Free Markets, Free People

Daily Archives: April 18, 2011


The cost of the regulatory state

One issue that deserves much more attention is the cost of the powers government exercises to regulate.  The Competitive Enterprise Institute has just issued a study that does exactly that – study the cost of the regulatory state and the impact it has on our economic viability.

You shouldn’t be surprised to learn that regulation is up and so is its cost (per the report, the cost of regulatory compliance in this country is about $1.75 trillion):

Among the report’s findings:

  • The Federal Register stands at an all-time record-high 81,405 pages.
  • In 2010, federal agencies issued 3,573 final rules.
  • While agencies issued 3,573 final rules, Congress passed and the president signed into law a comparatively “few” 217 bills. Considerable lawmaking power is delegated to unelected bureaucrats at agencies, an abuse addressed recently in proposals such as the REINS Act.
  • Alarmingly, proposed rules in the Federal Register have surged from 2,044 in 2009 to 2,439 in 2010, a jump of 19.3 percent.
  • Of the 4,225 rules now in the regulatory pipeline, 224 are “economically significant” meaning they wield at least $100 million in economic impact—this is an increase of 22 percent over 2009’s 184 rules.
  • Given 2010’s government spending (outlays) of $3.456 trillion, the regulatory “hidden tax” of $1.75 trillion stands at an unprecedented 50.7 percent of the level of federal spending itself.
  • Regulatory costs exceed all 2008 corporate pretax profits of $1.463 trillion.
  • Regulatory costs dwarf corporate income taxes of $157 billion.
  • Regulatory costs tower over the estimated 2010 individual income taxes of $936 billion by 87 percent—nearly double the level.
  • Regulatory costs of $1.75 trillion absorb 11.9 percent of the U.S. gross domestic product (GDP), estimated at $14.649 trillion in 2010.
  • Combining regulatory costs with federal FY 2010 outlays of $3.456 trillion reveals a federal government whose share of the entire economy now reaches 35.5 percent. 

The report urges reforms to make the regulatory costs more transparent and accountable to the people, including annual “report cards” on regulatory costs and benefits, and congressional votes on significant agency rules before they become binding.

Take a moment to absorb those numbers.  And ponder, for a moment that final percentage.  35.5% of what our economy produces now is related to government spending or compliance to a government regulatory regime.

Here’s a thought – if the government wants to spur economic growth, create jobs and, most likely, increase revenue for government, perhaps a serious – and I mean very serious- look ought to be taken (along with action, please) at the mountain of costly regulations now imposed by said government and a majority of them rolled back.  Over 81,000 pages of regulations, and I’m sure some bureaucrat out there believes everyone of them is necessary.

Sane people know better. Much of it is out of control or heading that way.  For instance:

Runaway regulation under the Clean Air Act.

In regulating greenhouse gas emissions, the Environmental Protection Agency (EPA) is trying to pick and choose which provisions of the Clean Air Act it wants to implement. But that is not how the Clean Air Act was set up. Under the Act, regulation under one section trips regulation under multiple other sections. Even if EPA tries to avoid this outcome,environmental pressure groups have already filed several lawsuits to compel the agency to begin regulating greenhouse gas emissions under other sections. Unless Congress intervenes, every building larger than a single-family dwelling likely will become subject to carbon controls in the near future.

Of course the next logical step after pulling in all structures other than “single-family” homes is to do what?  That’s right, pull in single family homes.

And:

EPA’s administrative cap-and-trade power grab.

The EPA plans to propose greenhouse gas emissions control technology standards for power plants in July2011 under the Clean Air Act. One of the primary options the EPA is reportedly considering is a cap-and-trade program. The fact that even the Democratic-controlled 111th Congress refused to enact a cap-and-trade program appears not to matter to Climate Czar Carol Browner or EPA Administrator Lisa Jackson. The EPA’s authority under the Clean Air Act requires clarification and the agency’s unilateral actions require investigation.

Can’t get it done by Congress (whose job it is, by the way).  Then do it by regulatory fiat.

Plus:

De facto moratorium on American oil and gas production.

Political decisions by Interior Secretary Ken Salazar and his appointees have led to a steep decline in domestic oil and gas production on federal lands and offshore areas. Production is already down and will almost certainly decline further. The extent of these cancellations is not fully apparent because they have been done piecemeal. An investigation is needed to put all the pieces together and thus show the damaged one and being done to America’s domestic oil and gas industry.Congress refused to enact a cap-and-trade program appears not to matter to Climate Czar Carol Browner or EPA Administrator Lisa Jackson. The EPA’s authority under the Clean Air Act requires clarification and the agency’s unilateral actions require investigation.

These are the types of regulatory abuse and over reach that are harming our economy, costing us jobs and making us less competitive.

Not only do we need to get government spending back under control, we badly need to get the regulatory state back under control as both spending and over regulation are eating up increasingly large parts of our GDP.

~McQ


Egypt, predictably, begins to go the way of radical Islam

Damien McElroy in Cairo, reporting for the UK Telegraph, has the following observations:

The Muslim Brotherhood, Egypt’s largest Islamic movement and the founder of Hamas, has set up a network of political parties around the country that eclipse the following of the middle class activists that overthrew the regime. On the extreme fringe of the Brotherhood, Islamic groups linked to al-Qeada are organising from the mosques to fill the vacuum left by the collapse of the dictatorship.

The military-led government already faces accusations that it is bowing to the surge in support for the Muslim movements, something that David Cameron warned of in February when he said Egyptian democracy would be strongly Islamic.

{feigned surprise} Oh, my, who’d have thought that could happen?  Only the terminally naïve or those with no understanding of the area or human nature would have figured otherwise. 

Power vacuums produce opportunities for others to fill them.  The US helped create that vacuum by insisting Hosni Mubarak must step down. 

Usually, as we’ve mentioned here any number of times, the most organized and ruthless succeed in filling such power vacuums.  And that’s precisely the case in Egypt where Islam in general is as pervasive as the air breathed there and the Muslim Brotherhood, while never allowed to be in power previously, was the most organized of the groups with the potential to fill the power vacuum.

And that is coming to fruition.  Not just in an Islamic sense, but in an Islamist sense as well.  The Muslim factions are poised to take over and control any government voted in by the public and do it in a big way:

Mohammed Badie, the Muslim Brotherhood’s spiritual leader, last week predicted the group’s candidates would win 75 per cent of the seats it contested.

Fundamentalist factions have also emerged as parties. Gamaa al-Islamiya, an al-Qaeda linked group that promotes Salafist traditions has used its mosques as a political base for the first time since the 1970s.

Egypt attempted in the past – however oppressive that effort was – to keep a largely secular government, at least by Middle Eastern standards.  And that was to our benefit and certainly to the benefit of the region.  It produced the peace treaty with Israel and ushered in a few decades of relatively peaceful times in the Middle East.  That’s pretty much likely to go by the wayside soon.  This next government will be steeped in Islam if not a good measure of Islamism.  That has been ordained by the first “democratic” vote in Egypt:

A scare campaign that a No vote in last months referendum would eliminate Islamic law from the Egyptian constitution ensured a 77 per cent Yes result.

As for those who participated in the April 6th movement and want a more secular and democratic Egypt?  Well, again, the best organized is the most likely to succeed, right?  And they have little or no organization:

But the April 6th movement that spearheaded protests has no clear plan for party politics. Diplomats have warned the demonstrators are not well prepared for elections.

"The leadership of the protests was so focused on the street-by-street detail of the revolution, they have no clue what to do in a national election," said a US official involved in the demonstrations. "Now at dinner the protesters can tell me every Cairo street that was important in the revolution but not how they will take power in Egypt."

Entirely predictable and clearly not in the best interest of the US – which calls into question the administration’s decision not to back Mubarak but call for his ouster.  The result is an unintended consequence one assumes – we backed a faction that we knew little about, which has had little impact since and now we’re going to see results that we don’t want and are not in the best interests of the US or peace in the region.  The same could be said about Libya.

Finally, don’t be fooled by the “independent” status of Egyptian political candidates for the Presidency there.  Their independence is in name only as they must court the factions that are likely to hold power in any legislature that forms.

Although the leading contenders for Egypt’s presidency are independents, many have begun wooing the Muslim blocs. Front-runner Amr Moussa, the Arab League president, has conceded that its inevitable that Islamic factions will be the bedrock of the political system.

Of course they will and that means, inevitably, that Egypt will eventually revoke its treaty with Israel thereby setting the peace process back to square one.

Yes, this has been beautifully played by the President and the State Department.  If naiveté in foreign affairs was ever more  evident than now, I’m having difficulty remembering it (Jimmy Carter is as close as it comes, and they’re making even him look competent).

~McQ


Quote of the Day–debt limit edition

Alan Greenspan to David Gregory on “Meet the Press” (via Politico):

"I have a more fundamental question. Why do we have a debt limit in the first place? We appropriate funds, we have tax law, and anyone reasonably adept at arithmetic can calculate what the debt change is going to be. … [T]here is a major problem in cutting spending. … [I]t is inconceivable to me that we’ve put ourselves in this position. Why we are continuously going back to the well to continuously up the debt limit when we already predetermined what that limit has to be, and so, consequently, they’re trying to abrogate what the Congress did?"

It is a pretty fundamental question.  What is the purpose of a debt limit – note the word, “limit” – if it only serves as a temporary point at which, when reached (again) Congress reconvenes and raises it almost automatically?   It makes no sense.  But then we’re talking about Congress and politicians here.

Greenspan’s point is dead on target.  What is its purpose if not to limit spending to that amount or less?  And what real purpose does it serve if it is continually raised?

The answer to the first is “political not policy” and the answer to the second, unfortunately, is “none.”

~McQ