Sequester hasn’t hurt regulatory spending

To the surprise of even the researchers, a new report shows the budgets of the government’s regulatory agencies were not adversely affected by the sequester. In fact, several agencies are slated to receive significantly more money because of legislation passed in recent years.

The study — which George Washington University and Washington University in St. Louis conducted jointly — tracked the spending and staffing patterns of 75 departments and agencies going back to 1960. Even though last year’s budget predicted declines in regulatory spending, the study found modest increases in both budget and personnel spending — 0.9 percent and 1.6 percent, respectively — between 2012 and 2013. And President Barack Obama’s budget for 2014 includes another 3.6 percent increase (inflation adjusted) in regulatory spending — from $56.4 billion estimated this year to $59.4 billion next year.

“I was a little bit surprised that the regulators’ budget is growing faster than inflation with the sequester,” said Susan Dudley, the report’s co-author and director of the Regulatory Studies Center at George Washington. “But then a lot of what we’re able to spend now is based on obligations and appropriations that have been granted in the past.”

The biggest drivers of the spending growth can be tied to specific legislation. The Food Safety Modernization Act of 2011 gave the Food and Drug Administration new authority and jurisdiction. Money followed — a $633 million increase in 2013, and another $693 million expected in 2014.


Similarly, the America Invents Act in 2011 — meant to reduce the backlog of patents — authorized the Patent and Trademark Office to set its own fees. With that power came more money — an additional $399 million in 2013 and another extra $293 million coming in 2014.

The Dodd-Frank Act, which imposed new regulations on the banking industry, has also boosted numerous financial regulatory agencies.

“Ones that are growing by leaps and bounds you can explain,” Dudley said.

And these overall increases showed up without the inclusion of the additional regulations that have been rolling out since the Affordable Care Act was signed in 2010. Although the Department of Health and Human Services issues roughly one-third of all major regulations, Dudley said, it has not historically been included in her research. Most HHS regulations do not affect private sector behavior, only entitlement spending — how much a nursing home should be reimbursed by Medicare, for instance.

But with the Affordable Care Act, places such as the Center for Medicaid and Medicare are now issuing regulations on private insurance companies.


Obama’s budget — “Even the most detailed budget presented to Congress,” Dudley said — did not distinguish between entitlement spending regulation and private industry regulation. It’s possibly a political move. By delineating the regulatory spending, congressional opponents could pass appropriations bills withholding funding for specific budgetary line items. Fewer line items means more executive branch freedom to spend congressionally appropriated money.

“Congress can stop regulations from going into effect if they don’t give money to the department that does it,” Dudley said.

And many in Congress have been trying to stop a regulatory trend Dudley noticed is making a comeback from the 1960s and 1970s: increased economic regulation, or regulations on private industries. Currently, 80 percent of the regulatory budget is spent on social regulation — consumer safety and health, homeland security, transportation, workplace, environment and energy.

But spending on regulating a private industry such as banking — economic regulation — is increasing at a faster rate than social regulatory spending, “reversing a trend that began in the 1970s away from economic regulation of private sector activities,” the study reads. Dudley believes history, and economic theory, should warn policymakers against reversing the trend.

“That’s the type of regulation that we thought we’d seen an end to in the ’60s and ’70s with the deregulation of airlines, trucking and rails,” Dudley said. “I think we’re forgetting what we learned in the ’60s and ’70s.”

Latest Podcasts