 Let me just give you a couple of take-away things that you need to remember from those talks. The first of all is the national impact, and at the national level, we would be 25 percent richer had we kept regulations at the same level that we had in 1980. It's not to say that there weren't some benefits since 1980, but I think that's important. The second thing is that the effect on regulations varies between states, and it changes over time. The third thing is, if we had had some regulatory reform back then, the people who would have benefited the most would be those that are least well off. So we've heard some about the problems of regulations, and so the next panel is going to give us some solutions, and just like the private sector needs innovative solutions in order to keep growth going, we also need innovative solutions at the federal level as well. So let's bring up the next panel, please, and I'm going to turn it over again to Bill. Thank you. So if my fellow panelists for panel two will make their way up to the stage, I will expand a little bit on what Richard said. In this panel, we're going to be looking at the information needed by policy makers. Now many of you, you don't need to raise your hand, but I know who you are, work for members of Congress. Well, you didn't raise your hand, you didn't raise your hand. Or who aspire to work for members of Congress, or who are trying to get away from working for members of Congress. You all know that the great difficulty is answering that question, what am I supposed to believe on this subject? You're looking for data, you're looking for information, you're looking for that quality moment that will answer questions like, what kind of information do I need to answer questions about innovation and economic growth? How does the current regulatory environment affect investment in my state, in my congressional district, in the country as a whole, and how do we get to regulatory reform? What promotes it? Well, we have three people up here who are highly qualified to speak about this subject. Let me introduce each one of them, and then we will begin, Patrick, with your presentation. I'm really pleased to be joined by Patrick McLaughlin, who you've referred to many times this morning already, who is that Patrick person? Patrick is the leader of our team, creating reg data, 2.12, 2.2 now. And it was that data which was behind the pathbreaking research that you heard Pietro talk about. Patrick has his PhD in law, economics, public choice, international trade from Clemson University as a colleague of mine at Mercatus. The next speaker is J.W. Verrett. J.W. is the courageous one. He's a lawyer. I'm going to be joining us today in a panel full of economists. He's with the George Mason University Law School and is a specialist in financial services, financial markets, and actually has been playing an important role for those of you who are looking at the Puerto Rico situation in advising members of Congress on that. We have something, I think, coming out today, tomorrow on Puerto Rico. And it includes very interesting remarks by J.W. And then, finally, a longstanding colleague of mine everywhere I go. I see Adam Theer working in the same place that I'm working in. Adam Theer, who I first met at the Heritage Foundation. Adam is our true blue leader in thinking about how we can have a world in which innovation, invention, activity can go forward without asking for permission every time we breathe. And he'll be speaking just a little bit about that subject. So without further ado, I would like to turn the microphone either there or here to Patrick McLaughlin. Thank you. As Bill mentioned, I do have a Ph.D. in economics, not all those other things. Well, you had written in those areas. Or you could write in those areas. It is interesting to me that my career has come to focus on law and regulation, most specifically. I'm trained in price theory. And so I spend most of my time dealing with goods, if you will, that are entirely unpriced. So it's sort of an interesting world that I've moved into. And of course, by goods that are unpriced from referring to regulations, these are the products produced by regulatory agencies. There are over, depending on how you count, over 70, maybe over 100 different regulatory agencies that have been created over the decades by Congress. And they produce goods that are supposed to improve customers' lives in some way. Now in price theory, in economics I should say, the price that is assigned to goods is a conveyor of information about the quality of the good, the usefulness of the good, the value of the good to the consumer. When you talk about a good that is unpriced, you have to ask yourself, at least I would ask myself as an economist, where is the information going to come from about the quality of that good? So this way of thinking about regulation I think is useful not to just an economist like me, is useful to you as well because it identifies one of the features, maybe a bug, it's a better way of putting it, of the process that leads to the creation of regulations. Specifically is that the information about regulations themselves, the usefulness of regulations themselves, is not coming out of a market like goods that are priced. So if we don't have that information, how do we understand whether regulations are working or not, whether they're delivering the kinds of benefits that the consumers of regulation, the people in the country, Congress as representatives of the people, are hoping to get out of the regulatory process. So that is one lesson I think for anyone who would want to reform the regulatory process, think about information that comes out of it first. If we can get to a way to develop better information about whether regulations are working or maybe before making them whether they're likely to work and then after making them whether they have worked, that could improve our understanding of the quality of the products being produced. But related to that is the point that information alone may not change outcomes. You have to combine information with incentives for those who are working in the process to change the outcomes. Jim Buchanan, the late Jim Buchanan, George Mason, Professor, Nobel Prize Laureate, consistently pointed to the fact that we need to think about the rules of the game when trying to understand the outcomes of different systems. Specifically, he was talking about politics for the most part, but we can apply that lesson to regulation as well. If we just create information about the likely, the anticipated benefits and cost of regulations or whether regulations have delivered their benefits at a reasonable cost if we're looking back in time, does that mean the information will actually be used? If we don't understand the rules of the game, the features of the process that's leading to the outcomes we're seeing now, we may not guarantee action upon any information that we create. So let me put that into some historical context. Pietro, Adam, and Dustin have all talked about some of the data that I've been part of creating with other colleagues along the way that has identified some characteristics of the regulatory process. I say the most prominent of these characteristics is regulatory accumulation itself, the build-up of rules over time, which can be constraining to firm choices, which can lead to all sorts of problems. So this feature has been identified now in an objective and replicable way, but we're not the first to identify this feature. Every president since Jimmy Carter has tried to do something to eliminate red tape, formally announced the creation of some process or some initiatives to go back and eliminate obsolete or duplicative or otherwise undesirable rules. So this advance, if you will, in science is nothing new in a very broad sense except for now we can use the more precise data in some of our economic models, but maybe we should think about, instead of what characteristics come out of the process, what is driving that process in the first place, and I think if you think of it that way, you'll understand why the efforts of the different presidents have not been successful for the most part to eliminate red tape. And the reason is the incentives of those people who are put in charge of eliminating red tape don't necessarily make them do it. All right, so let me give credit for probably the pithiest statement of the summary of the regulatory process to one of my students, actually. This is a student who's working on his thesis now. I'm advising him on his thesis and he's focusing on, excuse me, the role of individual bureaucrats in the regulatory process. And one day he showed up at my office, big grin on his face and practically bouncing up and down. He said, I've got it, I've got it. This is what my whole project is about. You ready? Regulators regulate. So I, of course, briefly considered gently suggesting that he's seek a different advisor for his thesis. But then I realized the brilliance of that statement, actually. In two words, it really summarizes some of the issues that made all the president's efforts, including the current administration, but going all the way back to Carter, not succeed. Let's break it down into just those two words. We have one, regulators. So when you refer to regulators, when people refer to regulators, what do they generally mean? It depends. I think in most cases, people are referring to the agencies themselves, the bureaucracies, even if they are a live unit that takes action, the Department of Transportation as an agent in the economy. You can think of things that way, but that's not what my student was saying. Some other people, when they refer to regulators, may be thinking about the political appointees or maybe the administration that's in charge of selecting the appointees. And that's, of course, also important. The heads of the agencies can move an agency one way or another to make marginal changes on the progress of the regulatory accumulation, if you will, but that's also not what he was referring to. What he meant was these government office buildings in D.C. and elsewhere are full of individual human beings, people who would describe their own jobs as regulators. I'm a regulator. That's what I do. And those people who have those jobs want to do their jobs, which leads us to the second word. Regulate. Regulators regulate. So if you have thousands, hundreds of thousands of employees who view their job, whose view of their own job is to regulate, and actually, more specifically, employees who have self-matched to specific agencies that have a specific mission, those people are going to want to do their job. That's regulators regulate. I think it's such a profound statement. I want to christen it, the Jones Immutable Law of Permanent Delegation. Regulators regulate. By the way, that student will be on the market soon if anyone is interested. But the presidential decrees that agencies should go back and look at their own rules, determine which ones are working and which ones are not, and get rid of the ones that aren't working, and go against this problem. The problem is that regulators, the people who are being told to do this, have a belief that their job is to regulate. And so you're running up against an incentives issue. Now, if you created a different set of incentives for these individuals, I'm sure you could get different results. But absent that change in incentives, absent understanding the rules of the game, looking inside that black box that we call the regulatory process, you're not going to be very successful, so how do we get to the point of succeeding? Let me bring it back to the beginning part of this talk where I talked about price theory and information and the feedback loop that prices generate. Prices tell you whether something was valuable or not by the consumers. In the case of regulation, we don't have that sort of feedback loop. So we want to create a process, if you want to reform regulation in the regulatory process and regulatory accumulation, what you need is to generate information, but not only generate information, but also generate a feedback loop, a way for that information to be used by the decision makers, either in Congress or at the heads of agencies. But that's only going to work, of course, if the heads of agencies or the individuals in the agencies have incentive to actually use that information. So there's different variations of proposals that do address this. I'll briefly mention just a couple some proposals would create an independent commission, an independent group of human beings who have incentive to identify regulations that are not working, basically who have incentive to do analysis rather than incentive to create rules. That's one way to circumvent sort of the incentive problem. And then a second group of proposals instead relies on budgeting, regulatory budgeting, for example. That was mentioned earlier in one of the talks it's another way of addressing the incentives of those who create regulations themselves by constraining their choice set, making them choose from different options but with some sort of constraint overlying their choice set. We can go into more. We've written at length about different proposals, but I think the big takeaway, I hope the big takeaway here is it's not just about creating information. That's important, but it's also about addressing the incentives of those who use the information and creating a mechanism, some sort of path for that information to be used. Thank you. Thank you very much, Patrick. Yes, please. I was watching the faces of those individuals in the audience who I know headed up regulatory agencies when you said regulators regulate and there was a recognition signal that went off. We'll pursue that during the Q&A because I think there's an interesting set of questions on whether or not we can ever measure effectiveness given the kinds of mentality which are in the agencies. Our second speaker, J.W., is going to take a look at investments and whether this whole business is dispersed or specific, it would benefit many or benefit few. J.W., take it away. Thanks. I'm going to go ahead and stand because I can't think when I'm sitting down and there's a risk I'll bore myself and fall asleep in my own talk. I'm really glad to be back here. I was, until last year, I was only leave to be Chief Economist for Chairman Hinshling and House Financial Services and that was a lot of fun. And yes, I said Chief Economist. I'm a lawyer. I was the Chief Economist. I tried to explain to my grandma how that worked. She said, you're an economist now? I said, well, not really, but on the Hill titles can get kind of weird, so. But I'm a lawyer who knows he's not an economist, not a fully trained economist. It's kind of like I took a few Spanish classes in college and I'd go to Spain for vacation. I know how to find a hotel, but I wouldn't want to give a talk locally. So I want to talk today about some expanded principles to deal with these regulatory pathologies. I'll talk a little bit about financial services specifically, but I want to save that toward the end and talk a little bit broader to the whole audience about pathologies I see in financial regulation and strategies that I believe will be effective at dealing with those issues. I want to be positive today. Usually when we talk about regulation, there's a tendency to be a little bit negative, but I want to be positive. I think there are strategies that will work and that will help us sort of like Washington across the Delaware and beat an unbeatable enemy here. So to just sort of generalize what I'm talking about, I was recently reading Wired Magazine, which I'm also not really a tech guy like Adam Adams, probably a much more informed reader of Wired than I am. It's sort of a technology monthly magazine and it sort of looks a little bit into the future of tech and tries to make predictions about the future of biotech and nanotech and all sorts of technologies just right before they're viable, but just sort of gives you a view of the future. And one of the things that seems most promising in the area of cancer research is the idea of actually changing viruses, taking viruses, changing their genetic code and using viruses to fight cancer, sort of coding viruses so that they go after cancerous cells. And I thought that was fascinating. The strategy of using disease to fight disease, using the pathologies inherent in a disease to fight another disease. So what I want to talk to you today along the same lines is using regulation to fight regulation. In other words, I guess sort of the title of my talk is bureaucracy for bureaucrats. Because I think that sort of approach, that sort of strategy can help to maintain momentum no matter who runs the administration. I think as the administration shift over to administrations that are more sort of aggressive about regulation that exceeds standard cost benefit analysis or something like that, I think these structural changes can actually help to maintain momentum into the next administration. And that's what's, I think, vitally important. So what do I mean? Well, first, let's start internal to any specific agency. I think it all goes down to finding ways to create something like separation of powers. The founders fought and died for the idea of separation of powers. They were suspicious of the tyranny of an English king, but they were also suspicious of the English parliament as well. They didn't trust parliament either. So they wanted a system of three branches of government equally powerful. And if there was a first among equals, I think they wanted the judiciary to be the first among equals. So it's about finding ways within these new independent agencies that are creatures the founders never would have thought of and I think probably would have driven James, Madison, and Mad finding ways to create separation of powers internal to the agency. So first, I think the most important suggestion is empowering an independent economics division within each regulatory agency to push back on the lawyers. First, I think what's helpful about that is that economists and lawyers come from very different professional cultures. In the legal professional culture that tends to populate these agencies, there's just sort of an advocacy professional norm that we take a tenable, reasonable position. It might not be the best position, but we'll just fight like hell until we win, right? I think that culture within an agency is especially pernicious because of the level of power that they get and frankly the level of both legislative, adjudicative, and executive power that they get. So the more you can create an independent economics division within these agencies to push back against the lawyers and to be empowered to push back against them, both in regulatory process and in enforcement process as well. And in the setting of enforcement strategies, the better. And I would highlight the Federal Trade Commission as an agency that though not ideal, has been the best at implementing this strategy in which the economists sort of get to push back against the lawyers. So a second suggestion in terms of internal checks is also just to empower individual division directors, particularly the chief economist, to force full commission review of specific issues. So I think there's an over-delegation problem to line regulators and to line enforcement attorneys that allows, I think, regulatory excesses to persist. And so that's a second sort of strategy internal to an agency. And then looking externally, looks on an agency's abuse of authority and power. An easy one is OMB OIRA review of independent agencies. We can do it. It's constitutional. If you talk to the folks in the old Reagan days, like Jim Miller, who was head of OMB at the time when they were sort of standing up OIRA as a check on executive regulatory agencies, they excluded independent agencies. And independent agencies are still excluded from OMB, a full OIRA review. But they say it wasn't because of any legal problem. It was purely a political choice that they made. I think it's time 20 years later to make a different political choice than the one that they did. And I think legally it can be done. And I think OMB OIRA review is one of those things that also establishes momentum going forward. One would hope a president would do it by executive order, but Congress can also certainly step in and provide for that process change. Secondly, I would consider the fact that I know in financial services, I wonder if perhaps in other areas, there's often a concept used, called a primary federal regulator. So for example, if you're chartered with the comptroller as a national bank, the OCC is your primary federal regulator. Okay? I think that there are in some ways, you can limit excesses when you charge your primary federal regulator with the ability to veto actions by other regulators that might have secondary regulatory authority over the institution. And let me offer sort of the most cogent example I have of that. There's a statute called FIRIA that establishes penalties for some banking law violations. And FIRIA was adopted and I think was pushed by the Bush 41 as a part of a sort of package where, look, he was bailing out the SNLs. He knew that would be very much politically, just it was in 2008. It would be politically costly. So he wanted to sort of get tough on SNLs. So FIRIA establishes a penalty system that can provide for as much as penalties of a million dollars a day for what I would characterize as potentially fairly minor banking law violations. It's an incredibly, incredibly harsh statute. But I think there's some incentive, at least, by the primary regulators to be a little bit circumspect in how they use it because they're responsible for the safety and soundness and continued viability of the institutions that they charter, not so with the DOJ. It's to enforce FIRIA as well as these regulators. So I think, for example, requiring the DOJ to get the permission of FDIC or OCC before they bring a FIRIA action against one of their agencies for which they serve as primary federal regulator would be a good idea. Congressional review and congressional oversight of these agencies, they're already a great plethora of ideas, already circulating about how to do this from the RAINS Act to balanced regulatory budget idea to put some budget process on regulation that I think are all terrific. The only thing I would add to that is, and I was guilty of this too when I was a staffer, legislative history is vitally important. You're setting up, you know, if you're creating a statute, you want it to endure during legal challenge, spend time writing up legislative history and committee reports to make sure it's clear as crystal to a future judge what you intended to do with some regulation you create to constrain the bureaucracy. Don't take for granted the judge is going to be able to read your mind, so spend time on legislative language and usually you can get things in there that might be important to you that the other side might not take the time to notice because maybe they might not take the time to read that legislative history. Federalism, I think, is also often important, though not always, not always. And I think the defining factor is, do the states charter and internalize the costs, charter institutions that they regulate and therefore internalize the costs of over-regulation. So, for example, if a state bank is chartered by a state, I would trust that state banking regulator as the primary source of power in regulating that institution over the feds. However, there's a sort of problem in state attorney generals like with Elliott Spitzer's abuse of the Martin Act where Elliott Spitzer didn't really care about out-of-state institutions or in-state institutions. He was looking at a very different goal that he was sort of maximizing. So I would look to federalism as a potential constraint on federal abuse, but I would be careful to make sure that the states have some reason to internalize the costs of over-regulation like that they're providing state incorporation and regulating incorporations through the judicial process or that they're chartering banks or other types of financial institutions and regulating only the institutions that they themselves charter. And then, finally, just a note for an idea that I think deserves to be fleshed out a little bit more, but let's start the conversation. Taxpayer rights of action and affected citizen rights of action against regulatory agencies. And I think the key component there is that the cost of that doesn't come out of the general treasury. It comes out of that agency's budget. If an agency abuses its authority, exceeds its authority, in some way that a judge determines, excesses of agency authority or under statute or failure to meet cost-benefit analysis, I know that's not, you know, not fully fleshed out, maybe a little controversial, but let's most certainly start that conversation. I think an agency ought to pay out of its own budget and have to go to Congress to explain why it did things in excess of its authority or that were criminally negligent. For example, Bernie Madoff, SEC, right, that's one place to start thinking. So those are some broad concepts. I have a few general ideas about Finreg reform that I threw out there. Arbitration is important. The Federal Arbitration Act would allow every publicly traded company to require arbitration of securities class actions, but the SEC discourages it. It says how we won't accelerate your filing if you include that. That's a gross violation of constitutional interpretation of the Federal Arbitration Act in a long-standing national policy. And encouraging the SEC to just follow the Federal Arbitration Act. There are a couple of other things very specific that I could talk about further during the Q&A or with some of my friends from the financial services world, but I hope those principles are helpful. I really want this to be a message of hope. I think that we can win the fight against the overreaches of the regulatory state, and I hope those strategies are successful in that fight, but thank you for your time. Thank you very much. By the way, there's a rule we adopted at the last meeting of the American Economic Association that any lawyer trained at Harvard is ex-officio and economist, so don't worry about that. We're going to end on, I suspect, an upbeat note with Adam Theer talking about innovation and that's certainly a key element of the regulatory story. Adam. Well, thank you, Bill, and I appreciate everyone being here today for our event on this. I've been spending a lot of time thinking about regulation throughout my life. As Bill mentioned, we've been fighting on these shores together for quite some time. 25 years I've been in the field of regulatory policy and it's been frustrating and demoralizing affair at times, because despite the best of our efforts and the best of the evidence we've produced, it seems like we're always on the defense in this debate, that we're never able to actually assert the fact that the better story is the better story, the one we have to tell. And I think that's the primary reason we lose a lot of these debates about regulatory reform is that the other side often has a more seemingly compelling or compassionate story to tell about the importance of regulation. We're just not as good at telling the story in terms of the costs and the problems. Now we do come up with a lot of good evidence, but ultimately at the end of the day, good compelling stories are what probably win hearts and minds over in terms of regulatory reform. We do our best. We try to tell stories about how it affects us at the household level, how it affects us at the business level, and how it affects us at the level I want to talk about today, which is really the level of national competitiveness. Because I think as Representative Goodlat said when he kicked us off today with his excellent remarks, he said that America cannot continue to compete internationally with the crushing weight of regulation imposed on our economy today and that's exactly right, but this is often how we focus on the negatives associated with regulation. We don't tell a good news story about where we haven't seen that crushing burden applied, because I think that's an even more compelling story to tell that will be instructive to policy makers and to the public about where we should turn or how we should change. And to that extent, the story I try to tell in my work at the Mercatus Center and that I've worked on for many years is the amazing, I think the most compelling success story of modern human history in terms of sort of capitalist success story, the rise of the internet and the digital revolution. In my new book, which we're passing out today on permissionless innovation and some of our work I've done, I've tried to highlight exactly just how compelling this success story has been for the United States and I often begin my remarks in a somewhat snarky way. I was testifying in the Senate last year about this and I actually even did it there. I said, how many of you can even name a major European technological innovator in the information technology space? And usually somebody throws out an old state-owned telco which I'm like, no, you don't get to use those. Somebody says Skype and I said, fine Skype, you know, that's been owned by American companies for 15 years now. And somebody, the Senate hearing said, Rovio and I said, the maker of Angry Birds, are you kidding me? Okay, I'll give you that. I guess that's innovation. But here in America, our technology companies coming out of the information technology space are household names across the globe. We are the envy of the world in the field of digital technology, computing software and the digital space. Let me just give you a few numbers to be instructive about how this incredible imbalance, how imbalanced this situation is. You think about tech unicorns. Unicorns are billion-dollar-valued companies and you compare America's tech unicorns with Europe's. Well, Facebook's market cap is twice as large as every other billion-dollar tech company in Europe combined. Airbnb alone is bigger than all of Germany's tech unicorns. And the market capitalizations for US-based unicorns for 2015 was almost $2 trillion, while the market caps for a handful of large European firms over $1 billion was $120 billion in the aggregate. $2 trillion to $120 billion. I mean this has to tell us something, right? This has to tell us something about the nature of what's happened in this space versus what's happened in Europe. And from the world of political science and business and economics, we call this a natural real-world experiment. What's happened on either side of the Atlantic over the last 20 years. And how did we get that right? Well, what we did in the United States is we very consciously adopted a policy of what you might think of as unregulation. We allowed the Internet to be born free as opposed to born in regulatory captivity. We allowed it to flourish by basically setting up a policy for the United States that was done in a very bipartisan way that basically said the Internet should generally be driven as a market-driven arena with a minimalist, consistent, and simple legal environment. Those aren't my words. Those are the words of the Clinton Administration and its so-called Framework for Global Electronic Commerce, which was published in the United States. And who had a ride-sped report here on the Hill. And I remember what was being written. There were a lot of people, including a lot of Republicans who were skeptical about what kind of report the Clinton Administration would produce on this front. They produced what I regard as the most pro-capitalist, pro-freedom type of report you could ever imagine in terms of how we should approach policy for a new emerging technology. And I think the proofs and the pudding about how important that policy vision was for the United States and for our national competitiveness. That has to therefore tell us something also about how we should go about regulating other emerging technologies. After all, it's not just the Internet. We're not just done with it in the digital revolution. What about the Internet of Things? Wearable technologies, autonomous systems, robotics, driverless cars, drones, 3D printing, advanced medical technology, virtual reality. These are all the next generations of potential success stories that America could again take control of and lead the world if we get policy right, if we get regulation right, if we take a light, minimalist, consistent legal touch as the Clinton Administration recommended for the Internet for all those other sectors and technologies. Now, certainly we would hope that others would recognize this today. I'm sometimes surprised by how little attention our government pays to those sorts of technological opportunities. And the Obama Administration must realize this. They just issued a report recently. It was about patents, but it talked about the importance of technological innovation and it put hard numbers on it. It said, quote, technological innovation is linked to three-quarters of the nation's post-World War II growth rate. The technological innovation, quote, in capital goods is the primary driver in increases in real wages. And finally, quote, across countries 75% of differences in income can be explained by innovation-driven productivity differentials. Absolutely. And most economists agree with that. They say that 30 to 34% of growth in western countries due to technological progress and a meta-survey of all the sort of economic histories and studies that have been done on this by Joel Moker of Northwestern says that, quote, technological innovation is, quote, widely considered the main source of economic progress by economists and economic historians. Everybody gets it. But if everybody gets it, that needs to translate into our policy vision. It needs to be clear in policy that we need to take a light touch, that we need to unregulate in some ways some of these things or deregulate where regulation exists. So is that possible? Is it possible that we could have a framework for these other technologies that mimics what we did for the Internet? I'd like to think so. I've got a blueprint sending out there on the table. It's called the Tech Point, 10-point checklist for putting permissionless innovation into policy. And I think it begins with acknowledging that we need to give entrepreneurs and innovators the green light that innovation is allowed and that they're going to be able to actually foster and incubate these new technologies and services in a light touch environment. There is, however, the problem of technologies that aren't lucky enough to be born free. The technologies that are, as I say, born into captivity, born in a regulatory environment that pre-existed. And this is what we're seeing today in the technologies that Richard and I cover and some of my other colleagues cover in the field of advanced medical technology where you have a crushing burden imposed by the FDA or you have NHTSA covering car technologies and holding back potential life-saving innovations with driverless cars or the FAA holding back innovations in the field of commercial drones and so on and so on and so forth. Some things got to give. Same with the sharing economy, by the way. Some things got to give in all those places. I'm hopeful that we can break through and technology can do an end around a lot of those rules, but really we need to clean up the past. We need to get rid of the old regulatory dead-wit and the accumulated regulations that Patrick's documented and the extreme costs they impose. There's no easy fix. I'm always reminding people that there's no silver bullet to make this problem go away or solve all these problems. And there's even disagreements among some of us on this panel about what the optimal approach should be. There needs to be many tools or approaches to this. I'll tell you one simple thing that I want to recommend for all of you to consider that when any new proposal comes, technological-related proposal in particular, before you or there's something out there that you can reform, I would ask others this, which is that in the world of technology policy today, everything operates at the speed of Moore's law. That is that the power of the semiconductor basically doubles every two years, but a price falls in half. And it requires every business in the United States and in the world to innovate at that pace of Moore's law. You innovate or you die. So everybody has to change every two years in the world of technology today. Everybody but the government that is. The government never innovates at the pace of Moore's law. So I would like to see, and this is, I know it sounds overly simplistic, I'd like to see Moore's law for policy. I'd like to see every single policy that affects technological innovation sunset after two years. If it's a good policy, you can put it back on the books. And I'd like to see all the existing proposals caught back up for consideration, reconsideration, and sunset if they potentially interfere with the sort of innovation that the Obama administration of others have highlighted is the primary determinant of long-term economic growth in human well-being. That's the only way we're going to move forward and stop this regulatory accumulation. And it's by telling this powerful story, basically a story that asks do we want to be Europe or do we want to be like the United States and what we did with the Internet and the digital revolution? How do we make that next digital revolution or Internet experience happen? Bravo. That's an extraordinary way to add me. And also, you know, keeping in mind the evidence from reg data is that the regulatory burden is accelerating. And with the acceleration of that number of constraining concepts, you could easily see ourselves at a turning point right now with respect to innovation, with respect to those, the crossroad of going in the direction of increasing accelerating improvement to human life and not so much maybe Bangladesh. I hate that. We're in the same position we were the last time. That is with different people, but with questions on your mind. So Sam has that microphone. And if there's a question or two, and yes, we'll start. We'll start there. Sure. I was 25 years ago. I was Newt Gingrich's first committee council. And so I have seen a lot of legislative efforts. And I've noticed that in the last 25 years, we have not had 60 votes or only very, very rarely 60 votes for fundamental reform. And so I'd wonder what the reaction of the panel would be to the idea that federalism might be the solution to the regulatory overreach problem. And that in the same way that two-thirds of the states got together and basically told Congress you will do a Bill of Rights or we might do something on our own and therefore force the Bill of Rights to be adopted. That in today's world, two-thirds of the states get together and essentially force Congress to propose a constitutional version of the Rains Act that would require major new federal regulations to be approved by Congress. And this isn't just a theory. There are now 900 legislators and six governors and two presidential candidates, Ted Cruz and John Kasich and the unanimous vote of the Republican National Committee in support of something that would require that regulations be approved by Congress. Does anybody have a view on that? I think it's a fascinating idea. I know that in my own space of corporate law and financial regulation, I believe that the state-based incorporation system has been tremendously effective and the feds have done the best they can to try to inhibit it with a succession of laws discreetly preempting of state corporate law. But it's endured for a long time. And I think when Republicans talk about health insurance across state lines, they're talking about a version of that same thing, that some states would become the great state to do that and they would internalize the costs of regulating health insurers and they would compete with each other. I think state competition is the best alternative. We have to unify federal regulation. I prefer something even more granular where states create regulatory regimes that institutions and firms can opt into and that would be respected across in other jurisdictions. Cities would compete with each other and you'd have Silicon Valley companies for which the corporate governance was designed specific to the needs of Silicon Valley firms, but it would be respected in other courts in other states as granular as you can get would be great. And even private institutions creating law is really the optimal I think outcome. But yeah, that sounds like a great start. Thank you very much J.W. We are going to abbreviate this Q&A because my former boss is here Senator Enzi. And Senator Enzi will conclude the conference, but not conclude the questioning. So you keep your questions in mind. The panelists will be available to you later. Richard. So first of all, let me sort of sum up the last panel which hopefully gave you some solutions. Let me point out to begin with, we talked about innovation in the government. There's been no major regulatory reform literally since the end of World War II in 1946, the Administrative Procedures Act. There's been some executive orders, but really nothing that's talked about in major reform. So Patrick gave you some ideas about some reform for existing regulations. There are some ones that perhaps are not working. We need to find incentives outside the agencies. The agencies do not have incentives to get rid of their own regulations and maybe that lies in a commission. For new regulations, and we heard Chairman Goodl had talked about it, maybe we need regulatory budgets. There's a number of ways to do that. One, the simple one is kind of one in, one out. A more complex one, but perhaps more comprehensive will give agencies a social cost, a total budget that they could spend. And the hope is that they put the best and never get to the bad ones. J.W. gave you, I think sort of a number of layers of reforms. One that I, as a former FDA or I particularly love is to empower the economists. Economists don't want to do what lawyers do, which is jealously defend their clients. So usually what happens is somebody makes a decision then everybody's supposed to fall in line. Economists aren't real, we're not followers, at least we're not very good at it. And then inside the executive branch, maybe we should empower overseeing the independent agencies. Oirud need a lot more employees to do that. Right now they've got about 50 employees to about 200,000 regulators that they're overseeing. So we'd have to expand Oirud somewhat. And then there's the, the, the mix between the Federal Government and the States, and perhaps we should look more to Federalism. Where are problems that the States can handle better than the Federal Government? And finally give citizens a right to challenge, which I think is great. And then Adam gave you a number of statistics, which I think are good. How much of growth is due to innovation? Well, maybe it's somewhere between 30 and 75 percent. It's a lot and it's important. And I think the big lesson that you want to take away from Adam's talk is we need a light touch for innovation. If we're going to succeed internationally and competitively, we need a light touch. And one way to do that perhaps would be to sunset any law that had, or regulation that had to do with innovation. So let's close our program off. We're going to have the Honorable Mike Enzi of Wyoming. He is Chair of the Senate Committee on the Budget. He's a small business, has been a small business owner and accountant and legislator, and he has firsthand experience with the importance of essentially getting it right. So, Senator Enzi, thank you. Good morning. Now you get to hear from the accountant. I want to thank the Mercatus Center for stimulating a lot of research that has been very helpful to my budget committee and drew quite a bit of criticism from my ranking member to begin with. But that has mellowed, and he's found that some of the answers that we've been provided are actually pretty helpful. And I'm hoping that we are headed toward a bipartisan reform of the budget, and that it will include regulatory reform. We've been working on that. And I highly recommend the papers that are out there on the desk that I assume you've been hearing about this morning. Very beneficial. I'll review them in more detail myself. Unfortunately for Wyoming in the past month, the people in my state have felt firsthand the effects of the awful consequences of federal over-regulation. It's forced three of Wyoming's largest coal producers to file bankruptcy in March. Two of the biggest coal companies had to cut 15% of their workforce. So they laid off 456 workers all in the same week. Now I know that the suffering of 456 people suddenly out of work doesn't sound bad in a place like maybe California or New York. But in Wyoming that's larger than the population of a lot of our towns. In fact, we only have 19 towns where the population exceeds the elevation. We're the least populated state in the nation. Our biggest city is 58,000. And every town in Wyoming, you can go outside of the town and you can see the whole thing at one time. So 456 people is a really big deal. And in Wyoming, energy production is the cornerstone of the economy. In fact, it is the cornerstone of the economy in the county that I'm from. The county that I'm from produces 40% of the nation's coal which results in 40% of the nation's electrical power. We also have oil, natural gas I think called coal bed methane which is a natural gas, and uranium. And when something happens in the energy field it affects us. We've never had it happen to all of the energy fields at the same time. In 2014, Wyoming's 20 mines directly employed 6,500 workers and they earned an average salary of $84,000, which is almost twice our state average. The industry indirectly employs tens of thousands more contractors and jobs that support the coal industry. And the coal industry paid over 1.14 billion in Wyoming taxes, royalties in 2014. Now that doesn't count what we really count on which is the coal bonus bids. If a company gets a bid for additional coal they have to pay a substantial fee. That has built most of the schools in Wyoming in the last 10 years. In fact, every town has a new school. It's one time money so the legislature said we don't want to spend that on continuing things. We'll spend it on one time purchases. We have a very responsible conservative state legislature. So with all that money and those good jobs, how did Wyoming find itself to be the fastest growing unemployment rate in the nation? Well, part of it's a lack of understanding I think of the president because I noticed that both the president and Hillary Clinton said if you're not a coal miner this won't affect you. I'll let the 1,000 actually it was 1,300 railroad employees that got laid off because they don't have that cold haul. It's affected of course the shops, the restaurants. One of the shops had 60% decline in the sales that they were making and I noticed that most of them are blue-collar beer drinkers because the big specials in Gillette Wyoming right now are reductions in the price of beer. Gotta get those people into the restaurant somehow. So it was the very thing that you've been talking about, the burdensome federal regulations. For the coal industry it really started in 2012 with the Environmental Protection Agency issuing its final mercury air toxic standard rule. Sounds like a really critical thing. It got worse in 2015 when the Department of Interior steamed protection rule and then the EPA's Clean Power Plan. Now, actually the Supreme Court struck down that mercury and air toxic standard rule and they did it because it had a very incomplete cost-benefit analysis. The cost is determined to be well I'll start with the benefits. The benefits are going to be half a million to six million dollars a year. The cost is ten billion dollars a year. There's a lot of innovation you can do for nine and a half billion dollars a year and that was never an option. The Clean Power Plan is still making its way through the courts but the damage has been done. The companies start complying when the rule passes and the administration knows that you can't put toothpaste back in the tube. The impact of these bad administrative regulations is tangible. The people in Wyoming are depressed and they're angry. On the other corner of the state, I have a little town called Kemmer and they have a coal mine and a power plant and the sole customer for the coal mine is the power plant and the EPA came in and said one third of that power plant has to be converted to natural gas and they said well you know what it's natural gas we can do with the coal. We need about five years more depreciation time to make it cost benefit and still keep the rates down. I said no you can't have that. So that puts a third of the people in the town out of work. The third that are coal minors and the third that run that one power that one part of the power plant because what final decision by them was we're just not going to leave not going to turn that third of the power plant on anymore. So I'm telling you about the situation in my home state because I want you to know that these are people who are depending on regulatory reform for their jobs and their livelihoods. The tremendous work ahead to get regulatory reform done isn't going to be measured by just higher economic output or holding down the number of pages in the Federal Register. It's going to be measured by the communities where the small businesses can grow by the industries that can innovate and meet the nation's economic demands and by workers who know that their work is building value and by families who can make their own choices about how to meet their daily needs. One of the first things that we know about over-regulation is that it's expensive both in terms of lost national production and smaller individual pocketbooks. I know that the first panel of this morning's program focused on the economic costs of regulation and the opportunities that reform presents. I commend the Mercatus Center for working to document the many different ways that regulation holds back the economy and making the case for real reform to people who don't realize or don't admit the harm of over-regulation. The cumulative cost of regulations paper released yesterday that was discussed by some of its authors here this morning says that economic growth has been slowed by 8 tenths of a percent per year since 1980 due to the cumulative effects of regulation or to state it another way in 2011 the economy was $4 trillion smaller than it had been in the absence of regulatory burden since 1980. $4 trillion, that doesn't sound like much it's just $4. I try to translate that all into at least billions that would be $4,000 billions and I'll say a little more on that in a bit as an accountant and chairman of the Budget Committee one of my missions is to help people understand the tremendous astronomical size of the amounts we deal with in revenue and spending the question that this important study attempts to answer is what's the true cost of regulations the true cost of regulations is bigger than people realize most people have a good idea of what a million is a billion of course is a thousand million that's a bit harder to get your head around and then a trillion is a thousand billion thousand thousand million I don't know I'm still having trouble with a million but the regulatory burden since 1988 has come to $4,000 billion and if you think the size of regulatory cost is overwhelming that's nothing to how complex, time consuming, confusing and contradictory the regulatory requirements can be for people who have to live with them especially for small business my wife and I had a shoe store and OSHA started just at the same time we started our shoe store and originally it had it so that if you stored anything above head level you had to wear a hard hat well a shoe falling on you from that far isn't going to hurt you but that was the regulation you could be fined if you didn't have it so I've spoken to businesses in Wyoming that have stopped measuring their regulatory work in pages because it's easier to measure them in feet the time it takes to comply with regulations isn't hours in most cases it isn't even days but weeks entrepreneurs don't build a business because they want to become experts in paperwork and compliance and pretty irrelevant rules too I'm on the education committee so I've dealt with the free and reduced lunches and noticed that in Wyoming some of the small communities were stopping free and reduced lunches so I got a hold of them to find out what the problem was and they said well we were about to have to put on one more person just to handle the paper reporting in order to get the little bit of funds that we get and we decided that we could give everybody pizza every day if we didn't have the free and reduced lunches and I said well so what any other effects they said oh yes now that we're feeding the kids what they want we've gone from six garbage cans to one garbage can pretty visual I talked to some of my small bankers and they were talking about the consumer financial protection bureau incidentally if there's a significant small business impact there's supposed to be a special committee to review those regulations the problem there's no definition for what significant impact is secondly the decision is made by the agency that's putting out the rule so you can see that not many of those ever happen but I talked to these small businessmen and I said how's this affecting you and they talked about the new employees and they showed me charts that they had to have so that they could check off all the boxes to make sure they weren't going to be fined for processing a loan improperly and I said you know we own a house in DC we called the cabin and a house in Wyoming and both of them are paid for and in Wyoming my wife would like to expand the kitchen a little bit so if I wanted to get a loan for that how long would it take I know how long it used to take now and they said 89 days in order to comply with all of the regulations and all the paperwork that I'd have to file and they'd have to file and I'd have to review and sign that I had reviewed 89 days but that's not all I'd have to wait 7 days after the approval to see if I wanted to reject the loan or not that's not all after the loans made 150 days the Consumer Financial Protection Bureau has the right to say that I shouldn't have made that loan that I shouldn't have accepted that loan they shouldn't have made the loan so I guess technically you have to wait another 150 days to see if you get the money or not it didn't happen in the old days and the old days weren't very very long ago if you had a business in the community and were doing well and had your house paid for the loans pretty fast but people go into business because they have a product they believe in an idea they're passionate about and every hour that goes by filling out forms and meeting bureaucratic requirements is a loss it's a cost to the spirit of innovation that got them started when we look at reforming rule making and regulation we need to keep in mind the innovative spirit that drives people at every level of the economy too often regulation doesn't solve the problem that regulators are trying to get at or worse regulations are solutions looking for a problem but we don't check that if regulations are necessary they need to target real tangible problems should be problems that can actually be evaluated and valued regulators need to state specifically what they're trying to solve including how to measure it if the solution is working if regulators actually had that information they could share it with industries, businesses entrepreneurs and communities if we gave the information to an industry or community and ask for their ideas I have no doubt that innovation would win out with creative solutions that don't come with the burden that most rules entail today I really believe in innovation and I think that that's been stifled and actually eliminated this area of coal is one of those that I've noticed they don't believe that it could ever be made better or cleaner but it needs to just stay in the ground well general electric didn't believe that and they started to build a facility to do coal improvement and it was canceled they said with this administration there's not going to be any customers you can't do something if there's not going to be a customer now at the University of Wyoming I ran into some young innovators and they figured out how to grow things in tubes they look kind of like an eavesdrain trough but they run them up a wall and then they put something in it so that you can grow things out this way and so you could have a green wall all the vegetables that you could eat and I asked them how many of those tubes they could put in a greenhouse and they said oh it won't work in a greenhouse they need too much CO2 they'd suffocate I said have you considered putting one of these next to a coal-fired power plant and using the residual heat in the CO2 they're looking into that now so another person figured out how to use solar to take the hydrogen out of water to burn with coal to make it cleaner so there are a lot of ideas I just need a little bit of incentive and not have the regulations get in the way but until we get away from a top down one size fits all approach to regulation where the people that are doing the regulation aren't even in the business that they're regulating until we get away from that we're going to continue to miss out on tremendous gains in our economy and our communities when a congress is most important duties is oversight right now in the face of an army of regulators congress has limited options for reining in agencies when they go too far or when they try to apply a law that's a way that it was never intended regulatory reform will create a better process for rulemaking a process that will limit the burden on industry, communities and families that's jobs any system is at risk of being abused by over eager bureaucrats with an agenda who have never been in that business and don't know how that business works I do a Wyoming works tour most weekends I'm in Wyoming most weekends and I travel a different part of the state all the time and I try to get into a business or two to see how they work because even though I was in business I have found out that any business that I wasn't in looks pretty simple and there are a lot of people that haven't even been in business so it looks even simpler I think of course a lot of people think that congress looks pretty simple but I've found out that there's a lot of work to finding employees finding ones with the right skills knowing what to pay them figuring out their own product how far in advance to make it how to sell it how to collect on it those are all major decisions for them and then they have to meet the federal regulations right now our options are limited to tools like the Congressional Review Act which is subject to a presidential veto I think that's one of the mistakes we made when that law was passed on any rule that congress says should be written congress ought to be the final decided on whether that was the proper rule or not now the president makes rules and regulations too but sometimes lacks authority to do that but at any rate the president congressional review act requires the president's signature and consequently it's only been used once it was used at the end of the Clinton administration when he decided to push through ergonomics in a hurry and I was able to pass the congressional review act in both the house and the senate just as we changed presidents and President Bush was willing to sign it so we used it once now May 17th is kind of the drop dead date on regulations anything that happens after that we have that same possibility of using the congressional review act again I'm pretty sure with the a dearth of regulations that are coming up that the president's well aware of that now as congress looks to enact a better system for rulemaking I hope it will also create a better oversight tool our government is built on a system of checks and balances and we've seen the consequences of letting the regulatory state go unchecked and how that can throw our economy off balance there is currently no incentive or need apparently to review what's been done in the past goals weren't stated so there's no measurement for achieving it's an issue my colleagues and I are working on since last year the homeland security and governmental affairs committee has made regulatory reform a priority including a subcommittee dedicated to regulatory affairs and as chairman of the senate budget committee I'm working to underline the role that America's mounting burden of regulation plays in slowing the economic growth and thus adding to our overspending and debt nightmare I notice they didn't call it deficit and debt people get confused with that they think they're pretty much the same deficit is our overspending we've done two ways spending and not taxing enough maybe but at any rate it's overspending not deficit I'm also working on possible solutions such as a regulatory budget and other ideas that can hold back the accumulation of regulations and hopefully reduce the backlog of outdated necessary regulations I want to thank the mercatus center for its efforts to highlight the cost of over regulation and advance common sense regulatory reform their works contributing to real changes in what regulation means for our country I want to thank all of you who came to hear about this important issue we can't succeed unless you take what you've learned today and build on it what we're talking about here today isn't theoretical at the end regulatory process are real businesses real jobs real communities real people real families the choices we make today about how to define the rulemaking process and the regulatory system are choices about whether business will succeed whether innovators will be able to turn an idea into a reality and whether workers and their families will have economic security it's a critical choice for facing it's a critical time for our economy but I know our spirit of innovation is one of our best assets and if we follow it we can succeed thank you