Thoughts About Today’s Oversight Hearing on the FCC’s Budget and Spending…

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Earlier today, the Subcommittee on Communications and Technology of the House Energy and Commerce Committee held an oversight hearing on entitled “The Budget and Spending of the Federal Communications Commission.”  Given the growing size of the federal bureaucracy, conducting this sort of oversight is indeed welcome news.

In his opening statement, Committee Chairman Greg Walden noted that “Last year, the FCC was given a budget of $424.8 million, and the FCC has reported that it can maintain current services with a budget of $421.2 million.  Although that’s less than a one percent decrease, it’s a start, and I appreciate the work of the FCC to keep costs down.”

While, as former FCC staffers ourselves, we certainly have empathy for our hard working colleagues in the agency, given both our growing deficit spending and our still-stagnant economy, is a less than 1% reduction in the agency’s total budget—particularly as the Commission is ostensibly removing many outdated regulations in the face of the competitive realities of the market—really the best we can do?

We think not.  And for two reasons.

First, President Obama’s proposed budget for 2012 adds another $1.3 trillion to the nation’s national debt.  The federal government is still living well beyond its means, and much of what the FCC is doing these days we could perhaps do without.

Second, last spring, we released a paper entitled Regulatory Expenditures, Economic Growth and Jobs: An Empirical Study.  In this paper, we show, using fifty years of data and advanced econometric techniques, that there is a demonstrable link between the size of the total regulatory bureaucracy and jobs and GDP.  Indeed, the data indicate that just a 5% across the board cut to all federal regulatory agency operating budgets would produce $75 billion in new GDP growth and create 1.2 million new private sector jobs EACH YEAR.

We even break these findings down into a “cost per regulator.”  According to our study, each year, a Federal Regulatory Agency Employee:

  • Cuts GDP by $6,200,000;
  • Eliminates 98 Private‐Sector Jobs; and
  • Destroys the Equivalent of the Economic Output of 134 Persons.

In terms of an employment multiplier, each million dollar increase in the overall federal regulatory budget costs the economy 420 private sector jobs each year.

While the data do not permit us to do an agency-by-agency breakdown (e.g., the cost to the economy of the FCC’s regulations versus the costs of EPA or SEC or FERC regulations), as Congress and the President struggle with the difficult decisions of how to shrink federal spending and how to grow the economy, our paper demonstrates that a sensible place to start would be to investigate responsible cuts in the budgets of federal regulatory agencies—including the Federal Communications Commission—of more than 1%.