Archive for April, 2011

If There Were An Annual ‘Regulation Day’

Posted by Walter Olson

As Iain Murray points out at National Review‘s “Corner,” there’s no date on the calendar each year that reminds us, the way income tax filing day does, of the huge share of our economic labors that the government commands in the name of regulation. In part this is because the costs of regulation are even better disguised than those of taxation: while paycheck withholding may lull us into complacency about our income tax burden, it is downright transparent compared with the costs of regulation, which the ordinary citizen may never recognize when passed along in the form of higher utility bills or sluggish performance by some sector of the economy. Iain notes the good work done by his colleagues at the Competitive Enterprise Institute:

Regulations cost $1.75 trillion in compliance costs, according to the Small Business Administration. That’s greater than the record federal budget deficit — projected at $1.48 trillion for FY 2011 — and greater even than all corporate pretax profits. This is only one of many findings of the new edition of Wayne [Crews'] “Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State,” a survey of the cost and compliance burden imposed by federal regulations.

As is now becoming evident, the Obama Administration is presiding over one of the most extraordinary expansions of regulation in all American history, in areas from health care to consumer finance, university governance to “obesity policy,” labor and employment law to the environment. Not all these developments originated with Obama appointees — some had their start under President George W. Bush or with lawmakers in Congress — but this administration has pursued stringent regulatory measures with extraordinary zeal, notwithstanding the odd feint to soothe business-sector misgivings.

Here are three more or less random samplings from recent days of the quiet momentum that’s built up in Washington toward a much bigger regulatory state:

• Reflecting the historical development of the Food and Drug Administration, the introduction of new medical devices such as pacemakers and joint replacements is still somewhat less intensively regulated than the introduction of new pharmaceutical compounds. As Emory’s Paul Rubin relates at Truth on the Market, pressure is building in Washington to correct this supposed anomaly by intensifying the regulation of devices. As Rubin notes, “virtually all economists who have studied the FDA drug approval process have concluded that it causes serious harm by delaying drugs,” yet the premise of the new campaign for regulation “is that we should duplicate that harm with medical devices.”
• Much of the new regulation of consumer finance has taken the form of rules governing what information lenders can ask for or consider about borrowers’ situation in extending credit. One such proposed rule, from the Federal Reserve, “would require credit card issuers to consider only a person’s independent income, and not the household’s income, when underwriting credit cards in an effort to protect young adults unable to repay debt.” Great big unforeseen consequence: many stay-at-home parents will now be unable to establish credit in their own names (via).
• Among a slew of other high-profile regulations, the Environmental Protection Agency (EPA) has chosen this moment to demand very rapid new reductions in emissions from industrial boilers (“Boiler MACT” rules). Per ShopFloor, Thomas A. Fanning, who runs one of the nation’s largest electric utilities, the Southern Company, thinks trouble lies ahead:
  

  EPA has proposed Utility MACT rules under timelines that we believe will put the reliability and affordability of our nation’s power system at risk. EPA’s proposal will impact plants that are responsible for nearly 50 percent of total electricity generation in the United States. It imposes a three-year timeline for compliance, at a time when the industry is laboring to comply with a myriad of other EPA mandates. The result will be to reduce reserve margins—generating capacity that is available during times of high demand or plant outages—and to cause costs to soar. Lower reserve margins place customers at a risk for experiencing significant interruptions in electric service, and costs increases will ultimately be reflected in service rates, which will rise rapidly as utilities press ahead with retrofitting and projects to replace lost generating capacity due to plant retirements.

At least we’ll be able to avert brownouts by switching over readily to fracked-natural-gas, Alberta tar-sands, and latest-generation-nuclear options — or we would had all those options not been put under regulatory clouds as well.