Obama, Regulation, and the State of the Union…

Posted By Larry Spiwak On January 27, 2012 @ 10:33 AM In "Cost Per Regulator",Law and Economics,Regulation,Regulatory Reform | Comments Disabled

At the State of the Union earlier this week [1], President Obama repeated his professed goal implementing meaningful regulatory reform.  For example, while the President noted that “we need smart regulations to prevent irresponsible behavior”, the President also again recognized that “[t]here is no question that some regulations are outdated, unnecessary, or too costly.”

To support his “walking the walk” about meaningful regulatory reform, the President boasted that “I’ve approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his.”  Mr. Obama also boasted that “I’ve ordered every federal agency to eliminate rules that don’t make sense. We’ve already announced over 500 reforms, and just a fraction of them will save business and citizens more than $10 billion over the next five years.”  While we certainly commend Mr. Obama for his efforts to reduce regulations that, using his own words from last year, have “outlived their usefulness [2]”, we do have a few thoughts in this regard.

First, boasting that “I’ve approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his” is a bit disingenuous.  Why? Because when we are taking about the economic impact of regulations, more likely than not the issue is “quality” not “quantity.”  Stated another way, if the economic impact of just one rule exceeds the costs imposts by another one hundred rules combined, you would be hard pressed to say the overall cost to society has been reduced by the fact you issued “fewer” regulations.  And, given the “quality” of the Obama Administration’s regulatory agenda—including everything from a 2000+ page heath care bill to a the creation of the new half-billion-dollar Consumer Finance Protection Bureau (“CFPB”) to the denial of the Keystone pipeline to the imposition of “Open Internet” requirements on broadband service providers—one would be hard pressed to say that these regulatory interventions would have a de minimis effect on the economy.  Indeed, based on government statistics, the cost of major new regulations in 2010 was at its highest level since 1981 [3].

Second, as our friend Randy May at the Free State Foundation recently observed [4], many of the regulatory reforms touted by the Administration are simply a “Potemkin village” because many of these rules (e.g., the “Fairness Doctrine”) were already dead and unenforced under current law.  Thus, as Randy observes, “Excising rules from the … books that are no longer operative is not an unworthy exercise. But it is not real regulatory reform.  And it should not be touted as such.”

However, if Mr. Obama is truly serious about removing burdensome regulations, we would like to remind folks that we have a simple and elegant solution:  impose an across-the-board cut in the operating budget of all Federal agencies by five percent.  If we do, our empiric research demonstrates [5] that while we may lose about 12,000 Federal employee jobs, fifty years of data reveal that we will pick-up both 1.2 million private sector jobs and $75 billion in GDP each year.  If we were to double the cut to 10%, then the domestic economy picks up close to $150 billion in new GDP and 2.3 million new private-sector jobs annually.

Either way, given current economic conditions and the ever-growing federal government budget crisis, that’s a heck of deal.


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URLs in this post:

[1] State of the Union earlier this week: http://www.whitehouse.gov/the-press-office/2012/01/24/remarks-president-state-union-address

[2] outlived their usefulness: http://online.wsj.com/article/SB10001424052748703396604576088272112103698.html

[3] based on government statistics, the cost of major new regulations in 2010 was at its highest level since 1981: http://www.heritage.org/research/reports/2010/10/red-tape-rising-obamas-torrent-of-new-regulation

[4] Randy May at the Free State Foundation recently observed: http://freestatefoundation.blogspot.com/2012/01/mr-genachowski-tear-down-that-potemkin.html

[5] our empiric research demonstrates: https://www.phoenix-center.org/PolicyBulletin/PCPB28Final.pdf

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