fire under our
regulatory reformers and gave them 90 days to produce dramatic
results. Today marks the 91st day -- and let me report our
reformers have come through with flying colors. From
biotechnology to banking to energy, we've made achievements that
will lower costs and increase choices for American consumers.
We've carried out reforms that will create and preserve good jobs
for Americans and help us stay competitive in the world. [We
estimate that the reforms we've set in motion just since January
28 will save consumers about $20 billion a year -- and that's
just a down payment on savings to come.]
Every agency I asked to participate has responded with
action. Some agencies already have accomplished important
reforms, and all agencies have completed a reform agenda which
they will carry out in the coming months.
To help us move forward with our reform agenda, today I am
ordering a [four-month] extension of the moratorium. Our
objective must be to stop new rules that hurt growth while
speeding up new rules to help our economy. During the next [four
months] I expect many more gains for freedom and common sense.
And I'm asking ask Congress to do its part. I am asking
Congress to pass legislation to give the President line-item veto
authority over burdensome regulatory requirements imposed by
statute. I am asking Congress to accept a common-sense
discipline clearly in the interest of American taxpayers and
5
consumers. Under my proposal, I would take a separate look at
every new regulation or scheme of regulations that Congress
attempts to mandate. If I find that the costs to society of a
particular provision outweigh the benefits, or that the
objectives of the legislation could be accomplished at less cost,
I would be able to send that provision back to Congress for a
clear up-or-down vote. Congress would be unable to hide bad
regulations in the fine print of those gigantic bills it sends
me. So if members of Congress want to join this spirit of reform
right now, they can pass my proposal.
Further, I'm putting Congress on notice: I will veto any
bill that attempts to put excessive new burdens of regulation on
the backs of our families, our consumers, our workers, and our
businesses. 11
Let me be clear about our aims: We cannot and will not
abolish all regulation. I have responsibilities as chief
executive to enforce sound regulations for the health and safety
of the American people -- and I'll keep that trust. But the best
way to keep that trust is through a fundamental reform of our
system of regulation. This is not a three-month or even a three-
year effort. This is not an exercise in adjusting or fine-
tuning the system. 11 There will be no -- I repeat, no --
return to business as usual. 11 We are engaged in a revolution
to overthrow the outdated and excessive rule by bureaucracy. 11
Our campaign against bureaucratic excess meshes with our
efforts to limit the terms of congressmen and make them more
6
accountable. It fits also with our crusade against the tyranny
of nuisance lawsuits that mock our time-honored traditions of
justice. And it goes hand in hand with our efforts to break the
bureaucratic stranglehold on American education -- by allowing
parents, not government, to choose their children's schools. In
short, there's a common purpose linking the all of our efforts to
renew the spirit and practice of limited government. 11
So let's take heart -- and let's get to work. We can see
the future. It's a freer future. There is no doubt in my mind:
The day is coming when we will put the final wrecking ball to the
discredited system of the social engineers. We will restore this
country. We will build it back, sturdy in the radical faith in
freedom that is the legacy of our Founding Fathers. [Signing
ceremony if appropriate.]
#
#
(Duggan/Simon)
April 27, 1992
Draft Three
Dereg
PRESIDENTIAL REMARKS:
REGULATION REFORM CEREMONY
ROSE GARDEN
WEDNESDAY, APRIL 29, 1992
2:00 P.M.
[Acknowledgments] A warm welcome to the White House for all
of you especially the many grass-roots fighters for economic
freedom who have travelled long distances to be here. You honor
us with your presence. I appreciate all your efforts for
fundamental reform of government regulation. This is one of the
top priorities I stressed in my State of the Union message, and
it is a vital element of government reform -- one of five key
issues on our national reform agenda.
Remember, the early residents of the White House were men
like Jefferson and Madison. They were freedom fighters, they
were revolutionaries. Two hundred years ago they unleashed
forces of social and economic freedom that gave the world a whole
new way of thinking about man's relationship to government. They
made the United States a haven for the poor and the oppressed --
a land of opportunity. 11
Our system did not promise material well-being, but it
guaranteed personal freedom. In just one century's time,
millions of poor people came here from every corner of the Old
World. And because America empowered them to use their God-
given talents to the fullest, people who came to our shores with
nothing but faith and imagination made us the richest nation on
earth -- in a poet's phrase, the New Colossus. 11
2
When a great economic shock hit the world six decades ago,
our governing elites turned too readily to projects of social
engineering. They embraced the notion that human actions, human
choices, could be organized to good effect through bureaucratic
blueprints. They began a cycle of rule by bureaucracy.
The age of social engineering suppressed our precious
heritage of limited government and the rule of law. It veered us
away from the tradition of the accountability of citizen
legislators. Our Congress shirked its own responsibilities while
embracing many premises of the command economy. Congress passed
laws mandating Americans to dance to the tune of arbitrary social
and economic goals -- while Congress handed off to a new class of
bureaucrats the details of the choreography. 11
Under the rule of bureaucracy, we felt the growing burden of
regulation's hidden taxes. And we learned some hard lessons. We
learned that lonely keepers of the flame of economic freedom --
men like the late Friedrich Hayek -- were right. The era of
bureaucracy and regulation produced one example after another
validating Hayek's observation: rule by bureaucracy undermines
the true rule of law and runs headlong into the iron law of
unintended consequences. 11
Inflexible safety rules can undermine safety in unforeseen
ways: If government mandates make ladders more and more costly
to consumers, for instance, more people will turn to cheaper
substitutes. They'll climb on chairs and stepstools -- which are
far less safe. Anti-market environmental rules can harm the
3
environment. Consider the case of used motor oil: Today it has
a very low market value -- just enough to provide collectors an
incentive to haul it away for free and sell it for reuse. But if
onerous bureaucratic handling methods are imposed, collectors may
refuse to haul it away unless they are paid to pick it up. To
avoid paying to have it hauled away, holders of used oil may just
dump it into the trash or into storm drains or streams or lakes.
I could go on all day with examples of abstract rules in
collision with human reality: How highway fatalities can
increase and American auto workers can lose jobs when Congress
mandates the fuel efficiency of our cars. How a regulation
system, plump with noble intentions, can keep life-saving drugs
and medical devices from patients who need them.
But we're here today for another purpose. We're here to
mark that the era of unaccountable government and unreasoning
bureaucracy is coming to an end. A new American revolution is
under way -- and you and I and millions of like-minded people are
leading it. Reforming regulation is a huge and time-consuming
task -- presiding over the Task Force on Regulation during the
1980s was, for instance, one of the most important assignments
President Reagan gave me when I was Vice President. But today
regulation is facing a heightened public concern, and a growing
public impatience. This is helping us accelerate needed reforms.
In my State of the Union Address, I lit a fire under our
regulatory reformers and gave them 90 days to produce dramatic
results. Today marks the 91st day -- and let me report our
4
reformers have come through with flying colors. From
biotechnology to banking to energy, we've made achievements that
will lower costs and increase choices for American consumers.
We've carried out reforms that will create and preserve good jobs
for Americans and help us stay competitive in the world. [[macro
numbers on savings to consumers and illustrations of agency
actions directly benefiting consumers' pocketbooks. ]]
[I want to note that every agency I asked to participate has
responded with action. Some agencies already have carried out
important reforms, and all agencies has completed a reform agenda
which they will carry out in the coming months.]
120
Today I am ordering a [??-day] extension on the moratorium
on regulations, and during this time I expect more
accomplishments for freedom and common sense.
I'm permanently directing federal agencies to follow
stricter accounting practices in comparing the real costs versus
the real benefits of proposed regulations.
And I'm asking ask Congress to do its part. I am asking
Congress to pass legislation to give the President regulatory
rescission authority comparable to the line-item rescission. [I
am asking Congress to accept a common-sense discipline clearly in
the interest of American taxpayers and consumers. Under my
proposal, I would take a separate look at every new regulation or
scheme of regulations that Congress attempts to mandate. If I
find that the costs to society outweigh the benefits, or that the
regulation is simply unenforceable, I would be able to send it
5
back to Congress for a clear up-or-down vote. Congress would be
unable to hide bad regulations in the fine print of lengthy
legislation. So if members of Congress want to join this spirit
of reform right now, they can pass my proposal.]
Further, I'm putting Congress on notice: I will veto any
bill that attempts to put excessive new burdens of regulation on
the backs of our families, our consumers, our workers, and our
businesses.
Let me be clear about our aims: We cannot and will not
abolish all regulation. I have responsibilities as chief
executive to enforce sound regulations for the health and safety
of the American people -- and I'll keep that trust. But the best
way to keep that trust is through a fundamental reform of our
system of regulation. This is not a three-month or six-month
effort. This is not an exercise in adjusting or fine-tuning the
system. There will be no -- I repeat, no -- return to
business as usual. 11 We are engaged in a revolution to
overthrow the outdated and excessive rule by bureaucracy. 11
Our campaign against bureaucratic excess meshes with our
efforts to limit the terms of congressmen and make them more
accountable. It fits also with our crusade against the tyranny
of nuisance lawsuits that mock our time-honored traditions of
justice. And it goes hand in hand with our efforts to break the
bureaucratic stranglehold on American education -- by allowing
parents, not government, to choose their children's schools. In
short, there's a common purpose linking the all of our efforts to
6
renew the spirit and practice of limited government. 11
Let me leave you with one final thought. Perhaps you've
heard about the time baseball fans in St. Louis gathered in the
old Sportsman's Park to celebrate a day in honor of their native
son, Yogi Berra. Yogi quavered with emotion as he stepped up to
speak. "First," he said, "from the bottom of my heart let me
thank all the people who have made this day necessary." III
The point of the story is this: The freedom-loving people
of this country -- the people of ingenuity -- are not merely
making renewal of limited government possible. 11 They're making
it necessary. 11 They're making it inevitable. 11 Technological
advance is accelerating so rapidly that bureaucracy can hope only
in vain to keep up.
So let's take heart -- and let's get to work. We can see
the future. It's a freer future. There is no doubt in my mind:
The day is coming when we will put the final wrecking ball to the
discredited system of the social engineers. We will restore this
country. We will build it back, sturdy in the radical faith in
freedom that is the legacy of our Founding Fathers.
[Signing ceremony]
#
#
#
(Duggan/Simon)
April 23, 1992
Draft One
Dereg
PRESIDENTIAL REMARKS:
REGULATION REFORM CEREMONY
ROSE GARDEN
WEDNESDAY, APRIL 29, 1992
2:00 P.M.
[Acknowledgments] A warm welcome to the White House for
all of you -- especially the many grass-roots fighters for
economic freedom who have travelled long distances to be here.
You honor us with your presence.
Remember, the first residents of the White House were men
like Jefferson and Madison. They were freedom fighters, they
were revolutionaries. Two hundred years ago they unleashed
forces of social and economic freedom that gave the world an
entirely new paradigm for man's relationship to government. They
made the United States a land of opportunity -- a haven for the
poor and the oppressed. 11
Our laws and our system of government did not promise
material well-being, but they guaranteed personal freedom. In
just one century's time, millions of poor people came here from
every corner of the Old World. And because America empowered
them to use their God-given talents to the fullest, people who
came to our shores with nothing but faith and imagination made us
Emma
Layarno poem about
the richest nation on earth -- the poet's New Colossus. 11
When a great economic shock hit the world six decades ago,
Statue of
Liberty
our governing elites suffered a lapse of faith in our traditions
of freedom and responsibility. Vainly, they embraced the project
of social engineering -- the notion that human actions, human
2
choices, could be manipulated as easily as civil engineers
manipulate stone and steel. They began a cycle of rule by
bureaucracy. Like the Lilliputians swarming over Gulliver,
bureaucracy cramped and pinned the colossus of American freedom.
The age of social engineering suppressed our precious
heritage of limited government, of the rule of law, of the
accountability of citizen legislators. Our Congress shirked its
own responsibilities while embracing many premises of the command
economy. Congress passed laws mandating Americans to dance to
the tune of abstract social and economic goals -- while Congress
handed off to a new class of bureaucrats the details of the
choreography. 11
Under the rule of bureaucracy, we learned some hard lessons.
We learned that lonely keepers of the flame of economic freedom -
- men like the late Friedrich Hayek -- were right after all. The
era of bureaucracy and regulation produced one example after
another validating Hayek's observation: that rule by bureaucracy
undermines the true rule of law, that government regulation
causes unintended consequences. 11
We've seen abstract safety rules undermine safety: When
government mandates make ladders more and more costly to
consumers, for instance, more people climb on chairs and
stepstools -- which are far less safe. We've seen that abstract
environmental rules can harm the environment. Consider the case
of used lubricating oil: Now it has a very low market value --
just enough to provide collectors an incentive to haul it away
3
for free and sell it for recycling. But if new bureaucratic
handling methods are imposed, collectors will refuse to haul it
away unless they are paid to pick it up. To avoid paying to have
it hauled away, holders of used oil will be tempted to dump it
that feed and
into the trash or into storm drains or streams or lakes.
I could go on all day with examples of government by
abstraction and its tragic collisions with human reality: How
highway fatalities increased when Congress mandated the fuel
efficiency of our cars. How a regulation system, plump with
noble intentions, keeps life-saving drugs and medical devices
from patients who need them. 11
But we're here today for another purpose. We're here to
mark that the era of unaccountable government and unreasoning
bureaucracy is coming to an end. A new American revolution is
under way -- and you and I and millions of like-minded people are
leading it. 11
In my State of the Union Address, I lit a fire under our
1-29-92
regulatory reformers and gave them 90 days to produce dramatic
results. They have not disappointed us. Today marks the 91st
yes
day -- so allow me to give a progress report: [details]
Today I am ordering a 90-day extension on the moratorium on
regulations, and during this time I expect more deregulation --
more accomplishments for freedom and common sense. Through the
executive order I will sign in a moment, I also am making
permanent an essential reform to bring all federal regulation
under the central oversight of the Office of Management and
in
4
Budget. This will eliminate a major cause of governmental
confusion, cross-purposes, and unintended consequences.
And we'll ask Congress to do its part. I'm asking today for
historic new rescission authority to block harmful regulations.
And I'm putting Congress on notice: I will veto any bill that
attempts to put burdensome new regulations on the backs of our
families, our workers, and our businesses. 11
Let me be clear about our aims: This is not a three-month
or six-month effort. This is not an exercise in adjusting or
fine-tuning the system. The system is broken beyond repair. 11
There will be no -- I repeat, no -- return to business as usual.
11 We are engaged in a revolution to overthrow the cycle of rule
by bureaucracy. We are fighting to regain -- and never again
give up -- fundamental freedoms. 11
Our campaign against bureaucracy meshes with our efforts to
limit the terms of congressmen and make them more accountable.
It fits also with our crusade against the tyranny of nuisance
lawsuits that mock our time-honored traditions of justice. In
short, there's a common purpose linking the all of our efforts to
renew the spirit and practice of limited government. 11
Let me leave you with one final thought. It begins with one
Baseball anecdotes After Yogi became a sportsman of national renown, friends from
of the classic pronouncements of a man I admire, Yogi Berra.
p.207 his old neighborhood on the south side of St. Louis organized a
tribute
dinner in his honor. Yogi was overcome with emotion when he rose
to accept the many testimonials. His voice quavered, and he
5
I want to
began to speak. "First," he said, "let me thank from the bottom
of my heart all the people who have made this evening necessary."
III
The relevance of Yogi's story is this: The freedom-loving
people of this country -- the people of ingenuity -- are not
simply making renewal of limited government possible. 11 They're
making it necessary. 11 They're making it inevitable. 11 One of
policy
our gifted young intellectuals, Chris DeMuth, put it this way:
Review
"The pace of technological change has become so rapid that new
spring 92
p.16
markets are established quickly, before regulators have time to
suppress them."
Let's take heart from that wise insight as we work to renew
our basic freedoms. There is no doubt in my mind: The day is
coming when we will put the final wrecking ball to the
discredited system of the social engineers. We will restore this
country. We will build it back, sturdy in the radical faith in
freedom that is the legacy of our Founding Fathers.
[Signing ceremony]
#
#
#
CAPTAIN OF ENTERPRISE
Christopher C. DeMuth on the Business of Liberty
AN INTERVIEW BY ADAM MEYERSON
A
fter several years of ideological indirection and
since a mainstream politician rose in the Congress to
financial instability, the American Enterprise Institute
oppose a new spending or regulatory program on the
has regained its footing as one of America's leading
simple ground that it was beyond the constitutional or
conservative public policy research organizations. The
prudential bounds of government. The reigning spirit is
turnabout has come under the direction of its president
political pragmatism, which regards government as a
since 1986, Christopher C. DeMuth, a University of
neutral or beneficial force rather than as a deeply
Chicago-trained lawyer with a strong background in the
problematic enterprise and which treats all questions of
law and economics movement who was head of the
policy as matters of case-by-case political calculation. This
White House regulatory office in the first Reagan term.
pragmatism is endlessly amenable to new extensions of
In February 1992, DeMuth talked with Policy Review
government, yet incapable of understanding why govern-
editor Adam Meyerson about the economic achieve-
ment projects so often go amiss except in terms of
ments and failures of the Reagan and Bush administra-
corruption, sloth, or stupidity. The result is that govern-
tions, AEI's research agenda on behalf of the free
ment and popular disillusionment with government
economic and political order, and relations between
grow in tandem-a very unhealthy situation.
the business community (with which AEI has strong
Now the moral and philosophical arguments for
ties) and the conservative political movement.
limited government are tremendously important and
need to be pressed at every opportunity. But I also think
Policy Review: You've argued that, with the fall of the
that policy research organizations such as AEI and
Soviet empire, "the decisive moral contest in our future
Heritage need to adopt for purposes of argument the
is between democratic capitalism and socialism." What
pragmatic spirit of the age. We need to demonstrate
is the nature of this contest? Who is the enemy?
empirically-in a way that will be convincing to those
who do not share all our philosophical premises but do
DeMuth: Socialism is the idea that government can
believe in "the facts"-the actual effects of particular
usefully organize the lives of individuals toward some
government policies and to show how well-intentioned
social purpose-whether it be better and cheaper health
policies systematically miss the mark due to compensat-
care, or the elimination of poverty, or the preservation
ing private behavior and interest-group politics. And we
of the family farm. However noble the purpose may be,
need to show how the economic or social circumstances
it is rarely achieved by government because people have
that are said to call for government action are frequently
purposes of their own and adapt to government policies
exaggerated, self-correcting, or no worse than the
in ways that compromise or defeat them, and because
government-prescribed cure-again as a matter of fac-
interest-group pressures skew government programs to
tual argument rather than overriding principle.
the groups' purposes at the expense of others. These
difficulties afflict all government programs, including
P.R.: Is the growth of government an inherent feature
"night-watchman state" functions such as defense and
of democratic politics? Or are there important con-
law enforcement, but they become much more serious
straints that can at least contain socialism, if not roll it
as the ambitions and size of government increase and
back?
as it attempts to regiment private markets and the in-
ternal affairs of social and economic groups.
DeMuth: The success of tax-limitation politics during
Today Communism has been defeated and avowedly
the Reagan years in Washington and at the state level
socialist parties are on the defensive. Yet the idea of
from California to New Jersey suggests there may be a
limited government, which was central to the American
"political maximum" of average tax rates. Tax limitation
Founding and the first century and a half of our history,
is, however, a very imperfect tool for limiting govern-
remains alien to modern politics. It has been decades
ment when the government has so many other means
Policy Review
10
of financing its activities-borrowing, printing money,
and "mandated benefits" and other forms of regulation.
Some striking recent research by Sam Peltzman of the
University of Chicago concludes that voters tend to
punish public officials who increase government spend-
ing rather than those who increase taxation. This re-
sheps
search suggests that voters understand that whatever the
government spends it eventually taxes one way or
another, but it also suggests that politicians have behaved
irrationally over extended periods of time. Perhaps the
recent resurgence of conservative politics shows that
pragmatic politicians have anticipated Peltzman's re-
search. Over the past decade popular, anti-establishment
movements in the United States, Britain, New Zealand,
Sweden, and elsewhere have constrained the growth of
government and even cut back on transfer payments,
subsidies, and state ownership of industries.
The growth of international commerce and finance
is also working to limit the growth of government. As
business firms find it easier to relocate their activities
away from relatively high taxes and regulatory imposi-
tions, nations lose effective jurisdiction. I was struck, for
example, that after the stock market crash of October
1987, the U.S. Congress and regulatory agencies did
almost nothing to "fix the problem" despite a good deal
of huffing and puffing. The traditional response to an
event of this magnitude would have been a welter of new
laws and regulatory controls; I think the principal reason
for forbearance was that it was evident that new com-
pliance costs and trading restrictions would have prompt-
American Enterprise Institute
ly driven U.S. trading business to exchanges in London,
Tokyo, and elsewhere.
Christopher C. DeMuth: With the fall of the Soviet
The political effects of the growth of international
empire, "the decisive moral contest in our future is
markets are not, however, one-sided. Where internation-
between democratic capitalism and socialism."
al trade threatens the policy discretion of individual
governments, the governments respond by restricting
man versus the Republicans standing up for manage-
trade or forming "policy cartels." There is a good deal
ment. Instead, both parties are now competing for the
of this in the movement toward economic and political
affections of the middle class by promising that health
integration in Europe. Similarly, governments and en-
care or auto insurance or housing can be provided
vironmental groups are giving greater prominence to
better or more cheaply if government provides or
international environmental issues as it becomes more
guarantees or subsidizes it. The federal budget is now
difficult for individual nations to pursue costly environ-
largely devoted to middle-class subsidies of one kind or
mental policies unilaterally.
another, most prominently medical care and retirement
income but also a profusion of narrower ones such as
P.R.: You've suggested that an underlying reason for
student loans and farm subsidies.
the growth of government may be the emergence of a
It is all an illusion: there are not remotely enough
"middle-class populism" that favors government subsidy
rich people to subsidize the middle class, and the poor
as a way of keeping down costs of education, health
pay almost no taxes and no one is suggesting they should.
care, housing, and other important goods and services.
So it is just the middle class subsidizing itself-people
who are pretty much alike economically, but who are
DeMuth: With the general growth of education, income,
encouraged by politicians of both parties to think of
and wealth in most of society, one of the most important
themselves as elderly or young, as parents or children,
traditional sources of the growth of government-
as medical patients or students or homeowners, rather
redistributive politics-has lost much of its emotive
than as people who are all or most of these things at one
force. It has been replaced by efforts to provide new
time or another. At some point a political leader is going
governmental benefits for people who are fairly solidly
to come along with the wit to point out that we cannot
middle class but who may be persuaded to regard them-
all grow wealthier by picking each other's pockets, but
selves as belonging to a particular group-consumers
for the time being the preservation of this illusion is a
of some good or service, members of a certain age
bipartisan project and virtually all politicians believe
group, members of a certain racial group, or as single
their careers depend on preserving and extending it.
versus married versus married with children. No longer
The failure to stop the growth of middle-class self-sub-
do we see the Democrats standing up for the union
sidy was the single greatest missed opportunity of the
Spring 1992
11
Photofest
"Most government expenditures consist of the middle class subsidizing itself. But we cannot all
grow wealthier by picking each other's pockets."
Reagan years. This failure was based on a misreading of
crisis is upon us 20 years from now, would be good
the political reaction to President Reagan's disastrously
policy-encouraging private saving and avoiding inequi-
ill-conceived Social Security reform proposal at the
ties between those who are more and less politically
beginning of his first term. The political blunder was not
sophisticated.
to propose reforms to Social Security, but to propose
reductions in benefits to people who were already retired
P.R.: You've said that the purpose of the American
or about to retire.
Enterprise Institute is "to do battle, in scholarship and
It is true but irrelevant that current Social Security
intellectual debate, on behalf of the free economic and
benefits are far greater than the value of the payments
political order." What are your current research
made by those who are now receiving benefits. The
priorities?
relevant fact is that retirees expected a certain level of
retirement benefits and planned their affairs according-
DeMuth: At AEI we try to adopt a longer time horizon
ly-upsetting these plans is a violation of social contract.
than the legislator, executive branch official, or jour-
But imagine if someone were to propose adjusting
nalist, but to stay much closer to practical policy issues
benefits far in the future, so as to maintain Social Security
than a purely academic research institution. We attempt
as a reliable safety net but not as a guarantee of a high
to look beyond the immediate political fray and an-
level of retirement income. The political consequences
ticipate which issues will be important three or four
could be very different. I do not think those who would
years out-time enough for us to prepare useful, original
be affected by such a change-say those who are now 45
research that will make the ensuing debates more in-
years old-would react strongly against it. They have
formed, less polemical, and more productive. If an issue
plenty of time to adjust, and many of them realize that
is being teed up at the Ways and Means Committee
the current rate of increase in benefits is demographi-
next Tuesday afternoon, it is too late for AEI to get
cally unsustainable, given the much smaller cohorts fol-
into it.
lowing the baby-boomers. Just ask around the office how
Of course, if we're successful at this we will have a
many people in their 40s think their Social Security
good deal to say about current controversies at any point
benefits are going to be as generous as those of their
in time. AEI scholars are routinely consulted on current
parents. Formally acknowledging and accommodating
policy issues and frequently testify before congressional
this reality now, rather than waiting until a major funding
committees, write newspaper "op-ed" pieces, appear on
Policy Review
12
television public affairs programs, and so forth. But
stand the possibilities of environmental as well as other
ideally these contributions are the tips of large,
economic gains from reform.
longstanding icebergs of research.
Probably the most distinctive focus of AEI's work is
In defense and foreign affairs, our chief priority is to
the social and political foundations of the free society
help define a new set of principles and purposes for
and "democratic capitalism." Much of our best work and
American foreign policy in the post-Cold War era-
many of our best-known people-Michael Novak, Irving
where the United States will have fewer outright enemies
Kristol, Robert Bork, Dinesh D'Souza, Ben Wattenberg,
but also fewer staunch allies, where the military and
Suzanne Garment, and others-are concerned with the
economic threats to American interests are much subtler
health of America's cultural, educational, and social
than they have been, and where traditional notions of
institutions. Doug Besharov, Nick Eberstadt, Charles
national sovereignty are losing ground to transcendent
Murray, and Karl Zinsmeister are working on the difficult
ideals of human rights and democratic self-government.
issues of child and family welfare and the effects of
An immediate focus in the military sphere is on the
government welfare policies. Karlyn Keene, Norman
paradox of superpower disarmament combined with
Ornstein, and William Schneider are producing impor-
weapons proliferation in what used to be called the Third
tant new work on changes in the American electorate
World, and the consequences of the diffusion of nuclear
and parties and on proposals for political and congres-
and other weapons technologies.
sional reform.
In domestic policy our work is concerned with
economic growth, social welfare, and the vitality of
P.R.: Economic growth has been slower under George
American culture and political institutions. The central
Bush than in the first three years of any recent presiden-
task of economic policy is to revive the growth in produc-
cy. To what extent do the recession and sluggish recovery
tivity that was characteristic of the U.S. economy for most
result from Bush's tax and regulatory policies, to what
of the 20th century but has slowed dramatically since the
extent from policy mistakes of the '80s, and to what
early 1970s, with harmful effects not only on economic
extent from a natural and inevitable unfolding of the
progress but on American optimism. If Americans are
business cycle?
less confident than we used to be that our children will
be better off than we are as a matter of social progress
DeMuth: The current recession has been relatively mild
as well as individual pluck, we are accurately reflecting
by postwar standards; certainly it is mild compared with
two decades of slowdown in productivity growth. This
that of 1981-82. But it has coincided with a substantial
slowdown is not inevitable. On the contrary, advances in
technology and the growth of world markets could yield
even greater progress than in the past.
We are devoting particular attention to two areas of
"Conservatives and
economic policy. The first is health care, retirement
income, and labor market policies. For all the current
talk about expanding federal health care programs, the
libertarians play a risky game
largest existing program, Medicare, will be insolvent in
a decade or so; the long-term prospects of our Medicare
in making the recession a
and Social Security programs are much larger fiscal issues
than the year-to-year budget deficits that receive so much
centerpiece of their attacks on
more attention in Washington. And in the meantime,
President Bush.'
various tax and "mandated benefits" policies make it
more expensive to hire people even as economic change
makes labor mobility more important.
The second is a revival of the deregulation movement.
amount of corporate restructuring and is having a more
Great progress was made in this area in the 1970s and
pronounced effect on middle-class, white-collar jobs. We
1980s, drawing on important research produced at AEI
have heard much more talk of economic hardship this
and elsewhere. More recently the reformist spirit seems
time around because more of the people hurt by this
to have left regulatory policy, and state and federal
recession are well-educated and articulate and therefore
regulation has been growing rapidly again. Our work
are conspicuous to politicians and journalists. It has
here will focus heavily on deregulation where obsolete
been a very long recession and it is not going to be
policies are imposing particularly heavy costs in the form
followed by a dramatic resumption of growth the way
of suppressed innovation-broadcasting and com-
previous ones were-the recovery, when it comes, will
munications regulation, financial market regulation, and
be seriously constrained by large federal budget deficits
food and pharmaceutical regulation-and on reform of
and heavy government borrowing, by the reduction in
environmental regulation. Environmental reform means
foreign financing from Japan and Germany, and by the
the adoption of reasonable rather than fanatical risk-
effects of new regulatory programs that have greatly
reduction goals, and the use of markets and economic
increased the costs and uncertainties of new investment
incentives for achieving these goals. I see great potential
and new hiring.
for improvement in both areas; current environmental
Even very healthy economies do not grow without
policies have become so extravagantly wasteful that even
pause or without dislocations caused by shifts in private
some of the environmental groups have come to under-
patterns of production and consumer demand-as Herb
Spring 1992
13
Although the economy-wide costs of these problems have
been cushioned by the growth of other, unregulated
financial institutions, the costs and dislocations could
have been greatly ameliorated by some fairly straightfor-
ward reforms-especially abolition of the Glass-Steagall
Act and privatization of deposit insurance-that the
administration repeatedly shied away from. The new
Clean Air, Civil Rights, and Americans with Disabilities
Acts are going to impose many billions of dollars in
annual costs on the economy without remotely commen-
surate social benefits. The president's embarrassing
embrace of managed trade during his recent trip to
Japan seriously compromised American leadership on
Archive Photos
trade liberalization. The cumulative effect of these sins
of omission and commission are significant, even in a
$6-trillion economy.
President Bush's reneging on his "no new taxes"
"The central task of economic policy is to revive the
campaign pledge was the bellwether event of his
growth in productivity that has slowed down
presidency, comparable to President Reagan's handling
since the early 1970s."
of the PATCO air controllers' strike in 1981. Both actions
had consequences far beyond the issues at hand, because
Stein said in a recent article, "Recessions Happen." I
they were convincing signals to political allies and foes,
doubt that the Bush administration could have done
bureaucrats, and private citizens of how the president
anything to prevent a recession following the long ex-
would respond to political pressures in a multitude of
pansion of the 1980s, or to avert the recent corporate
other circumstances. Reagan's breaking of the PATCO
restructurings, many of which were long overdue and
strike signaled, accurately, that "no more business as
will be beneficial in the longer run. Conservatives and
usual in Washington" was more than campaign rhetoric.
libertarians are playing a risky game in making the
Bush's agreement to a tax increase he had vowed never
recession a centerpiece of their attacks on President
to accept signaled, with equal accuracy, that it was back
Bush's policies.
to business as usual. Everyone in Washington, with the
People of all political persuasions whose lives are
possible exception of a few of President Bush's advisers,
absorbed in politics and public affairs tend to exaggerate
understood that the 1990 budget agreement was not
the consequences of government policies in order to
about solving a particularly knotty fiscal problem, but
magnify the stakes of the political battles they are
about whether it was safe to get back to promoting
engaged in. In fact, an economy as immense and diver-
increased federal spending, taxation, and regulation. In
sified as ours is capable of absorbing a tremendous
both cases millions of private citizens understood what
amount of government-imposed damage and continuing
was happening and adjusted their affairs accordingly,
to perform quite nicely. This is an important but little-
adding to productive economic activity in the 1980s and
appreciated implication of Ronald Coase's work, which
subtracting from it in the 1990s.
won him the Nobel Prize last year, and of the "rational
expectations" school of macroeconomics that builds on
P.R.: Would you favor a "growth package" designed to
Coase's work.
boost the economy this year?
Although the tendency to exaggerate the influence of
government policies is an occupational hazard of both
DeMuth: It depends on what you mean by "growth
liberal and conservative activists, it's a much more serious
package." If you mean a pastiche of short-term tax and
problem for conservative and especially for libertarian
regulatory adjustments intended to inject immediate
activists. The great proficiency and self-governing power
adrenaline into the economy this year, my answer is no.
of private markets is our argument, after all. If we adopt
At best these sorts of gimmicks will be too small to have
the premise that the economy is a hothouse flower,
much effect on the general economy and will be instantly
acutely sensitive to every policy adjustment made in
discounted; at worst-and more likely-they will signal
Washington, what has happened to our argument that
a return to the politics of handing out tax exemptions
government programs are often futile because private
and regulatory exceptions to politically influential
interests and markets compensate and compromise their
groups, and to this extent will make the immediate
purposes? If we wish to encourage greater modesty in
economic situation worse.
the claims of government, we need to be more modest
If you mean policies aimed at reviving the long-term
in the claims we make for our own policies.
growth of productivity, income, and wealth-not before
Having said all this, I do think the domestic policies
November but over the next several decades-then I'm
of the Bush administration have been harmful and have
in favor of them and claim they would have some positive
contributed to our present economic difficulties. The
immediate effects. This would include "credible steps"-
serious problems of our banks and thrifts, for example,
meaning concrete actions as well as legislative
are largely the result of government policies and were
proposals-toward curing the long-term insolvency of
clearly evident at the time George Bush took office.
our middle-class entitlement programs, reducing govern-
14
Policy Review
ment-induced inflation in medical care costs, restoring
istent. When ideas triumph, it is usually because they
freedom of contract in labor markets, reforming primary
become harnessed to the interests of important political
and secondary public education, eliminating regulatory
constituencies. This is not to denigrate the power of
barriers to innovation in high-growth-potential markets,
ideas. But those of us in the idea business need to
and establishing less wasteful and more effective environ-
appreciate that our role is not to slay dragons but to
mental programs. Every one of these steps would be
educate people to a more accurate and larger concep-
dismissed out of hand as suicidal by today's practicing
tion of where their interests lie.
politicians and their managers and pollsters, but I am
The closest approximation to a pure triumph of ideas
certain they could be politically as well as economically
in regulatory policy was the revolution in antitrust incited
successful, even in the fairly short run.
by the work of Robert Bork, Richard Posner, and others
in the middle 1970s. But this is the exception that proves
P.R.: As you've noted, the budget deficit has disappeared
my rule, because here there were no entrenched political
from the public discourse of establishment Washington,
interests. A collection of populist antitrust doctrines had
even as the deficit itself has risen to its highest relative
level since World War II. Under what circumstances, if
any, are budget deficits a problem?
"The long-term prospects of
DeMuth: The size of the annual budget deficit is not
as important as the uses to which government spending
Medicare and Social Security
is directed. Well-run businesses borrow constantly during
periods of rapid growth, and they can do so indefinitely
are much larger fiscal issues
as long as they invest the money in activities whose
economic returns exceed the costs of borrowing. Bor-
than the budget deficits that
rowing, whether by a business or a government, becomes
a problem when it does not finance future growth. So
receive so much more
the deficit problem is really a spending problem, because
most government spending doesn't meet the growth
attention.'
test. This is not to insist that government spending
should always meet a growth test, but only that expen-
ditures on current consumption, such as income trans-
fers, should be covered by current taxation or even
grown up over the years through Supreme Court
(although this raises problems of its own) by surpluses.
decisions, and although these doctrines produced a lot
To the extent the large budget deficits of the 1980s
of economic damage they did not benefit any well-
financed the substantial growth in our military
defined political constituency. For example, no par-
capabilities, and to the extent this growth contributed
ticular group benefits in advance from a highly restrictive
to the collapse of the Soviet Union's international am-
or highly permissive policy toward corporate mergers.
bitions (as several well-placed Soviet officials have said it
As a result, the reversal of Warren-era antitrust
did), then this turned out to be a spectacularly produc-
doctrine in the 1970s and 1980s proceeded largely
tive investment rather than a squandering of our nation-
through intellectual debate in the law schools, law
al wealth. On the other hand, budget deficits really are
reviews, and eventually the courts, unimpeded by or-
impoverishing if they simply finance current consump-
ganized political opposition. The one exception, where
tion or if they are wasteful-paying for things citizens
Chicago School antitrust has yet to prevail, is in the area
don't want or encouraging inefficiency in private
of permitting manufacturers to set the retail prices of
markets.
their products in order to promote effective distribution
In all events, year-to-year budget deficits are not nearly
and marketing; this is the one area where an influential
as important as whether the total amount of national
political group-discount retailers-opposes the
debt is rising or falling as a proportion of GNP. If total
change.
debt is rising rapidly in proportion to economic activity,
In other areas of regulatory policy, for example airline
as it is today, then current borrowing is unlikely to be
regulation, research at AEI and elsewhere was certainly
financing future growth but is instead placing a growing
influential, but I doubt it would have prevailed in the
burden on future generations.
absence of several important political and demographic
developments, especially the decline in the political in-
P.R.: With the possible exception of the University of
fluence of unionized labor and the growth of the size
Chicago, AEI did more than any other research organiza-
and prosperity of the middle class. Senator Kennedy's
tion to lay the intellectual groundwork for the deregula-
airline deregulation hearings in 1978 played to an
tion movement of the Ford, Carter, and Reagan
audience of potential airline travelers that had become
administrations. What were the most important lessons
larger and more politically important than unionized
from this triumph of ideas over entrenched political
airline employees. The dramatic wage adjustments that
interests?
followed airline and trucking deregulation showed that
a large part of the excess profits produced by regulated
DeMuth: The first lesson is that pure triumphs of ideas
fares and entry had been captured by unionized
over entrenched political interests are rare to nonex-
employees.
Spring 1992
15
It has been harder to deregulate broadcasting and
Commission, and Anne Brunsdale at the International
telecommunications and financial markets because the
Trade Commission. But mostly he has appointed men
interests that profit from government restrictions-cable
and women dedicated to aggressive expansion of their
television firms and stockbrokers, for example-have
agencies' regulatory turf-then given them hefty budget
more political clout than the airline and teamsters'
increases. And he has passed up opportunities to reap-
unions did. There is good reason to hope for progress
point principled deregulators, such as Heather
in these areas, however. The pace of technological in-
Gradison, who had been the best chairman in the history
novation has become so rapid that new markets are
of the Interstate Commerce Commission.
established quickly, before regulators have time to sup-
As a result, the front lines of federal regulation are
press them. And the economic costs of maintaining the
currently manned by people dedicated to expanding
existing regulatory programs are becoming so large and
those lines rather than improving the performance of
conspicuous that the foreseeable benefits of deregula-
the industries they regulate. The Securities and Ex-
tion are generating political pressure for reform.
change Commission, which is supposed to promote the
The economic benefits of deregulation have been
efficiency of securities markets through financial infor-
enormous-if anything, even larger than economists
mation disclosure, has been thrashing about looking for
predicted. The distribution of benefits has sometimes
new fields to conquer-futures markets, the Treasury
been surprising, but this is because free markets are
bond market, corporate governance. The Food and Drug
driven by consumers rather than by government plan-
Administration has inexplicably embarked on a crusade
ners and often go off in unanticipated directions. For
to suppress the dissemination of truthful information
instance, the biggest winners from airline deregulation
about foods and pharmaceuticals, based on the perni-
cious idea that consumers and physicians cannot assess
information that is partial or that comes from an inter-
ested source. It is very discouraging to see political
"The conservative
officials so preoccupied with the narrow bureaucratic
interests of their agencies when critical industries such
movement's greatest strength
as financial services and pharmaceuticals are badly over-
regulated to begin with.
is that it is the avant garde of
I am also concerned about the lack of leadership from
the top. Although the vice president's Council on Com-
American political thought."
petitiveness has done heroic work in trying to counter
the growth of regulation, it lacks the staff and institu-
tional authority to deal with the scores of regulatory
proposals that come out of the agencies each week. The
have been vacationers and those who used to travel by
Office of Management and Budget's regulatory branch
bus or car because they could not afford air travel.
has a large and knowledgeable staff and an able career
Business travelers-those who tend to complain about
director, but its lack of political leadership for three years
the effects of deregulation-have generally enjoyed sig-
running has seriously weakened the regulatory review
nificant gains as well, in price, frequency, and directness
program established in earlier administrations.
of route, but their gains have been smaller than others'
and have often been compromised by more crowded
P.R.: You were head of OMB's Office of Information
coach cabins.
and Regulatory Affairs (OIRA) in the first Reagan term.
The "excesses" of deregulation one hears about in the
What did you do that is not being done now?
popular media are misunderstandings. The savings and
loan debacle was a predictable (indeed predicted) result
DeMuth: The Reagan administration established a fairly
of too little deregulation-investment and interest-rate
effective program at OMB that reviewed all executive-
restrictions were removed while deposit insurance and
branch regulations under a cost-benefit standard. I ad-
other policies continued to guarantee depositors against
ministered the program for several years, but the effort
risk, resulting in large government subsidy of imprudent
was led by then-Vice President Bush and involved several
pricing and investing. The judicial restructuring of
others-Dave Stockman, Jim Miller, Doug Ginsburg, and
AT&T was not deregulation at all, but rather a transfer
Wendy Gramm. And although President Reagan's strong
of business decisions from within the old Bell System to
views on federal regulation gave the program particular
the regulatory arena and the erection of a complex
bite, it was not a dramatic new departure but rather an
program of market allocation-the hallmark of protec-
extension of similar programs of the Nixon, Ford, and
tionist regulation-administered. by the courts.
Carter administrations. Central review of agency regula-
tions is a natural and nonpartisan response to the growth
P.R.: What are your major concerns about the Bush
of regulation itself, much as central review of agency
administration's approach to regulation?
budgets was a response to the growth of federal spending
in the 1910s and '20s.
DeMuth: The president has made a few excellent ap-
During the Reagan years the review process was
pointments to the regulatory agencies, such as Alfred
solidified and extended to include a twice-yearly exercise
Sikes at the Federal Communications Commission,
in which the agencies and OMB would agree on rulemak-
Wendy Gramm at the Commodities Futures Trading
ing priorities, including both new regulations and aboli-
16
Policy Review
tion or reform of existing regulations, for the coming
markets rather than mandates. The EPA has taken some
months. More important, the cost-benefit standard-the
tentative steps in this direction, and the new Clean Air
principle that new regulations should be issued only on
Act gives it additional flexibility in a few areas; but we
good evidence that the social benefits would exceed the
still have light years to go.
social costs-was established as executive branch policy
and, through rulemaking and litigation, made some
P.R.: How would you characterize the discipline of
headway in the courts. Eventually an executive order
economics today?
applied the cost-benefit standard in the form of detailed
program-by-program guidelines.
DeMuth: Academic economics has become excessively
Our greatest failure was not getting the cost-benefit
concerned with questions of theory, especially game
standard and OMB review process codified in statute and
theory, and insufficiently concerned with testing theory
applied to rulemaking by the so-called independent
against practical experience and the actual behavior of
regulatory agencies such as the Federal Trade Commis-
sion and the Securities and Exchange Commission. A
bill to do this passed the Senate 94-0 early in President
Reagan's first term, but died in the House. President
"Bush's agreement to a tax
Bush should propose such legislation and fight for it
now. This would be a better way of getting the agencies
increase he had vowed never
to focus on regulatory reform than the "regulatory
moratorium" and other administrative steps the presi-
to accept signaled that it was
dent has taken recently. It would precipitate a huge
controversy in the Congress, but the controversy would
back to business as usual in
concern the right questions-which economic standards
should guide regulatory decisions, whether regulatory
Washington."
agencies should be accountable to the president or to
the congressional committees-rather than sideshows
like industry meetings with White House officials.
firms, markets, and other economic institutions. Game
P.R.: Rumor has it that you were one of the top can-
theory is very appealing to young academics eager to
didates for Environmental Protection Agency ad-
make their mark in the journals-it offers opportunities
ministrator in the first Reagan term. What direction do
for the display of mathematical virtuosity and it enables
you think environmental policy should be going in?
one to demonstrate or refute just about anything.
Depending on the assumptions of a game, one can
DeMuth: The American people strongly support large
"prove" that higher or lower taxes, more or less regula-
public expenditures on improving the environment.
tion, or greater or fewer trade restrictions are good for
This is an important and appropriate function of govern-
the economy. Game theory is fun but it cuts the student
ment in the modern world, and one that political con-
loose from the parsimony of economics: rather than
servatives should embrace with enthusiasm.
making strong and refutable predictions based on a few
The policies we are pursuing to protect the environ-
behavioral assumptions, it makes malleable predictions
ment are, however, enormously wasteful-we could be
based on an abundance of assumptions. Because it is
achieving the same degree of environmental quality for
self-contained-beginning and ending on a blackboard,
much less cost or far more quality for the same cost. The
so to speak-it elides the painstaking, time-consuming
standards set by the EPA for pollutants force expendi-
business of explaining the behavior of real institutions
tures to reduce public health risks that are far in excess
and venturing policy proposals that address real rather
of what anyone spends to reduce private risks, and many
than assumed behavior.
of them force large expenditures that produce no health
Academic economics has also become deeply inter-
benefits at all. And the means employed to achieve
ested in "positive" rather than "normative" questions-in
environmental goals are often extraordinarily wasteful
explaining why government policies are as they are,
in themselves, due to EPA's reliance (often required by
rather than what they should be. This is a healthy and
statute) on command-and-control techniques and en-
promising departure, but I worry that it makes many
gineering controls that set a uniform standard for all
good economists appear agnostic or uncaring about the
firms regardless of cost-effectiveness.
substance of policy. One of AEI's chief tasks is to attract
Environmental problems are ultimately issues of
bright economists to the task of explaining how policy
scarce resources, and the most equitable and efficient
could be improved, rather than why it is so bad.
approach to allocating scarce resources is through
markets and private property. The current regulatory
P.R.: Was Michael Milken an American hero?
programs should be considered way-stations toward es-
tablishing enforceable private property rights in environ-
DeMuth: I would not call him a hero—I would call him
mental resources. The first steps in doing this are setting
an accountant turned financier who turned out to be
pollution-control standards that are within the bounds
astoundingly gifted at both. The genius of our economic
of health and amenity expenditures people make in their
system is supposed to be that it produces miracles of
private lives, and then achieving those standards through
material welfare out of unheroic individual actions, and
17
Spring 1992
(walley
Walley
World
Walley
M
Archive Photos
"The biggest winners from airline deregulation have been vacationers and those who
used to travel by bus or car because they couldn't afford airfares."
Milken personified this genius. He saw major gaps that
case through to conclusion. Among other things, this
no one else saw in the way our financial markets were
would have produced a formal record and decision
organized, and he acted with immense talent and energy
regarding just what it was, if anything, that Milken did
to fill them. In doing so, he and many other young
wrong-something that to this day no one can say with
financial revolutionaries of the 1980s were responsible
any specificity.
for an enormous amount of social good.
The financial markets of the 1980s were scenes of a
P.R.: AEI is probably closer to top corporate leaders
certain amount of fraud and abuse, but I have seen no
than is any other public policy research organization.
evidence suggesting that there was more fraud than has
How would you assess the political agenda of American
existed in financial markets in other times. It was a period
business today compared with 10 or 20 years ago? Have
of great economic dynamism, when new firms and new
the big corporations learned to love big government?
financial techniques were rapidly dislodging established
ones. Those who were being lashed by the gales of
DeMuth: There is about as much diversity in political
competition turned to the media, to the political process,
views among corporate executives as among others of
and to criminal prosecution to get revenge on purely
the same age and education. But even liberal
economic adversaries. Milken, who had been the leading
businessmen are "conservatives" when it comes to
revolutionary, ended up being the leading victim. The
managing their own companies, and even conservatives
government never even tried to demonstrate that he was
can be persuaded of the virtues of government spending,
guilty of the scores of serious crimes it charged him with,
regulation, and tax-preferences when these things give
and I think it could not have done so. The six charges
their firms advantages in the marketplace.
he pleaded guilty to were mostly minor technical viola-
I think the latter tendency is no stronger today than
tions-indeed charges that he accommodated
it was 20 or even 100 years ago; after all, most of our
customers' violations-that had never drawn a major
oldest subsidy and regulatory programs were established
sentence before Milken. I think the Justice Department
and maintained with significant business support. What
was guilty of a shameful abuse of individual rights in the
has changed in recent decades is that the political con-
case-it should have disavowed any reliance on the RICO
sensus supporting limits on the scope of government has
statute, refused to accept a plea bargain, and tried its
evaporated-not only has government grown in size and
18
Policy Review
complexity, but the possibilities of government interven-
P.R.: What are the most important institutional and intel-
tion have become much greater than they used to be.
lectual strengths and weaknesses of American conser-
As a result it has become more difficult for business
vatism?
executives to be active free-marketers and anti-interven-
tionists, whatever their personal opinions. The pos-
DeMuth: The conservative movement's greatest strength
sibilities for government to help their firms-or to hurt
is that it is the avant garde of American political thought,
their firms at the behest of others-are everywhere, and
as it has been now for the past 20 years. We are not a
ignoring these possibilities jeopardizes the economic
majority, or even a majority within the Republican Party,
interests of shareholders just as surely as ignoring market
and, although we have won some notable victories, most
opportunities and threats. The daily reality is that busi-
of the time we do not get our way when it comes to
ness firms must work with, and to a degree cooperate
concrete political decisions. But most of the great issues
with, the bureaucracies at the FDA, EPA, and scores of
in American politics today are argued within the con-
other agencies-agencies with enormous discretionary
servative movement-in our think tanks, journals,
power over their businesses, long institutional memories,
caucuses, and conferences-and these conversations
and a demonstrated willingness to get even with
determine how the issues are advanced and debated
troublemakers.
before wider political audiences.
The business dilemma is like the problem of congres-
Conservatism is a large enough tent to hold sub-
sional term limits: voters consistently favor term limits
groups representing most of the important tendencies
while reelecting their own entrenched congressman
in contemporary politics-social conservatives,
every election, because they realize incumbency has ad-
neoconservatives, libertarians, Buchananites, the law and
vantages and that voters in other districts will be return-
economics movement. Its major ideas have been ratified
ing their incumbents. Limited government is a "public
by objective developments clear to most ordinary
good"; when the limits are dropped, self-interested in-
citizens-the collapse of Communism, the failure of
dividuals and firms will adjust their behavior accordingly.
many liberal domestic programs, the growth of crime
Many corporations are far more timid and risk-averse
and welfare dependency, the exhaustion of state and
than they should be, strictly from the standpoint of
federal budgets. And political liberals, who held the
immediate corporate self-interest, in dealing with the
bureaucracies, the congressional staffs, and the courts.
But they are also the single most important positive force
in American politics-and conservative and libertarian
"Many corporations are too
activists would do well to meet them more than half way
and to try to work with them as effectively as liberal
timid in dealing with
activists worked with labor unions in an earlier era. Most
individuals of conservative or libertarian disposition do
bureaucracies, congressional
not go into politics, they go into business and finance,
and they take their views with them as they climb the
staffs, and courts."
corporate ladder. Those who do well are among the most
talented, imaginative, and energetic people in our
society. Business life rewards and cultivates the virtues of
hard work, self-discipline, and efficient management of
political avant garde in the 1950s and 1960s, have so far
resources; it commands attention to detail, measure-
failed to come up with an alternative set of ideas that
ment, the logic of cause and effect, and the workings of
are intellectually convincing or that fit contemporary
supply and demand. People who come out of this cul-
experience. The New Republic is now thoroughly
ture, even those of generally liberal political bent, usually
neoconservative on everything but economic policy and
bring a conservative slant as well as much useful
income redistribution, and these are the weakest parts
knowledge to the policy issues they are concerned with.
of the magazine. The American Prospect has run some
In some respects, the business community is becom-
interesting articles but so far it is not close to advancing
ing more market-oriented than ever. It enthusiastically
a liberal "new paradigm."
endorsed President Nixon's wage-and-price controls in
The conservative movement's greatest weakness is
1971, but would not do so today or in the foreseeable
that, with the retirement of Ronald Reagan, it has lost
future. The younger generation of business executives
its leader-someone who could get the various conser-
and entrepreneurs seems to me quite adamantly liber-
vative factions to suppress their differences, and who
tarian on economic policy. Institutions like AEI and
could mainstream their major ideas into the wider politi-
dozens of others around the country would not exist
cal debates. For the time being, the conservative move-
without corporate financial support, in large part be-
ment is torn by factional and institutional rivalries, which
cause business executives realize that independence as
are healthy up to a point but which threaten to weaken
well as specialization permits us to be more effective
the movement as a whole. With no new Ronald Reagan
advocates of private enterprise. AEI has occasionally lost
on the horizon and the Republican Party once again
a corporate donor because of our positions on import
controlled by pragmatists, the conservative challenge is
restraints or commercial subsidies, but these incidents
to learn to hold our issue-defining position without the
have been rare.
assistance of a single galvanizing leader.
Spring 1992
19