President Barack Obama’s “tsunami” of new government regulations looks more like a summer swell.
Obama’s White House has approved fewer regulations than his predecessor George W. Bush at this same point in their tenures, and the estimated costs of those rules haven’t reached the annual peak set in fiscal 1992 under Bush’s father, according to government data reviewed by Bloomberg News.
The average annual cost to businesses under Obama is higher than under his predecessors, the Bloomberg review shows. The increase is estimated to total as little as $100 million or as much as $4.1 billion, or at most three one-hundredths of a percent of the total economy.
The scope of government regulation has emerged as a major issue in the 2012 presidential race and on Capitol Hill. Republican presidential candidates have accused Obama of stifling job creation by imposing rules on businesses, and House Republicans have vowed to rein in proposed regulations on everything from the environment to health care to banking.
“This is getting picked up and talked about, but not for any good reason,” Michael Livermore, executive director of the Institute for Policy Integrity at the New York University School of Law, said in an interview. “There’s nothing new about this attack: It comes and goes in good times and in bad.”
How Obama Compares
Obama’s White House approved 613 federal rules during the first 33 months of his term, 4.7 percent fewer than the 643 cleared by President George W. Bush’s administration in the same time frame, according to an Office of Management and Budget statistical database reviewed by Bloomberg.
The number of significant federal rules, defined as those costing more than $100 million, has gone up under Obama, with 129 approved so far, compared with 90 for Bush, 115 for President Bill Clinton and 127 for the first President Bush over the same period in their first terms. In part that’s because $100 million in past years was worth more than it is now due to inflation, Livermore said.
In the last 12 months through the end of September, the cost range of new regulations is estimated to be $8 billion to $9 billion, a decrease from 2010, according to non-partisan Government Accountability Office reports analyzed by Bloomberg. That total put the average annual cost of regulations under Obama at about $7 billion to $11 billion, compared with the $6.9 billion average from 1981 through 2008 in current dollars, according to the OMB data.
Republicans say that the number of high-cost regulations are up, damaging an already weak economy, and more rules are on the way. The House Committee on Oversight and Government Reform released a report on Sept. 14 alleging a “tsunami” of new federal rules.
“I don’t think there is a measure by which there has been a regulatory tsunami,” Cass Sunstein, the head of the Office of Information and Regulatory Affairs at the White House, said in an interview Oct. 19. “The costs are not out of line by historical standards.”
Those numbers, which do not include independent agencies such as the Securities and Exchange Commission, encompass the expense of new regulations, and do not take into account the economic benefits of healthier children, safer roads or fewer industrial accidents, which Sunstein argues can dwarf the initial costs.
The Department of Interior, for example, says that new controls on deep-water oil drilling will cost the industry $180 million; one well blowout could cost $16.3 billion. Industry lobbyists counter that many rules, especially the most expensive from the Environmental Protection Agency, will impose costs much greater than estimated.
Former Massachusetts Governor Mitt Romney, one of the leading contenders for the Republican presidential nomination in public opinion polls, has accused Obama of “vastly” expanding the regulatory reach of government.
Republicans said the Bloomberg analysis doesn’t count new regulations in the pipeline for banks, health care and the environment.
“It’s been piling up,” Representative Darrell Issa, a California Republican and chairman of the oversight and reform panel, said today in an interview. “And not all regulations are created equal. Congress long ago lost control of the regulatory process.”
EPA Rules Blocked
House Republicans voted to block three Obama environmental initiatives this month, and the House Judiciary Committee debated two separate measures today that would curtail the ability of the administration to issue expensive new rules.
The Obama administration has issued 16 rules to implement the 2009 health care overhaul. The SEC completed 10 major rules stemming from the Dodd-Frank financial reform in the last fiscal year, according to the GAO. Those are forecast to cost $520 million.
The administration has 219 major rules under consideration, up from 137 in 2005, according to a report by the Competitive Enterprise Institute, a Washington-based group that advocates for limited government. Many of those rules will never be implemented, according to Sunstein.
For every administration, many regulations are dictated from the outside by court orders or Congress.
Republicans contend that the issue is about more than raw numbers. It’s about how businesses perceive the regulatory environment.
“This goes to the issue of uncertainty,” Jeff Rosen, a lawyer at Kirkland & Ellis LLP in Washington and outside adviser to Romney, said in an interview arranged by the campaign. “For many businesses it’s not only that they’ve been hit by all these rules in 2009 and 2010, but there are 219 economically significant rules coming down the pike.”
Business owners are expressing those fears.
According to the National Federation of Independent Business, 18 percent of small business owners rate regulation as their most important problem, second to overall economic demand. In the last month of the Bush administration, that total was 8 percent. A Gallup poll released yesterday said small business owners are most likely to say complying with regulations is the most important problem facing them today.
‘All Over Again’
“I feel as though this is 1980 all over again, when we had a serious invasion of regulatory overkill,” C. Boyden Gray, who was a senior official in the Reagan and first Bush administrations, told a congressional panel today. “We’re at a stage now where things have just gotten out of control.”
U.S. Labor Department statistics show the impact of regulations on layoffs has been small.
Of the 7,247 mass layoffs last year -- those involving at least 50 workers -- 18 were the result of government regulation, according to department data. Of the 3,114 mass layoffs in the first half of this year, 11 were related to government regulation. By comparison, 1,053 mass layoffs were attributed to business demand.
“The economy as a whole doesn’t employ fewer people as a result of regulation,” Roger Noll, co-director of the Program on Regulatory Policy at the Stanford Institute for Economic Policy Research, said in an interview. “It’s just that they are allocated in a different way.”
Obama has moved to quell Republican criticism. In January, he issued an order forcing all departments to avoid direct regulation and to take a look at current rules and scrap those harming the economy.
Then on Sept. 2, Obama himself quashed a proposal from the Environmental Protection Agency to tighten smog rules, the most expensive pending federal regulation with an expected cost to the economy of $10 billion a year.
That decision raised questions about whether he would implement, scrap or scale back a handful of other pending regulations estimated to cost at least $1 billion a year. Those rules include limiting pollution from power plants, setting pollution standards for boilers, limits on how many hours truck drivers can spend behind the wheel each day, and requirements for rear-view cameras on vehicles.
The next signal of where the Obama administration stands on major regulations may come as soon as Oct. 28, when the U.S. Transportation Department faces a legal deadline to produce a final rule on truck-driver fatigue. The regulation may impose more than $1 billion in costs on trucking firms by reducing the number of daily driving hours from 11 to 10. Proponents argue it may save more than $2 billion by improving driver health and lowering highway fatalities.
Environmentalists accused the president of caving to big business in its retreat on the smog rule. Business leaders said the administration was finally heeding its warnings that regulation was strangling job creation and economic growth.
“The pause button is being pushed for awhile,” William Kovacs, senior vice president of the U.S. Chamber of Commerce, the biggest business lobbying group in Washington, said in an interview.
Sunstein said Obama is aware of the risks of too many rules.
“Regulations cost money, and it’s clear the country is in a difficult time right now,” he said. To minimize those costs, Sunstein said, “our goal is to listen to every legitimate objection people have.”
Final Rules Review
Statistics show the pace of new rules has tapered off. During the first full fiscal year of the administration, the Office of Management and Budget reviewed 58 major, final rules. In the last 12 months that number fell to 45, according to OMB’s database.
“The spigot turned on in the second half of 2009, but since then they have not gone at the same rate,” James Gattuso, senior research fellow in regulatory policy at the Heritage Foundation in Washington, said in an interview.
Gattuso’s report in October 2010, Red Tape Rising, put the cost of regulation in Obama’s first full fiscal year at $26.5 billion, the largest in history. That total is double the OMB’s estimate because of differences in measuring the costs to drivers and companies for auto and fuel rules, he said.
On a global scale, the U.S. is one of the best places to do business, with rules allowing new businesses to be set up in just six days and strong protections for investors, according to a World Bank report released Oct. 19. Of 183 countries surveyed, the U.S. ranks behind just Singapore, Hong Kong and New Zealand in the ease of doing business, the World Bank said.
No matter those rankings, it’s unlikely to change the criticisms in Congress or on the campaign trail, according to Sally Katzen, who was Clinton’s regulatory director.
“This is a perennial problem,” said Katzen, a senior adviser at the Podesta Group in Washington, said in an interview. “When the Democrats are in the White House, the Republicans complain that there are too many costly, burdensome regulations inundating them.”
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