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.
Legislators like having someone else do their dirty work.
Enacting broad laws while leaving agencies to fill in the details
helps insulate politicians from the impact of their dirty work.
When constituents get upset lawmakers just blame the bureaucrats
and act as an ombudsman to work out the problem, if possible. Then
they collect the citizen’s vote in the next election.
The pressure on Congress to use regulation as a policy tool
grows along with pressures to cut spending. Notes Crews: “Taxation
and regulation can substitute for each other, and the pressure for
deficit reduction can invite lawmakers to opt for off-budget
regulations on the private sector rather than adding to
already-unchecked deficit spending.”
Just five agencies, Agriculture, Commerce, Environmental
Protection Agency, Interior, and Treasury account for 42 percent of
federal rules. The fact that all regulations cost money doesn’t
mean they necessarily cost more than the benefits they provide.
Unfortunately, however, most do. Politics rules administrative
agencies as well as houses of Congress. Any system which allows
people to spend money and reengineer society at someone else’s
expense is not likely to promote the public interest.
No surprise, regulation as well as spending by government
interferes with job creation. If you make it more expensive to
create companies, hire people, and sell goods and services, there
will be less economic activity and lower employment. Thus, Crews
argues: “When it comes to stimulating a limping economy, both
reducing deficits and ensuring that regulations are bearable are
critical for economic health. Better regulatory oversight and
monitoring can help ‘liberate to stimulate’.”
A number of steps could be taken to help slow the regulatory
onslaught. The most important would be to withdraw government
entirely from certain areas. For instance, Obamacare should be
repealed. Washington has no business mandating what must be in
health insurance plans and who should buy them. Too much of what
Uncle Sam does is social engineering inappropriate in a free
society.
Most everyone promotes “cost-benefit” analyses, but, warns
Crews, “A problem with cost-benefit analysis, however, apart from
it not being done and enforced, is that it largely amounts to
agency self-policing. Agencies that perform audits of their own
rules rarely admit that a rule’s benefits do not justify the costs
involved.” At the very least such analyses should be carried out by
a separate, independent agency.
Moreover, Crews suggests aiming more deeply, at improper
delegation by Congress, which “should answer for the compliance
costs — as well as benefits — of federal regulations.”
Regulations could require congressional assent before they go into
effect. Rules also should automatically sunset unless Congress
votes otherwise. Many authorizations likely would be perfunctory,
but such a process would make it easier for future presidents and
Congresses to review past federal actions.
Federal regulation costs too much. In freedom as well as money.
Consider the Supreme Court case earlier this year, Sackett v.
EPA, in which the justices unanimously rebuffed the
Environmental Protection Agency when it sought to prevent review of
its actions until citizens had been hit with bankruptcy-inducing
fines. Not just money was at issue. Also at stake was America’s
status as a free society.
Despite trillions in deficit spending and even more in loose
monetary policy the American economy remains in the doldrums.
Instead of trying more of the same, as proposed by the president,
Congress should adopt a “deregulatory stimulus.” Cut back old
regulations and stop new ones. Then maybe America will finally get
back to work.
