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Bureaucracy vs. Economy, elected Government

There may be no area where President Trump’s battle against what some refer to as “The Swamp,” Washington’s administrative agencies, is more pronounced than in his effort to reduce the overwhelming amount of regulations imposed not by the elected government, but by an unresponsive, permanent class of bureaucrats.

The current White House initiated a policy of abolishing two regulations for every new one implemented, as mandated by Executive order 13771.

Estimates are that regulations cost the U.S. economy almost $2 trillion.  But the harm done even by that extraordinary figure is surpassed by the damage done to the American soul.  The concept of government being open, transparent and accountable, the very basis of the nation, has been eclipsed.  In terms of impact on the daily lives of the citizenry, Congress, the White House and the Supreme Court combined all play second fiddle to the bureaucracy.

In 2018, the American Action Forum (AAF)   outlined how the Trump Administration was slashing regulations at a record pace. The study found that the approximately $16.4 billion in regulations emanating from 70 agencies were cut. Despite that, only the surface of the problem has been scratched.

The Competitive Enterprise Institute (CEI)   notes that “…the cost of government extends even beyond what Washington collects in taxes and the far greater amount it spends. Federal environmental, safety and health, and economic regulations and interventions affect the economy by hundreds of billions—even trillions—of dollars annually. Regulatory burdens can operate as a hidden tax. Unlike on-budget spending, regulatory costs are largely obscured from public view. They are the least disciplined aspects of government activity, which can make regulation overly appealing to lawmakers. Budgetary pressures can incentivize lawmakers to impose off-budget regulations on the private sector rather than add to unpopular deficit spending…”

In its 2019 “10,000 Commandments”  report, CEI’s Wayne Crews  presents these key facts:

  • The estimated $1.9 trillion “hidden tax” of regulation is greater than the corporate and personal income taxes combined. If the cost of federal regulations were a country, it would be the 9th largest, behind India and just ahead of Canada.
  • Each U.S. household’s estimated regulatory burden is at least $14,615 annually on average. That amounts to 20 percent of the average pre-tax household budget and exceeds every item in that budget, except housing.
  • In 2018, the Trump administration issued 3,368 rules. That’s more than the 3,281 final rules in 2017, which was the lowest number of regulations coming out of federal agencies in a single year since the National Archives began publishing rule counts in 1976.
  • The estimated regulatory cost burden is equivalent to more than 40 percent of the level of total federal spending, projected to be $4.4 trillion in 2019.
  • In 2018, Washington bureaucrats issued regulations at a rate of 11 for every one law Congress enacted. The average for this “Unconstitutionality Index” for the past decade has been 28 to one. The five agencies issuing the most rules are the Departments of Commerce, Defense, Health and Human Services, Transportation, and the Treasury.
  • In 207, President Trump’s first year, the Federal Register finished at 61,308 pages, the lowest count since 1993 and a 36 percent drop from former President Barack Obama’s 95,894 pages, which had been the highest level in history. The 2018 Federal Register rose to 68,082 pages (however Trump’s rollback of rules can add to rather than subtract from the Register).
  • In the pipeline now, 67 federal departments, agencies, and commissions have 3,534 regulatory actions at various stages of implementation(recently “Completed,” “Active,” and “Long-term” stages), according to the fall 2018 “Regulatory Plan and the Unified Agenda of Federal Regulatory and Deregulatory Actions.”
  • Of the 3,534 regulations in the Agenda’s pipeline, 174 are “economically significant” rules, which the federal government describes as having annual economic effects of $100 million or more. Of those 174, 38 are deemed “deregulatory” for purposes of E.O. 13,771.
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CEI reported that “In 2017, Trump’s first year, the Federal Register finished 2017 at 61,308 pages, the lowest count since 1993 and a 36 percent drop from President Barack Obama’s 95,894 pages in 2016, which had been the highest level in history.”

The American Legislative Exchange Council (ALEC) notes that there continue to be roadblocks to this effort, citing a recent U.S. Supreme Court case as an example. “In Kisor v. Wilkie, the Supreme Court squanders a prime opportunity to take back its job to interpret the law by upholding the Auer deference while also recognizing some of the concerns excessive deference presents. Auer holds that federal courts must yield to an agency’s interpretation of ambiguous regulations produced by that agency when all other tools of interpretation have been exhausted.”

Wayne Crews will appear on this week’s Vernuccio-Novak Report

Illustration: Pixabay

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Attacking Red Tape

The U.S. Department of Commerce  is moving to undue the extraordinary burden placed on the American economy during President Obama’s tenure.

The prior Administration introduced record-breaking over-regulation, as noted in numerous studies, most notably that performed by the Competitive Enterprise Institute (CEI). That addiction to regulation was more than just a nuisance. The CATO institute asserts that “It is widely recognized that excessive regulation is unnecessarily killing jobs.”

The Daily Signal found that “job-creating entrepreneurs in the United States have been dispirited by the scope and cost of escalating red tape…Since 2009, the expansion of Uncle Sam’s regulatory control has been one of the prime culprits in America’s startling decline in economic freedom and overall competitiveness. Each new edict has meant a new government bureaucracy that entrepreneurs and producers must navigate. Worse, the trend of overregulating our economy has also bred cronyism and tarnished our free-market system. As reported in the 2015 Index of Economic Freedom, an annual study that benchmarks the quality and attractiveness of the entrepreneurial framework across countries, the United States remains stuck in the second tier economic freedom rank of the “mostly free,” with its business freedom score plunging to the lowest level since 2006. This increased regulatory burden, aggravated by favoritism toward entrenched interests, has notably undercut America’s historically dynamic entrepreneurial growth. A 2014 Brookings Institution analysis shows that with business exits now exceeding new business formations, entrepreneurial dynamism in the United States has been steadily dwindling. In light of the excessive and costly regulatory environment, it is not surprising that America’s ongoing economic recovery has been far from dynamic. Fewer Americans can prosper in this overregulated economy.”

The cost of compliance with the tidal wave of regulatory mandates was overwhelming. CEI estimated that in 2015, regulatory-related expenses were approximately $1.88 trillion, 10% of the entire American GDP and over 5 times the cost of federal corporate income taxes that year.

It’s not only private sector projects that are daunted by over-regulation.  Improtant infrastructure projects suffer greatly, as well.

According to the Department of Commerce, “the cost of permitting delays can more than double direct project construction costs when all delay factors are considered….the types of costs associated with delays are subtle and insidious – and we too often accept them as  status quo without realizing the massive drag they have created on our economy. For example, many proposed new projects offer environmental benefits compared to the status quo, so by delaying the new ‘greener’ solution, we may often prolong higher emissions and congestion associated with the status quo. Furthermore, delays may mask a greater threat – important infrastructure projects may not even be considered or initiated because of investment uncertainty and risk created by permitting delays. The risk of delay and associated lower returns can be a powerful disincentive for any private capital participation.”

In response, the Commerce Department issued, earlier this year, a Request for Information (RFI) on how to cut the burden, particularly for the hard-hit manufacturing sector, and has now published a study based on the results in a report entitled “Streamlining Permitting, and Reducing Regulatory Bburdens for Domestic Manufacturing.”   

The Report notes that:

“Federal regulations impose enormous costs on America’s businesses and working families. These costs burden virtually every sector of our economy, although the manufacturing sector is disproportionately hard hit. The direct costs on manufacturing companies were estimated by the National Association of Manufacturers (NAM) to be $138.6 billion as of 2014,1 though this estimate does not include indirect negative effects on the U.S. economy such as reduced innovation and global competitiveness, lost investment, and significant job losses.  Small businesses are also disproportionately burdened by excessive federal regulation.

“on January 24, 2017, President Trump signed a Presidential Memorandum on Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing. The Memorandum, which is one part of an Administration-wide regulatory reform agenda, required the Secretary of Commerce, in coordination with other executive departments and agencies, to conduct outreach to stakeholders on the impact of federal regulations and permitting requirements on domestic manufacturing and to submit a report to the President setting forth a plan to streamline federal permitting processes and to reduce the regulatory burdens affecting domestic manufacturing industry expressed clear support for the need to protect the environment, human health, and worker safety, but shared concrete, detailed concerns about how the federal government tries to achieve those objectives. Respondents identified numerous regulatory and permitting problems, including:

  • onerous and lengthy permitting processes that increase cost, add uncertainty, and inhibit investment in new and existing manufacturing facilities;
  • inadequately designed rules that are impractical, unrealistic, inflexible, ambiguous, or that show a lack of understanding of how industry operates;
  • unnecessary aspects of rules, or unnecessary stringency, that are not required to achieve environmental or other regulatory objectives;
  • overlap and duplication between permitting processes and agencies; and
  • overly strict or punitive interpretations of guidance, policies or regulations that are often counter to a pro-growth interpretation.

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“Despite numerous regulatory reform initiatives over the years, businesses continue to express concerns about increasing regulatory burdens. The fact that manufacturers continue to raise the same concerns, even after decades of regulatory reform efforts by the federal government, indicates a failure on the federal government’s part to fully engage with regulated industries and fully understand the real-world impact of its regulations. There is a vital need for better dialogue and understanding between regulators and industry. In the meantime, the urgency for reform continues to grow. A 2017 NAM study states that most manufacturers perceive their regulatory burden to have increased significantly, such that reducing their current burden is at least as important as reducing the cost of new regulations.

SUMMARY OF RECOMMENDATIONS

“The Department makes three major recommendations.

  • Each agency’s Regulatory Reform Taskforce (RRTF) should deliver to the President an ‘Action Plan’ in response to all permitting and regulatory issues highlighted by industry.
  • Annual Regulatory Reduction Forum. There is no regular process for consultations with industry to identify specific actions the federal government can take to eliminate unduly burdensome regulations and accelerate permitting decisions. Thus, the Department recommends creating an annual, open forum for regulators and industry stakeholders to evaluate progress in reducing regulatory burdens.
  • Expanding the Model Process in FAST-41. [Title 41 of the FAST Act (FAST-41) (42 U.S.C. § 4370m) was designed to improve the timeliness, predictability, and transparency of the Federal environmental review and authorization process for covered infrastructure projects.] The FAST Act  contains various provisions aimed at streamlining the environmental review process, with improved agency coordination through the creation of a Coordinated Project Plan and a Permitting Dashboard. Covered projects will typically enjoy better coordination, transparency of approvals, and expedited permitting. The Department recommends that the Administration use existing authority to extend the use of streamlined permitting procedures in the FAST Act to any project that will result in a significant, immediate economic benefit to the United States. For example, consideration could be extended to funded, qualifying projects in a new “economically significant” category. Consideration should be extended to complex, funded manufacturing projects that are in late stages of development and that can demonstrate significant net direct and indirect benefits to the domestic economy. To be eligible for the current streamlining process, projects in this sector or category would still need to meet the definition of a “covered project” under FAST-41. FAST-41 provides a model process that could be incorporated into other Federal legislation that governs Federal programs and requirements that apply to manufacturing facilities. To expand further the universe of manufacturing projects that benefit from streamlined regulatory approval processes, the Administration could work with members of Congress to both expand the definition of “covered project” under FAST-41 and to incorporate procedures similar to those found in FAST-41 in other legislation applicable to manufacturing projects. The Department believes that these three recommendations, if executed promptly and with constant, aggressive leadership, will yield significant results. Set forth below is (i) a summary of issues raised in response to the RFI; (ii) an analysis relating to potential reforms; and (iii) specific recommendations and priority areas for reform.”

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America’s Declining Entrepeneurial Spirit

Is the continuous growth of government destroying America’s entrepreneurial spirit? Physicists inform us that for every action, there is an equal but opposite reaction.

Over the past several decades, the federal government has grown increasing large.  During that same time period, according to a study by the Brookings Institute, the number of new business enterprises getting started has declined, and the number of businesses going out of existence has risen.

According to the vital but worrisome study, “declines in business dynamism in the U.S. overall are a pervasive force throughout the country geographically…”  The Brookings study notes that this decline is seen “in all fifty states and in all but a handful of the more than three hundred and sixty U.S. metropolitan areas during the last three decades.”

The Brookings study does not provide a specific reason for this unwanted trend, but the New York Analysis believes that the growth of government has clearly absorbed funds and energy away from the private sector.

According to a study by usagovpending.com,“Government spending at the start of the 20th century was less than 7 percent of GDP… The 1950s began a steady spending increase to about 36 percent of GDP by 1982. In the 1990s and 2000s government spending stayed about constant at 33-35 percent of GDP, but in the aftermath of the Crash of 2008 spending has jogged up to 40 percent of GDP.”
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There have been some government expenditures that are laudatory and absolutely necessary.  Defending the nation from foreign threats is vital, and Washington has done a commendable job in fighting wars. The development of the interstate highway system was essential for the growth of the economy, and funds spent on advanced scientific research are the groundwork for future economic success.

But far less successful have been the many expenditures on areas not traditionally under federal jurisdiction.  There is no indication, to cite one example,  that the numerous anti-poverty programs developed since the 1960s have noticeably decreased the poverty rate, but they have cost the taxpayers vast sums, draining cash that could have been used more productively by the private sector to increase employment, which would have achieved a more salutary effect on poverty.

The vast increase in Washington’s regulatory role, and those of states and municipalities as well,  can reasonably be noted as a disincentive to the creation of small businesses.  The creation of a new enterprise can be daunting and costly enough, but when an array of bureaucratic hurdles are added to the challenge, the effort my appear sufficiently daunting to discourage would-be entrepreneurs, and provide an obstacle to the continued existence of current firms.

Unfortunately, the increased regulatory trend appears to have accelerated during the past five years.

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Excess Regulations Harm Economy and Households

The Federal government set a new record in red tape in 2013, printing 26,417 pages in the Federal register containing new 3,659 final rules and 2,594 proposed rules.  Altogether, 79,311 pages were printed in the Federal Register.  Four of the five highest page counts in the history of that bible of bureaucracy occurred during the Obama Administration.

The information was compiled by the Competitive Enterprise Institute’s  (CEI) Wayne Crews, who is preparing a study entitled “The Ten Thousand Commandments.” Crews estimates that the cost to the public of complying with Washington’s red tape is about $1.9 trillion annually, “roughly the annual GDP of Australia, Canada, or Italy.”

According to the CEI study, regulations not only make American business less competitive, they cost each US household “$14,974 annually in regulatory hidden tax, or 23% of the average income of $65,596.” A substantial part of the explosive growth in regulations during the Obama Administration has been due to the combined effects of Obamacare and the Dodd-Frank financial controls.

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According to Heritage, part of the reason for the regulatory explosion is the President’s push to control the government without the consent of Congress.  The think tank notes that in his 2014 State of the Union address, the President disturbingly pledged to take steps “whenever and wherever I can without legislation.”

Both Heritage and CEI note that hundreds of new regulations are in the pipeline.