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A Further Perspective
Obama vs. Job Creation
The Regulatory State keeps Americans unemployed.
Everyone agrees that the U.S. economy needs a stimulus. Especially President Barack Obama, who hopes to get reelected in November. The economy is not doing well and the American people aren’t inclined to give the president another chance.
All he can think of doing is increase government spending. The federal government has run up nearly $4 trillion in deficits over the last three years alone, with another $1.2 trillion in borrowing expected this year. But President Obama apparently believes that just a little more red ink will do the trick. Make it an even $6 trillion and the economy will boom!
However, Americans would do far better if politicians across the political spectrum instead took an ax to America’s regulatory state. Leviathan has arrived and is firmly ensconced in Washington. A plethora of unnecessary and costly regulations have resulted,
Clyde Wayne Crews of the Competitive Enterprise Institute has produced the latest edition of his “Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State.” It provides a sad tale of expensive meddling that is impoverishing all of us.
There are governments which devote a larger GDP to government. However, no nation has a bigger government than America. Observes Crews: “in absolute terms, the U.S. government is the largest government on the planet—whether one’s metric is revenues, expenditures, deficits, or accumulated debt. Only seven other nations top $1 trillion in annual government revenues, and none but the United States collects over $2 trillion.”
If Uncle Sam only was wasting money prodigiously he would fulfill the role of the traditional highwayman. A price of traveling the roads once was to occasionally be relieved of one’s money. But the thieves would ride off and leave you otherwise unmolested. They wouldn’t stick around and make your life miserable.
That, however, is what Washington does. Notes Crews: “Federal environmental, safety, and health, and economic regulations cost hundreds of billions — perhaps trillions — of dollars every year over and above the costs of official federal outlays that dominate the policy debate.” It’s as if the highwaymen insisted on accompanying you, telling you how to ride, eat, sleep, and act. You’d have to waste more money. And you’d lose your freedom.
That’s the case today. Crews points to an estimate from the Small Business Administration that regulatory compliance costs about $1.75 trillion annually. With spending of $3.6 trillion last year, the “estimated regulatory ‘hidden tax’ stands at 48.7 percent of the level of federal spending itself,” he writes. But another $55 billion is spent by the government directly to regulate. That means the real price of regulation is $1.8 trillion, or more than half of federal spending last year.
In some cases outlays and regulations are separate. The federal government’s biggest single program, Social Security, results in little extra government regulation. The program’s main job is write checks, which Uncle Sam does with wild abandon.
However, warns Crews, “Government spending’s relationship to government regulation bears scrutiny by policy makers. Unchecked outlays and deficit spending that enlarges the scope of government can translate, in later years, into greater regulatory compliance costs as well.”
A good example is Obamacare, a multi-trillion dollar program which creates a regulatory nightmare by basically turning health insurance over to the federal government. The companies which issue the policies still are nominally private, but Washington will largely determine what policies are available. In April the Obama administration transferred a half billion dollars to the IRS to help implement the law. By one count Obamacare will create at least 159 new agencies, but the Congressional Research Service declared: “The precise number of new entities that will ultimately be created pursuant to [the legislation] is currently unknowable.”
Regulatory costs of $1.8 trillion should cause sober reflection. As noted before, that’s half of federal spending, and is far less visible than expenditures which have to be appropriated by Congress. The price of regulation is greater than combined annual corporate profits. Regulatory costs run almost ten times as much as total corporate income taxes and nearly twice as much as individual income tax collections. Regulation alone runs about 12 percent of GDP. Combine government spending and regulation, and 36 percent of the economy is under federal control.
Obviously, Barack Obama is not the first president to use his powers, fair or foul, to regulate the rest of us. But he has been among the busier chief executives. Last year federal agencies issued 3,807 final rules, a 6.5 percent increase over the year before. Proposed new rules rose almost 20 percent, to 2898 over the same period. Last year total Federal Register pages, which record rule-making in Washington, ran 81,247. That was just 158 pages below the historic record—set in 2010.
Uncle Sam continues to be busy. There currently are 4128 rules in the federal pipeline. Of these 212 are “economically significant, representing an economic impact of at least $100 million. That’s a one-third jump in just five years. The only higher number during the past decade was in 2010, of 224. Finalized “economically significant” rules are down just two over 2010, from 81 to 79, but are up almost 93 percent over five years ago.
Regulations increasingly have supplanted legislation as the means of codifying new “laws.” Last year agencies promulgated 3807 rules while Congress only passed 81 bills. And most of the latter resulted in the issuance of far more rules.
About the Author
Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).
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Who Knows?| 7.10.12 @ 11:32AM
Legislation?
LAWYERS!
Congress, the SCOTUS, the president---all three branches are where the graduates of law schools go to "broker" commerce.
The penultimate JUST SAY NO clan.
Jack London| 7.10.12 @ 12:16PM
Note that in this article there is not a single example of a rule he would cut.
Albertus Magnus| 7.10.12 @ 12:30PM
So?
JD| 7.10.12 @ 12:37PM
Irony, thy name is Jack London. A key point of the article is that legislators don't actually create regulation through legislation anymore; they just legislate the creation of regulatory agencies to do the writing for them. So Jack complains that the author doesn't propose a regulation to cut, when the author's complaint was that liberals never cop to the regulations they WRITE!
JD| 7.10.12 @ 12:34PM
Conservatives attack causes. Liberals compensate for symptoms.
Take "income", for example. The Left notes that some people have little income. How does it respond? By taking money from other people and giving it to those with low income.
But what does this achieve? Does the income of the poor person increase because he is given money? NO! He has more money to spend, but his income has not increased. Indeed, history has shown us that the more a person is given, the LESS he produces for himself! The lack of wealth creation by the poor is not addressed at all by the Left; the Left merely feels that if the purchasing power of the poor is sufficiently augmented, then they don't NEED to increase their actual productivity. Thus the need for redistribution only increases. Ironically, it is that increased "need" that the Left uses to justify itself!
Conservatives, by contrast, would look at the lack of productivity among the poor and seek ways to make them more productive. An end to business-depressing policies is the most substantial approach. Removing bad incentives is another.
JD| 7.10.12 @ 12:51PM
I phrased that last paragraph poorly. What conservatives truly do is look at why the poor are unproductive, and REMOVE the causes of that lack of productivity. Those causes, most often, are liberal economic policies.
The Left cannot comprehend the idea that such maneuvers could solve problems, for two reasons. One, they don't see their policies as the causes of problems. Two, they don't feel that problems can be solved without government ACTION.
When plagued by a rock in one's shoe, a conservative removes the rock. A liberal tries to invent a pad for his shoe that will make the rock less painful. He bills the conservative for the cost of the pad.
Purp| 7.10.12 @ 3:08PM
This article is so much baloney.
Customers buying products and services create jobs - not less regulation.
No business makes hiring decisions based on regulation burdens.
Businesses will only hire when they have customers - people spending money. When the middle class has money - business adds jobs.
By giving money to the middle class, the economy is boosted. Period.
JD| 7.10.12 @ 3:28PM
Suppose we have a completely poor society with no employment and no property, and we wish to raise it into prosperity. How might we achieve this?
You think the answer is spending. I think the answer is production. Let's try my idea first.
One person in the society starts making stuff. Now he has the stuff he's made, and enough spare to sell. But he can't sell it because no one else can buy. And no one else can buy from him, because they all have nothing.
Then a second person produces. He has enough for himself and some to spare. He and the first person can now buy from each other, though no one else can buy or sell with either of them.
Then a third person starts producing, and becomes able to trade with the first two. And so on. Soon everyone is producing, and everyone can buy things, which means everyone can sell things.
Productivity is the catalyst for economic growth.
Now, your turn. Solve this poor society's problems with spending.
Purp| 7.10.12 @ 6:58PM
You have left some holes in your plan. Production needs capital to get started. How did the first guy make "stuff"? From what?
Our country is awash in capital, over 2 Trillion sitting on the sidelines. Why? Because demand is weak. There aren't enough customers to make demand need more production- but it's not spending by the government that's needed, it's spending by the consumers, or customers.
Now, how do you get money in the hands of the real economic engines? Give it to them or make them work for it. Temporarily, the government steps in to prime the engine to get demand up, until enough customers provide enough demand to run on it's own.
If you're smart, you don't produce something you cannot sell, right? If you see a need for a product, you can take the risk of producing it so you can make money on it.
But without the demand, no business will hire more people, period.
Supply side doesn't work - you cannot make it and then they will come. "They" have to be there first. It's not producing that creates economic activity - it's the ability to sell it first - then the scramble to produce it better, faster, cheaper (competition) .
That is the essence of marketing and the adage "location, location, location" - if you don't have a market for your goods, don't bother. If you can't sell it, you can have the best ice machine in the world, but try selling that ice machine to an eskimo. And, what is your market? Your customers.
JD| 7.10.12 @ 11:25PM
I wonder, how did mankind ever pull himself out of the stone age if it was impossible to produce without capital? Where did the first capital come from?
This is not one of life's great chicken-and-egg mysteries. It is clearly possible to be productive without capital. All "unskilled labor" is production without any capital brought to the table by the producer. The productive capacity IS the capital!
You say "demand" as if the mere need for stuff will save us all. That's absurd! Need doesn't do anything. Infants have need. Do we need more infants?
True "demand" is not mere need. It's need - and something to trade in exchange for what is needed! That something is what the needy person PRODUCED in order that he might trade for what he cannot produce for himself. Even the wealth that your side would have us give to the poor to "prime the pump" has to be produced before it can be redistributed.
Yes, that's right, all your precious liberal ideas are subject to the same laws of physics as the ideas of smart people - nothing exists without being produced! And that includes the VALUE that your "spenders" offer in trade!
JD| 7.10.12 @ 11:28PM
You say that my plan has "holes" because what is produced cannot be traded unless others want it. That's a straw man argument. The very idea of producing something worthless, yet expecting others to buy it, is an economic absurdity that only liberal price-fixers would invent.
I did not bother saying that what is produced had to have value to those who might trade for it because it was obvious. You imposed an absurd position that I did not take upon me in order to debunk what you otherwise could not debunk.
aware| 7.11.12 @ 6:06AM
"How did the first guy make "stuff"? From what?"
If you don't understand this foundational concept it is impossible for you to say anything of value about economics. The "first guy" did as God intended, he combined his labor with available resources to create value which improved his life. This is still the only way to create wealth without theft.
JD| 7.11.12 @ 11:21AM
He cut down a tree branch, fashioned a spear, killed an animal, built a fire, and cooked the meat.
Or he wrote an app and sold it for 99 cents a copy on the app-store.
Or anything in between.
Purp acts as if I'm being absurd by saying someone with nothing can make something without first being gifted resources. But he's the ones being absurd, acting as if resources can exist to be gifted without someone first making them!
JD| 7.10.12 @ 3:31PM
Purp, your statements are so absurd that you have to know they're absurd. Businesses make hiring decisions based on cost/benefit analysis, and such analysis is profoundly impacted by regulatory burdens, which increase costs.
As I said in my posts above yours, you liberals are locked in to the idea that problems must be solved by ADDITIONS to the system; by government ACTIONS. The idea of finding and REMOVING the CAUSES of problems is beyond your comprehension.
You are people who would fix a clogged drain by installing a second drain instead of removing the clog.
Purp| 7.10.12 @ 7:11PM
My statements are not absurd, but they don't fit supply side economics, which is what you are touting.
You have it somewhat backwards.
If you can sell more product or services, you hire. But it is the very last thing you do to sell more. If you can sell more without hiring, you do.
That's why unemployment decreases lag the rest of the economy - hiring workers is the LAST thing companies will do coming out of recession or depression.
Businesses complain about all kind of costs, just like you complain about taxes. That's really just the cost of doing business. Tax burden and regulatory burden does not keep people from hiring. Not being able to sell product stops hiring or creates layoffs.
Regulation isn't a bad thing. Neither are taxes. But is not news that people complain about both.
It's not a simple formula, and this discussion is way over simplified, but the bottom line is that without customers, even China would stop selling and therefore producing ... as has recently happened to slow their economy.
You can produce some level of inventory to have on hand, but if cars aren't selling the Auto makers stop producing. Period.
Everything a business does is to sell to it's customers ultimately. Including hiring workers ultimately.
JD| 7.10.12 @ 11:39PM
"That's really just the cost of doing business." - that sentence is the root of your problem. You ask that we treat the implementation of your ideology as an inevitable, incontrovertible fact. You want us to restrict the scope of possible remedies to problems to the implementation or non-implementation of conservative ideas and business options, because the liberal ideas are untouchable.
Your regulatory BS is not a natural, inescapable "cost of doing business." It's lunacy that you've created, which ought to be destroyed. We might as well respond to your every complaint about CEO pay by saying "hey, that's the cost of doing business!"
No where in your self-indulgent rant did you refute the fact that your regulations increase the cost of doing business. Heck, you BRAG about that fact. Why would a regulation be necessary to coerce a behavior if the behavior didn't run contrary to business incentive? Regulation definitionally hurts business!
Regulation increases costs and decreases potential profits. Both are easily sufficient to tip the scales of cost/benefit analysis such that an expansion that might have been worthwhile is no longer. You cannot refute this; you're not even trying to refute it. You're just trying to change the subject back to your foolish idea that lack of "demand" is the ONLY factor, which is all the more ludicrous since lack of demand is, definitionally, lack of others making enough money in their businesses to buy from yours. A symptom, not a cause.
Oldefarte| 7.11.12 @ 11:21AM
"Regulation isn't a bad thing. Neither are taxes"....that is about the dumbest thing that I have ever heard!!!!!!!!
Warrior| 7.10.12 @ 3:33PM
Very myopic view. You again show nothing more than a failures viewpoint of the world. By taking money from one to give to another, you have not created any wealth, you have simply shifted the purchase. By eliminating regulations on businesses, you would create more manufacturing which would create jobs, which creates wealth and thus the puchasing power is increased directly proporitionate to the number employed. I tried to simplify this for you, but I'm sure it was still too difficult for your limited abilities.
Purp| 7.10.12 @ 7:20PM
We did eliminate regulations, in particular, on financial instruments, during the Bush administration. As well as lower the tax rates on everyone, even the estate tax, gone.
And, I don't have to tell you what happened - so where are the jobs?
OMG, this is so simple - by eliminating some regulations you make something easier to produce, sure.
But who is buying the product? You can have no regulations, but without the customers, even oil wouldn't sell, would it?
Exports can create demand to create jobs here in America, that's one way the government isn't spending money necessarily, but demand can grow.
Why would anyone manufacture anything they cannot sell? Even with NO REGULATIONS?
Produce it faster, cheaper, better - so what, if you have no customers?
Put people to work building bridges, roads, schools, hospitals - bullets, bombs, tanks if you like. Those people will then turn around and become customers to start buying, increasing demand and companies will hire to meet the demand and the cycle continues and the new hirees become customers increasing demand still higher. Economy is booming. Done.
Warrior| 7.10.12 @ 8:20PM
You will be ignored going forward. You are economically and ideologically retarded. More talking points and no substance. Pure triangulation and obfuscation without even a hint of thought beyond what the DNC produces. Please move to Cuba and you can live in your mindless utopia where the government pays for everything and the economy is centrally controlled. Sorry for responding.
Albertus Magnus| 7.10.12 @ 9:19PM
Purp is a tiresome, dim-witted fool. What he thinks is "economics" is talking points from pedantic socialists. Nothing he says need be taken seriously and no response will ever shut him up. He "debates" like a divorced woman on PMS. Purp is a waste of time.
JD| 7.10.12 @ 11:31PM
Name significant regulations eliminated under Bush. I've never heard of one. I only hear the vague "Bush deregulated everything" claim in Democratic campaign ads.
You're a fool, suggesting that demand doesn't exist. Do you think that everyone in the world has everything that he wants, such that no one is looking to buy anything? Of course not. The problem is not that no one wants to buy things. The problem is that they lack the money with which to buy. That is a SUPPLY problem.
Once again, the liberal inability to understand that money is a store of generic value and a medium of exchange leads to absurd conclusions. In this case, it leads to the idea that lack of money and lack of production aren't synonymous.
Oldefarte| 7.11.12 @ 11:24AM
Exports? What to Europe? You moron, do you understand that Europe is financially tanking and having to be bailed out due to your and your boy's socialistic tactics?????
Oldefarte| 7.11.12 @ 11:19AM
No, EMPLOYERS create jobs and they do so when they are not fearful of being taxed and regulated to financial death;and your "customers" only spend their money when their taxiation is not excessive and they are confident of having their job in the future. If employers are laying off employers due to the taxiation/regulation which is strangeling business, then businesses are losing customers and sales and their profits are declining. All businesses makes decisions on taxiation/regulations, dumbars! You don't "give money" to the middle class, but instead you provide them with whats known as a JOB, and with 20% of the population now out of work and having no jobs, they don't buy products, businesses have declining profits/sales and the economy tanks. That is whats known as OBAMANOMICS!!!!!!!!
Tx_indep| 7.11.12 @ 4:12PM
The fundamental problem with this analysis is that people have demand at a specific price, and the demand decreases as prices are increased (for example, through regulation and taxes). So arguing that reducing tax burdens and regulations have no effect is simply an indication of economic ignorance.
Tx_indep| 7.11.12 @ 4:15PM
sorry, should have said Purp's analysis.