Regulation is one method by which the Federal government claims resources to achieve its goals.  The share of the nation’s resources claimed by regulation has grown rapidly in recent years.

At present, there are only weak constraints on the government’s use of resources through regulation, and there is no procedure for incorporating the full cost of regulation into government decisionmaking.  A system for budgeting regulatory compliance costs has significant potential as a management tool for controlling and shaping the economic impact of Federal regulation.

Although on strictly legal grounds it might be possible to establish a regulatory budget system by administrative action, the political importance of such a system suggests that it should be established by legislation.  There appear to be no constitutional barriers to including the so-called independent regulatory commissions in a regulatory budget system, along with the regulatory agencies in the executive branch.  The organization and management of a regulatory budget system could be similar to that currently utilized for the fiscal budget.  Enforcement of regulatory budget ceilings would pose no unusual problems.  For start-up it would appear expedient to focus on the compliance costs of new and revised regulations.  Coverage of existing regulations could be added subsequently.

Without estimates of the cost of regulation there could be no regulatory budget.  While existing methods of cost estimation need improvement, the very existence of a regulatory budget system would stimulate new or improved methods.  Use of a methodology recently developed by Arthur Andersen and Co. could at acceptable cost provide the precise, consistent, and transparent estimates of compliance costs that would be required for a workable regulatory budget.