Regulatory Reform
AH&LA supports reform efforts that will result in a regulatory process which is more open, fair, and allows for greater public participation.
More than 50 agencies, ranging from the Animal and Plant Inspection Service to the Bureau of Customs and Border Protection, have a hand in federal regulatory policy. With nearly 250,000 employees, they produce over 4,000 new rules – and some 70,000 pages in the Federal Register – each year. The American lodging industry faces the bulk of its federal regulatory burden from the Depts. of Justice, Labor, Commerce, and Homeland Security.
In order to run a busy hotel or motel, a manager of a lodging property must navigate through the growing maze of laws, permits, and regulations. Complying with regulations raise the price of most products and services, as well as tying up funds businesses can use to hire additional employees, modernize facilities, or operate more productively.
Federal regulations are too often written by Washington-based bureaucrats with little practical knowledge of business or hotel operations, and with little input from those most affected by proposed rules. Federal regulations cover many diverse segments of a lodging operation such as accessibility to disabled customers, blood borne pathogen exposure, family and medical leave, hearing-aid compatible telephones, minimum wage, new employee verification, payroll tax deposits, teen labor, tip income audits, and W-2/W-4 Forms.
All federal regulations, whether they are beneficial or unjustified, come at a cost: they are a regulatory tax imposed on all Americans. Hidden regulatory costs are staggering by almost any measure. According to the Office of Information and Regulatory Affairs (OIRA), the White House office responsible for reviewing and tracking federal rules, regulations adopted in the past 10 years cost Americans $34 billion to $38 billion annually. All federal regulations, OIRA states, could be costing Americans 10 times this amount: some $380 billion.
However, these numbers are low compared to private and academic estimates. According to one recent authoritative study by the Competitive Enterprise Institute, a noted Washington think-tank, regulatory costs hit $1.142 trillion in 2006. Given that 2006 government spending reached $2.654 trillion, the hidden tax of regulation now approaches half the level of federal spending itself.
To put these massive 2006 government regulatory costs in perspective:
- Regulatory costs exceed 2004 corporate pretax profits of $1.059 trillion.
- Regulatory costs exceed the estimated 2006 individual income taxes of $998 billion.
- Regulatory costs dwarf 2006 corporate income taxes of $277 billion.
- Regulatory costs of $1.142 trillion absorb 9 percent of U.S. gross domestic product (GDP), which was $13.06 trillion for 2006.
Even more regulations are on the way. Historically, the amount of regulatory activity surges dramatically in the last year of a presidential Administration as regulators, freed from normal political constraints, clean off their desks.
There are already signs that such a regulatory surge is on the way for 2008. Reams of new rules are in the pipeline for 2008, ranging from Department of Agriculture rules on genetically modified food to Food and Drug Administration rules on dietary supplements to Americans with Disabilities Act rules for airlines.
The EPA looks to be particularly busy, with rules being adopted or nearing completion on everything from ozone to electric generator emissions. However, the most costly EPA agenda item could be regulation of carbon dioxide and other greenhouse gases from motor vehicles.
Regulatory reform is a glacially slow process in Washington and generally occurs during business-friendly Administrations or Congresses. Although reformers in the 104th, 105th, and 106th Congresses failed to establish cost-benefit analysis and risk-assessment as touchstones of regulatory decision-making, they also achieved some notable successes. The 1995 Unfunded Mandates Relief Act (UMRA) has discouraged Congress from imposing new regulatory burdens on state and local governments. The 1980 Regulatory Flexibility Act, as amended by the 1996 Small Business Regulatory Enforcement Fairness Act (SBREFA) and buttressed by President Bush’s Executive Order 13272 in 2002, has in some measure contained regulatory costs and agency discretion.
In the 110th Congress, there have been no significant efforts to reign in the growth of the regulatory state. Some limited regulatory reform efforts, notably towards financial service corporations in response to the credit and housing loan crisis, have been enacted in 2008.
For more information, contact Kevin Maher, AH&LA senior vice president for Governmental Affairs, at (202) 289-3147,
kmaher@ahla.com.(Updated August 2008)