More Regulation Is the Last Thing Economy Needs: Ramesh PonnuruRamesh Ponnuru
Aug. 23 (Bloomberg) -- At least one sector of the economy is booming, and President Barack Obama can legitimately take credit for it. Since he took office, employment has surged 13 percent at federal regulatory agencies. The regulators’ budgets are up 16 percent. (These numbers are derived from a May report published by Washington University and George Washington University.) And that’s before some of the major regulatory initiatives of the administration -- the financial-reform bill and the health-care overhaul -- are fully implemented.
Obama understands that a reputation for regulatory hyperactivity in the midst of a weak economy wouldn’t help his re-election prospects. In January, he promised “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.” That review led to some modest improvements: The Environmental Protection Agency pulled back a rule that would have treated dairy spills on farms as though they were oil spills.
Overall, though, the regulatory burden on the economy is still growing.
Calories, Ozone, Boilers
The new health-care law will force major fast-food chains to re-do their signs to include calorie information -- a change that one chief executive officer said would cost his company as much as building 1 1/2 new (job-providing) restaurants.
The EPA is moving ahead with plans to tighten restrictions on ozone. Hundreds of counties don’t meet the standards at the moment; companies investing in them will face new obstacles. The EPA estimates the annual cost of the new rules will be at least $19 billion. The agency is also planning to put in place new directives on boilers, which manufacturers say would impose $14 billion in capital costs. The CEO of Southern Co. warns that the boiler regulations will make electricity service more prone to interruptions as well as more expensive.
Reviewing data from the Government Accountability Office, two analysts for the conservative Heritage Foundation concluded, “No other president has burdened businesses and individuals with a higher number and larger cost of regulations in a comparable time period.” President George W. Bush, they note, was in his third year before new compliance costs hit $4 billion. “President Obama achieved the same in 12 months.”
Going Too Far
Regulations already on the books provide some benefits, such as improved health and a cleaner environment, and many proposed rules would presumably also yield positives. But there is good reason to think that federal government has a tendency to go too far.
For one thing, most of the costs of regulation -- the Small Business Administration estimates that compliance costs in 2008 were $1.75 trillion -- don’t appear in the budget. If legislators are lax when it comes to on-budget spending, how much freer are they likely to be with outlays that don’t show up in the deficit figures? Nor can we assume that industry will reliably check the growth of regulation, since large companies sometimes welcome regulations that hobble their smaller competitors.
Republicans on Capitol Hill are promoting two pieces of legislation to turn back the regulatory tide. One is the “REINS Act,” which would require Congress to approve any new rule with major economic effects. The bill is motivated by the view that regulation harms the economy, and that Congress has handed over too much of its legislative power to regulatory agencies.
Senator Ron Johnson, a Republican from Wisconsin, has introduced legislation to declare a moratorium on major new regulations until the unemployment rate drops to 7.7 percent -- that is, until it goes lower than it was when Obama took office. (The president would have the power to waive the rule to address national emergencies.)
‘Ball and Chain’
“I’m not anti-government,” Johnson told me. “We do need some regulation. The purpose of my piece of legislation is to call a halt to the issuance of new regulations until we get our economy back on its feet.” The amount of regulation, he adds, “is a ball and chain on the necks of job creators.”
Johnson is, of course, making a partisan point by choosing an unemployment target tied to Obama’s inauguration. His 20 co-sponsors are all Republicans. But the underlying concept is attractive. A permanent ban on new regulation wouldn’t make sense. Ultimately, we need a rational structure where some rules go and others stay. Existing executive orders that require agencies to undertake cost-benefit analyses before issuing regulations should be codified in legislation, and strengthened to require that the analysis be published before the regulation takes effect.
But why not sidestep the debate over the merits of particular rules and the shape of a new system for now, and just agree that this isn’t the time to pile new burdens on the economy? If we have gotten by this long without whatever safety and health benefits these regulations may bring, surely we can go a few more years without them. Congress would, of course, retain the power to enact new laws should new needs arise that don’t qualify as emergencies. But regulatory creep would halt.
Obama has challenged Congress to put country before politics. Perhaps Congress and the president should try putting recovery before regulation.
(Ramesh Ponnuru is a Bloomberg View columnist and a senior editor at National Review. The opinions expressed are his own.)
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