As part of the U.S. Chamber’s Project on Regulatory Reform, former Indiana Governor and Senator Evan Bayh and former White House Chief of Staff Andy Card held a press conference last week to preview the launch of their bipartisan, nationwide tour to educate Americans on the need to restore balance, restraint, and common sense to the regulatory process.

After the event, Card and Bayh gave an exclusive interview to Free Enterprise magazine.

Free Enterprise: During today’s press conference, you both hit on a couple of common themes, one of which was the international competitiveness aspect of regulation. What do you say to those who say we shouldn’t sacrifice our own high regulatory standards just because of what other countries do or don’t do?

Evan Bayh: Well, clearly we shouldn’t have a race to the bottom or let the lowest common global denominator set the standards by which we conduct ourselves. But at the same time, you have to take into account the international dynamic of some of these things.

The example I used was if we set stringent new levels on CO2 emissions but the Chinese or Indians just continue to emit more and more and more, we will have just burdened American rate payers, workers, and businesses and yet we want to solve global warming. And so it would be alose-lose situation.

Another example I mentioned was my friend in Indiana who said because of some of the regulations that have been put in place on  medical device manufacturers over the years, they’ve had to move 70% of their trials and new product development overseas, costing us jobs and access to new healthcare advancements.

Andy Card: On the capital formation side, capital will move where it gets the best return, and if the United States has a regulatory burden that makes it very difficult for that capital to generate a return that investors are hoping for, they’ll make investments someplace else.

I favor regulation. I’m not against regulation. I want responsible regulation. Regulation of health and safety is paramount.. Beyond that, I think we should be very careful about how we might try to regulate in such a way that we deny entrepreneurs an opportunity to take an appropriate risk.

FE: Isn’t the argument behind most regulations based on health and safety?

Bayh: What we’re saying is that there may be ways to accomplish the health and safety objective without having as much negative impact on job creation and business expansion. So it’s smart regulation—the right balance—taking into account the global perspective and competitiveness.

In all fairness, this is all relatively new. Following World War II, there was a period where we dominated the world economically. We didn’t really have significant competitors, especially for higher end products. And so an additional regulatory burden didn’t really make that much of a difference. But now it can, because capital—as Andy said—will go around the world. Ideas and intellectual property can go around the world. And labor is available in different marketplaces, even trained labor. If you don’t keep an eye on your global competitiveness, pretty soon you’ve hurt your economy, and that’s what generates the money to make this a more compassionate, humane society as well as a more prosperous one.

Card: It’s more expensive to manufacture goods in our economy [compared to developing markets].. So we have to look at what can mitigate the challenge of high labor costs so that we can still get our product to the marketplace. Many of the regulations in the pipeline go beyond the relationship between a worker and a product. It goes to how that product must be designed and put into the marketplace.

FE: What can Congress do?

Card: I’d like to see Congress take more of a role in some of their regulatory processes because I think they’ve abandoned some of the responsibility that the public thinks they have.

When you go and talk to a small business owner complaining about the regulatory burden, frequently they blame Congress for the law that was written. That’s because the law was written very broadly and regulators had to find a way to bring legislative intent into the marketplace. That’s where the disconnect is.

I’d like Congress to write tighter laws, but I’d also like bureaucrats who write the rules to get better direction from Congress and the American people.. That’s why I’d like a review after the regulation is written but before it takes effect—some adult body within Washington, D.C.,to pay attention and say, ‘what’s the ramification that we might not have anticipated?’

FE: What about the Regulations from the Executive In Need of Scrutiny (REINS) Act? Do you think Congress has the bandwidth to vote on every single economically significant regulation that agencies come up with?

Card: You can negotiate the threshold [of economically significant]. Is it $100 million, or should it be $500 million? That’s part of the sausage making process that generates laws.
But I think some version of the REINS Act makes sense because the regulations, especially those in the pipeline right now—health care and financial services—have a huge impact on our economy. If we get it wrong, we will saddle our economy with a burden it cannot carry, and that means we won’t have the job growth we desperately need.

FE: I don’t think anyone would argue that health care and financial services regulations are economically significant. Should Congress vote on the forthcoming regulations, and do you think the outcome would be different than the original votes?

Card: Even today, I read that the president had found an unintended consequence of the health care law. So even he’d  be interested in fixing it!

Bayh: These things are all works in progress. You had the small business expense reporting requirements [1099 reporting]—it was eliminated with broad bipartisan support. People [lawmakers] focused on it and said, ‘Wait a minute, that’s crazy, we’re not going to do that.’

And there have been 1,400 [health care law] waivers that have been granted so far in cases where it became apparent that it was either going to cause people to drop their coverage or it was going to cause the cost of that coverage to go up substantially. So these laws need to continue to be fine-tuned and refined to make sure the law of unintended consequences isn’t the one we end up enacting.

FE: You both also suggested that Congress has moved way too fast on a lot of these regulations. Is this a case of hindsight being 20/20?

Bayh: In some cases, yes, there may have be a rush to judgment, which is not the way to go. In other cases, as Bruce [Josten] points out, it can take 12 years [to put some regulations in place].

Consider the amount of capital American businesses are sitting right now. The quickest stimulus to the economy would be to convince them to unleash some of that. But with so much regulatory uncertainty, that works against making those kinds of decisions.

In fairness, the biggest obstacle right now is lack of consumer demand, but regulatory uncertainty certainly doesn’t help convince businesspeople that this is the right time to deploy some of that capital with new hiring or new capital projects.

Card: I’m on the board of a very large corporation, Union Pacific. There are an awful lot of regulations that impact the railroad industry. Some of those regulations are working their way through the pipeline. So do you make investment based on those regulations because you think they’re going to come out this way, or do you wait to find out what they’re going to do while you are sitting on the capital?

There is one example of a regulation that was put in place for perfectly understandable reasons after a train accident in California–it’s called Positive Train Control (PTC). Why don’t they have trains that just automatically stop if something is going wrong? Well, it turns out that PTC was going to be a $2 billion burden on the railroad industry. Unintended consequence. Thankfully people in the executive and legislative branch said, ‘Whoa, that wasn’t our intent. We thought it would be an easy solution, not a long or expensive solution.’  So they’re biding their time on that. That’s the sensible solution we’re looking for.

FE: You mention regulatory uncertainty. This isn’t a new phenomena. Haven’t businesses always faced regulatory uncertainty?

Card: I think it’s the plethora of regulations in so many sectors that impact commerce in America. When you’ve got healthcare and financial services, those two parts of our economy probably generate more jobs and the movement of more capital than anything else, and they’re both wondering what the future holds in terms of regulation.

Bayh: Like death and taxes, uncertainty unfortunately will always be with us. But with more regulations than ever being enacted, that creates more uncertainty. You combine it at a time when the economy is already tepid and struggling to get to a self-sustaining recovery, it’s just not a great time to add to the burden.