A Shutdown Silver Lining: Fewer Regulations

The government grinding to a halt also slows down new burdensome regulations.

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A variety of foods labeled Gluten Free are displayed in Frederick, Md., Friday, Aug. 2, 2013. Consumers are going to know exactly what they are getting when they buy foods labeled "gluten free." The Food and Drug Administration (FDA) is at last defining what a "gluten free" label on a food package really means after more than six years of consideration. Until now, manufacturers have been able to use their own discretion as to how much gluten they include. Under an FDA rule announced Friday, products labeled "gluten free" still won't have to be technically free of wheat, rye and barley and their derivatives. But they almost will: "Gluten-free" products will have to contain less than 20 parts per million of gluten.

The government shutdown may choke the flow of federal regulations, but looking at some of the rules on the books, this might not be a bad thing. While there are regulations that provide great benefits to people, more than a few do not. To the contrary, they waste resources by duplicating market efforts or needlessly restricting market activity in order to deliver targeted benefits to special interests.

Take, for example, a recent U.S. Department of Agriculture rule revising deadlines for cherry growers to submit their plans to comply with production quotas for tart cherries. In a bizarre nod to the Soviet Gosplan (a committee responsible for producing the USSR's infamous five-year economic plans), the Cherry Industry Administration Board annually approves a central plan for national tart cherry production. All cherry growers must comply with the plan or seek the board's approval to deviate from the plan. The USDA sanctions any grower that does not comply.

Cherries are not the only agricultural product whose production the USDA regulates. The Agricultural Marketing Agreement Act of 1937 granted the USDA powers to regulate the production volume for many other "agricultural commodities with a national public interest." It had little economic rationale back when it passed and it certainly makes no sense today. Can anyone identify what national interest tart cherries serve?

[See a collection of political cartoons on the government shutdown.]

As with any cartel, especially one enforced by the federal government, the regulation's main purpose is to deliver targeted benefits to the cartel members. In this case, it favors cherry growers at the consumers' expense by limiting production volumes and keeping prices artificially high.

When they are not used to pay off special interests, regulations may still waste resources by duplicating market efforts. For example the Food and Drug Administration recently approved a "gluten-free" standard after debating it for nine excruciating years. It took the agency so long, in part, due to the massive amount of research it had to review in order to establish a new standard. Yet, the ruling was also delayed as the FDA tried to navigate the conflicting interests: activists arguing for more stringent requirements and the food industry pushing for a more lenient standard.

[See a collection of political cartoons on the economy.]

The irony is that markets already offer consumers a number of "gluten-free" standards operated by independent, private organizations. Some of these standards are very stringent, which would please the activists and consumers that are highly sensitive to gluten. Others are less stringent, which would make it cheaper for food producers to comply with gluten-free standards and allow them to pass along the savings to consumers. Instead of fighting over a single government imposed standard for nine long years, markets took the initiative and provided consumers with a range of choices fitting the needs of different individuals.

Rescinding either regulation would reduce prices and increase choices. Producing fewer wasteful regulations in the first place would additionally save taxpayers money and reduce compliance burdens on businesses, which is why the hiatus in new regulations may be a good thing.

Unfortunately, the reprieve from burdensome and unnecessary regulations will be only temporary. When the shutdown ends, the flow of regulations will resume. To make the reprieve permanent, Congress needs to establish greater oversight over agency regulations and push agencies to review and repeal outdated or duplicative existing regulations.

Sherzod Abdukadirov is a research fellow at the Mercatus Center at George Mason University.

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