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Federal Paperwork Costs as Much as the Deficit

November 14, 2018

Can the Republican-controlled Senate and the Democratic-controlled House of Representatives agree on anything? Here is a candidate: reduce paperwork mandates from the U.S. government.

Before you laugh, please consider a number: 9.78 billion. That is the number of annual hours of paperwork burdens that the government imposes on its citizens.

If you asked every citizen of Boston to spend the next three years filling out federal forms — eight hours a day, every day — you would not come close to that figure. And if you assumed, on the basis of the average hourly wage, that an hour of work is worth $22, the federal paperwork burden imposes a cost in excess of $215 billion. For comparison, that’s the amount of the monthly federal budget deficit in the immediate aftermath of the 2018 tax cuts.

Actually, the harmful effects of paperwork burdens are greatly understated by these numbers. To get permits, licenses, tax deductions, jobs, educational assistance, subsidies, health benefits and job training, you have to fill out maddening federal forms. To avoid serious penalties, you have to do the same thing.

Excessive paperwork requirements do not merely take time. They impede infrastructure improvements. They increase poverty. They reduce economic growth. They make it difficult or even impossible for people to get access to opportunities and benefits that could fundamentally change their lives.

University of Chicago economist and Nobel laureate Richard Thaler has an excellent term for excessive paperwork burdens: sludge. For many Americans, sludge is a curse.

There ought to be a law. Actually there is. It’s called the Paperwork Reduction Act, which was enacted in 1979. It is overseen by the Office of Information and Regulatory Affairs (I was the administrator of OIRA during the first term of the Obama administration). Unfortunately, the law has failed to live up to its promise — creating a big opportunity for bipartisan reform.

The Trump administration has emphasized the importance of deregulation, producing results that are celebrated by many Republicans and deplored by many Democrats. The project of deregulation should include elimination of sludge. Starting now, OIRA should ramp up its efforts to control the flow of new paperwork burdens and also to reduce the existing ones.

A good first step would be for President Donald Trump or OIRA to issue a directive, calling on federal agencies to develop public plans within a short period (say, three months) to produce major reductions in sludge. Building on previous efforts, the directive could specify ambitious numerical targets. The directive could also identify ways to meet those targets — for example, through simplified forms, less frequent reporting, electronic filing and (most promisingly) ruthless elimination of unjustified mandates.

OIRA could also insist on careful pretesting of forms, to ensure that their own burden estimates are realistic. A directive on the books calls for such testing, but it is widely ignored.

Steps of this kind could be accompanied by a widely publicized call for public comments, asking Americans to specify the sludge that they hate most. Executive branch agencies that now impose serious paperwork burdens could work closely with both Democratic and Republican members of Congress, since they are in a good position to find out what most affects their constituents.

In terms of actual legislation, it’s past time for an overhaul of the Paperwork Reduction Act, which has not been seriously revised since 1979.

As it now stands, the law requires OIRA to scrutinize every information collection from the federal government — to “minimize” its burden and “maximize [its] practical utility of and public benefit.” That’s good.

But what happens if the office fails to do that? Under the Paperwork Reduction Act, the answer is: Nothing at all. Here’s a better answer: Americans should be given a right to go to court to challenge a mandatory information collection as excessive and unjustified — in the technical jargon of administrative law, as “arbitrary or capricious.”

When a federal agency issues a regulation, people who are adversely affected usually have the right to make that challenge in court. At least when a paperwork burden exceeds a certain threshold, people should be allowed to require the government to justify it — or to get it struck down in court.

Congress should also amend the law to require agencies to make a reasonable demonstration that the costs of paperwork burdens are justified by the benefits — and that they have chosen the least burdensome way to produce those benefits.

Since the early 1980s, the U.S. has experienced a cost-benefit revolution, in which the costs of regulatory requirements (involving food safety, the environment, even homeland security) must usually be justified by the benefits. Unfortunately, the revolution has bypassed sludge.

Let’s fix that. If, for example, the Department of Health and Human Services is imposing hundreds of thousands of hours of new paperwork burdens on hospitals and doctors, it should be required to show that the imposition is justified.

There are a lot of good ideas for changing the law, and they cut across political lines.

True, no one ever marched under a banner saying “Paperwork Reduction Now!” But in practical terms, an aggressive effort by the new Congress to cut sludge would make a huge difference in people’s lives.

(In the third paragraph, clarifies that the $215 billion federal deficit is the monthly figure.)

To contact the author of this story: Cass Sunstein at csunstein1@bloomberg.net

To contact the editor responsible for this story: Katy Roberts at kroberts29@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “The Cost-Benefit Revolution” and co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”

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