Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

26 January 2012

Obama's Socialist Fantasy Tale - Regulations

In his State of the Union speech, Obama claimed to have reduced the number of new regulations each year compared to President George W. Bush.  This may be true in one respect, but it is a matter of sad misdirection in most respects.  Let us examine this issue.

First off, there may be more important measures for the effects of new regulations than the number of them.  Not that the number is unimportant.  It is and it is bewildering, especially for business owners at whom most are aimed and for whom little tolerance exists.  Homeowners and employees have it easy compared to business owners and managers.  So what other measures are important.  One that is easy to establish is the number of pages of the regulations newly added to the Code of Federal Regulations.  Another is the number of new regulations costing more than $100,000,000 to implement annually.

We need some historical background and perspective.  In 1970, the Code of Federal Regulations (CFR) had 54,834 pages of regulations.  That would be a good many more pages of regulations than any businessman would have time to read and study.  Remember that the Congress was unable and unwilling to read the over 2,000 pages of the ObamaCare bill, but they have no hesitation of expecting businessmen to know many tens of thousands of pages of regulations.  By 1998, the number of pages of regulations had grown to 134,723 pages and the 201 volumes containing them required 19 feet of shelf space.  I wonder of any businessman alive ever read through that complete set of volumes to find out which regulations applied to his operations.  The General Accountability Office (GAO) says that in fiscal years 1996 to 1999, a total of 15,286 new regulations went into effect.  222 of these cost more than $100,000,000 a year to implement.  In those 4 years, the cost of operating US businesses went up by more than $22.2 billion a year due to these regulations.  No doubt that is a very low-ball figure.

As a candidate for President, Obama blamed the recession on Bush because he failed to regulate the economy enough.  Nothing could have been more untrue.  Government controls tended to push the financial institutions hard toward making sub-prime mortgages and toward supplying the easy credit bubble that collapsed the economy when the sudden price increase in oil in 2007 put the economy under strain and pin-pricked the balloon.  As for regulation in general, George W. Bush was a champion of regulations.  The great economist Veronique de Rugy documented that fact very well in a Reason Magazine article in the January 2009 issue called Bush's Regulatory Kiss-Off.  Examine the graph of the regulatory budget increases by President from de Rugy's article:


George W. Bush loved regulations even more than Clinton did in his second term or his father or Nixon.  Republicans in general do not have a good record of minimizing regulations.  It is one of the many shortcomings of Republicans and generally flies in the face of the rhetoric they use honoring individual rights and respecting business activity.  So let us bear this in mind when Obama claims to have implemented fewer regulations than Bush.  That is like saying that I love graft just a bit less than Tammany Hall did.

But by other measures, Obama is no regulatory saint.  Wayne Crews, of the invaluable Competitive Enterprise Institute, anticipated regulatory claims by Obama in his State of the Union address and tells us much more about his regulatory regime in an article called President Obama's State of the Union?  Hyper-Regulated.  He notes that Obama has claimed to be reducing ineffective regulations, but he is strengthening the National Labor Relations Board to prevent plant relocations, he is not allowing speedy energy infrastructure building (Keystone XL Pipeline), he has not allowed oil and gas drilling on federal lands, and the EPA is going forward with "maximum technology" requirements for utilities, cement plants, and industrial boilers.  The Dodd-Frank Too-Big-To-Fail Bill requires tremendous numbers of new regulations, most of which have missed their statutory deadlines.  Hey, when the Senate cannot produce a statutory required budget for any of three years, why should the bureaucracy of the Obama Administration have to meet the deadlines they are required to meet by law?  And Crews notes that despite widespread opposition, the FCC is proceeding with net neutrality, even without congressional authorization.

General metrics such as the number of new pages added to the regulatory law are literally horrifying.  In 2011, 82,351 pages of regulations were added and in 2010 Obama added 81,405 pages.  In these two years, Obama added 163,756 pages of regulations which we should compare to the total pages of regulations in 1998 of 134,723 pages.  The 19 feet of shelf space needed in 1998 for the regulation volumes, grew by 23 feet of additional shelf space in two years under Obama!  Unfortunately, those years between 1998 and 2010 saw huge increases in the necessary shelf space also.  There is surely no lack of regulations now.  In fact, it is a travesty of law to have so many regulations that no one can know them and no one understands them.  In fact, no one could obey them, because such a volume of regulations will have many contradictions in them and there will be many cases in which obeying one regulation will put one in conflict with another.  Such a body of law cannot be self-consistent.

Wayne Crews also examined the number of new regulations with major impact upon businesses.  In 2008, the Democrat Congress and Bush put out 180 new regulations with major economic impact.  Obama put out 212 in 2011 and 224 in 2010.  The highest number of such important regulations added prior to 1998 was 159.  The government is really going for major impact on our weak economy!  The number of regulations in the pipeline for implementation was 4,004 rules in 2008, but in 2010, Obama had increased this to 4,225 and in 2011 it was 4,128.  So, there will be no future shortage of new regulations unless a very determined President and Congress act to stop them.

Rules in the pipeline affecting small businesses, who create so many new jobs, are now 822, compared to the 2008 number of 753.  Crews says that about 21% of all rules affect small businesses directly.  Most regulatory rules affect small businesses by increasing their costs or by using up the money of big businesses so they are unable to do as much business with small businesses as they otherwise would.

As we know, Obama has a special reverence for environmentalism.  The EPA is especially threatening under his regime.  The EPA has 318 new rules in the pipeline and 18 of these are economically significant, meaning that they admit that they will cost more than $100,000,000 annually to implement.  Some will cost much, much more.  93 of these rules will affect small businesses directly.  Of these, 14 are economically significant.

Almost every time there is a complaint that something went wrong because we had too few regulations, careful thought and research reveals that regulations caused the problem or that regulations already in place were not used to prevent the problem.  This is not surprising given the massive regulatory structure already in place.  No one understands the regulations and it is not reasonable to have sufficient regulators to see if companies are obeying the regulations.  The first law of good law is that the laws should be knowable, reasonable, and enforceable.  Our regulatory structure massively defies this simple common sense.  Nonetheless, governments all over the US believe it is their primary function to give us more laws and more regulations.  This is otherworldly wrongheaded.

1 comment:

Charles R. Anderson, Ph.D. said...

Very shortly after posting this, I discovered the following statement by Rush Limbaugh:

“It was chock-full of lies. It was fantasyland. No, it didn’t soar. It was boring.”

I agree. It was lie after lie and misdirection after misdirection. I personally wanted to wring his neck for his presumptuousness in thinking he could put such nonsense over on me or on most fine Americans. Obama is an imposter, an embarrassment, and as wrongheaded as a man can be.