The New Wave of American Business Regulation

By , Murray Weidenbaum is director of the Center for the Study of American Business at Washington University in St. Louis.

YOU do not have to be a steady reader of the Congressional Record to spot the current upturn in federal regulation of business. Congressional action on well-intentioned but costly legislation is proceeding at a very rapid pace. The new Clean Air Act and the Americans with Disabilities Act are two reminders of the demise of the regulatory reform movement of the 1980s. The regulatory expansion of the 1990s has arrived and the decade has just begun. Some overall perspective is useful. During the 1970s, the head count of the federal regulatory agencies rose 62 percent. In contrast, over the 1980s, the number of regulators declined, from an all-time high of 119,000 in 1980 to 106,000 in 1989. The fiscal 1992 budget shows an increase of 7,500 new regulators - before taking into account the environmental and other statutes recently passed by Congress.

The new Clean Air Act will cost an added $25 billion to $35 billion a year, over and above the more than $100 billion spent annually on pollution controls. The final version of the law provides for tradeable emissions permits, a cost-minimizing approach long advocated by economists. Unfortunately, the permit provisions became more complex and less economically sound as the bill wended its way through Congress. Other burdensome features of the new law include requiring small companies to obtain emissions permits from the Environmental Protection Agency, and to monitor their emissions continuously.

The 1990 Clean Air Act is not the end of the line. Environmental activists are gearing up for a 1991 legislative drive. Major revisions are being developed in the clean water law and in the toxic wastes statute (the Resources Conservation and Recovery Act). Revisions to the latter may feature more attention to small companies generating organic wastes. Municipal solid-waste disposal may also be ``federalized'' to a much greater extent. This would drive up disposal costs for residential, commercial, and industrial nonhazardous wastes.

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Environmental regulation is not the only increased burden Washington is imposing on business. Buried in last October's budget package is a seven-fold hike in maximum penalties for civil violations of Occupational Safety and Health Administration (OSHA) regulations. The top civil penalty for a single repeated or willful violation will rise to $70,000. A fivefold increase in penalties was mandated for civil violations of the Mine Safety and Health Act. The feds expect to raise more than $1 billion over five years from the two sets of increases in fines. These changes were a compromise. Some members of Congress were urging mandatory minimum penalties for all OSHA civil infractions, even the most trivial and unintentional. Pressure for revamping the basic OSHA law continues.

The Americans with Disabilities Act is another law whose title made it hard to oppose. Some of the provisions are needlessly burdensome. The broad definition of disability includes former drug addicts and alcoholics. It took a lot of doing to get Congress to state that this complex new law does not cover current illegal drug users.

Employers must make a ``reasonable accommodation'' for an individual with a disability. This includes restructuring the job, modifying work schedules, changing training policies, making existing facilities readily accessible, and providing interpreters. Moreover, employers may not ask a job applicant if he or she has a disability or how severe it is.

The president did veto the new Civil Rights Act and his veto was sustained. A large majority in both houses voted for the bill. Democrats last week introduced a tougher Civil Rights Act of 1991 into the House. Even the vetoed version would have become a lawyer's happy hunting ground because of vague wording.

Take the requirement that ``objective'' evidence must be used to defend ``subjective'' hiring and promotion decisions. How can an employer hiring someone from the outside provide objective evidence to prove that he or she is a better manager than someone else? Or better at dealing with the public? These decisions are matters of personal judgment. If executives have to do it by the numbers, they can be replaced by brand new MBAs at half the price of experienced individuals - but that likely would violate the age discrimination law.

Under the approach embodied in the 1990 version of civil rights legislation, virtually the only way for a company to avoid prolonged, costly litigation is to hire and promote on a racial quota basis. Not surprisingly, Congress would be exempt; most regulatory statutes do not cover the legislative branch.

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