ECONOMIC

in the future. Consequently current stockholders ot such industries whopurchased shares after regulation was introduced are unlikely to earn morethan a normal return on their investment. When regulatory reform threatensto alter the economic environment on which they based their future profitexpectations, they will naturally resist.In many instances income distribution considerations are cited in supportof holding regulated prices below free-market levels. Allowing prices to rise,however, may not affect low-income consumers more adversely than higherincomeconsumers. There are substantial differences in consumption patternsamong households at the same income levels, and the effects of deregulationon family well-being are likely to differ greatly. For these reasons it ispreferable to use the regular tax and income transfer systems, rather thanprice regulations, to achieve society's income distribution objectives.Another problem facing regulatory reform is the difficulty often encounteredin bringing regulatory reform initiatives before the full Congress. Individualcongressional committees, responding to the pressures described above,are sometimes reluctant to consider significant reform bills. Thus, althoughthere is a growing consensus that regulatory reform is needed, the processof achieving it may be hampered by fragmentation of individual proposals.It may therefore be desirable for policy makers to address a number of regulatoryreform issues simultaneously. Such an approach was contained in theproposed Agenda for Regulatory Reform submitted by the President to the94th Congress. This proposal would have required the Administration tointroduce legislation to effect major regulatory reforms over a 4-yearperiod. Another provision would have ensured congressional action by placingthe Administration's proposals before the full Congress after a specifiedtime if similar proposals were not reported out of committee.SUMMARYMajor policy initiatives are required to address the kinds of regulatoryproblems described above. Two types of efforts are needed. First, the statutesunder which some agencies operate need to be modified. This approach isparticularly applicable to the independent regulatory agencies which havejurisdiction over specific industries. The principal goal should be to eliminateregulations that inhibit competition, prevent innovation, and otherwisedistort the allocation of resources. Second, the quality of agencydecisions under the existing regulatory statutes needs to be improved. Thisapproach appears particularly suited to those regulatory agencies which dealwith matters of health, safety, and the environment.Several specific reforms deserve consideration in 1977. First, reform thatincreases rate flexibility and eases entry restrictions in the airline and truckingindustries would reduce the costs imposed by prices set in excess of competitivelydetermined free-market levels. The reduction in the quantity ofresources absorbed unproductively would increase the ability of the economyto produce more goods and services of all types, including those of the regulatedsector.157224-250 O - 77 - 11