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Editorial ¦ July 26, 1993
Figuring out true cost of legislation

By Barry B. Burr

The problem with legislation today, especially as it becomes more complex and intrudes more into the everyday conduct of both business and personal affairs, is Congress pays little regard to the implications of its bills, either in terms of costs or unwarranted disruptions.

One of the most powerful but little-known forces on Capitol Hill is a small group within the staff of the Joint Committee on Taxation, the reconciliation committee made up of members of the Senate Finance Committee and the House Ways and Means Committee. According to David Langer, consulting actuary, David Langer Co., New York, this small group -- 14 economists and four computer specialists -- is in charge of assessing the revenue aspects of all proposed legislation. That's an immense responsibility. In the first seven months of last year alone, Mr. Langer notes, the group had to evaluate 1,800 legislative proposals.

In other words, these economists have an impossible task. Worse, the constraints placed on the scope of their analysis by the committee makes it unlikely the impact of any bill would receive the far-reaching assessment necessary to match the increasingly far-reaching nature of legislation.

Among other things, Mr. Langer points out, this group is instructed specifically to ignore from its consideration the cost to taxpayers of complying with laws.

This exclusion leads to such egregious situations, Mr. Langer discovered last year, as the withholding rules for pensions. Congress estimated the law, enacted last year, would produce $ 2.147 billion in revenue for the federal government over the next five years. But Mr. Langer estimated the true amount of revenue from the legislation would be a mere $ 86 million, while it would cost business $ 4.55 billion to comply (Pensions & Investments, Aug. 31, 1992).

Few people, either in or outside of government, know how to project the cost and social and economic implications of legislation. But Mr. Langer has the beginnings of a solution. Mr. Langer, a member of the actuarial alumni advisory group to the University of Michigan, has suggested the school establish a multidisciplinary course program -- composed of actuaries, economists, lawyers, social scientists and others -- to assess the compliance costs and the economic and social impact of legislation as well as its federal revenue aspects.

"Given the apparent understaffing of the (joint committee on taxation), the official disregard of taxpayers' time and money and very likely the effect of political considerations," Mr. Langer suggested to the advisory group, legislation and existing laws aren't receiving the scrutiny they deserve.

"The University of Michigan could become a training ground for new areas of specialization having to do with the systematic analysis of legislation," Mr. Langer wrote to the advisory group.

Eddie Goldenberg, dean of the School of Arts and Sciences, who met with several members of the group to hear Mr. Langer's proposal, supported the recent expansion of the Department of Mathematics' actuarial sciences degree program, advanced by Mr. Langer, in conjunction with the actuarial alumni advisory group. Ms. Goldenberg couldn't be reached for comment.

A multidisciplinary study of the economic and social impact of legislation sounds like such an obvious idea. But it hasn't been tried on a systematic basis. Such a study is long overdue. Perhaps if the costs of legislation were clearer, the intrusion of government, and the quantity and scope of legislation, would become much less. But perhaps Congress understands this and in fear of an informed public undercutting its powerful prerogatives to write legislation prefers to keep such costs from consideration.


© 2001 DAVID LANGER COMPANY, INC.