An example of how government can become an obstacle to economic recovery
I don’t imagine anyone would argue that it is supposed to be like this, however, this is reality in one city in one state and I’d guess that its true in most places to one degree or another. The place in question? San Francisco, where a woman wanted to open a simple ice cream shop.
Ms. Pries said it took two years to open the restaurant, due largely to the city’s morass of permits, procedures and approvals required to start a small business. While waiting for permission to operate, she still had to pay rent and other costs, going deeper into debt each passing month without knowing for sure if she would ever be allowed to open.
“It’s just a huge risk,” she said, noting that the financing came from family and friends, not a bank. “At several points you wonder if you should just walk away and take the loss.”
Ms. Pries said she had to endure months of runaround and pay a lawyer to determine whether her location (a former grocery, vacant for years) was eligible to become a restaurant. There were permit fees of $20,000; a demand that she create a detailed map of all existing area businesses (the city didn’t have one); and an $11,000 charge just to turn on the water.
Imagine how many potential business owners would have said “the hell with it” and, if possible, gone elsewhere or shelved the idea completely? Had that happened in this case, had the woman in question not had the patience of Job and enough money to weather the 2 years in question, 14 full and part-time workers wouldn’t be employed there.
That’s the problem with stories like this – its hard to get a handle on how many businesses have been discouraged by such a permitting and regulation regime, but you have to assume they are plenty.
It should not take two years for a government to say “okay” to a business. Nor should there be exorbitant fees associated with it.
Thankfully San Francisco has begun to recognize the enormity of its problem and attempt to do something about it. A little thing called “reality”, in the guise of the headquarters for Twitter, has finally begun to bring some government officials around:
“The city has had the reputation of being a difficult place, and a hostile place, to do business,” said Mark Farrell, the city supervisor who has the most private-sector experience (he still operates a venture capital firm). “We’re changing the dialogue.”
According to Mr. Farrell, a critical shift occurred last year when supervisors approved a tax incentive to keep the headquarters of Twitter, the social network, in the city after the company threatened to move.
But he admitted that such actions were relatively easy compared with reforming the city’s entrenched bureaucracy. “To change the inner workings of government is a longer proposition,” he said.
Christina Olague, a former Planning Commission president who was recently appointed city supervisor, said that planning codes governing businesses had ballooned over the years to become hundreds of pages long. “It’s so convoluted,” she said. “It’s so difficult for these businesses to move ahead.”
But the byzantine, time consuming and costly regulatory process, for the most part, still remains. Check out this animated video which illustrates how absurd it can be.
As we’ve said any number of times here, if government wants to play a role in the economy and the economic recovery, perhaps the best role it can play is, for the most part, to get the hell out of the way.
~McQ
Twitter: @McQandO
An Electric Car Mandate?
The editors of the Washington Examiner consider the probable effects of the new CAFE standards (being imposed by the EPA now instead of NHTSA) and ask a pertinent question:
Getting from the current 35 mpg CAFE standard to 54.5 can be achieved by such expedients as making air conditioning systems work more efficiently. We have a bridge in Brooklyn to sell to anybody who thinks that’s even remotely realistic. There is one primary method of increasing fuel economy — weight reduction. That in turn means automakers will have to use much more exotic materials, including especially the petroleum-processing byproduct known as “plastic.” But using more plastic will make it much more difficult to satisfy current federal safety standards. The bottom-line will be much more expensive vehicles and dramatically fewer kinds of vehicles.
[...]
Total costs, as calculated by the EPA, will exceed $157 billion, making this by far the most expensive CAFE rule ever. For comparison, the previous rule in 2010 cost $51 billion, according to the EPA. But the EPA doesn’t include this fact in its calculation: Annual U.S. car sales are 14-16 million units, yet over time, this rule will remove the equivalent of half a year’s worth of buyers. Will that be when the EPA takes a cue from Obamacare and issues an individual mandate that we all must buy Chevy Volts?
I’m just curious, for those who support the individual mandate dictated by Obamacare, what is the argument that such an electric car mandate isn’t possible? If the federal government can force us to purchase insurance from the companies it allows to offer the product based on the idea that health care is a national issue, how is promoting cleaner air and more energy security not the same thing? Indeed, it would seem that the arguments are even stronger for forcing everyone to buy electric cars if furthering the “common good” is the only real restriction on federal power.
So what is the difference from a legal, constitutional standpoint? Is there one?
Medicare’s Doctor (and patient) trap
John Goodman poses a scenario for you to consider:
Suppose you are accused of a crime and suppose your lawyer is paid the way doctors are paid. That is, suppose some third-party payer bureaucracy pays your lawyer a different fee for each separate task she performs in your defense. Just to make up some numbers that reflect the full degree of arbitrariness we find in medicine, let’s suppose your lawyer is paid $50 per hour for jury selection and $500 per hour for making your final case to the jury.
What would happen? At the end of your trial, your lawyer’s summation would be stirring, compelling, logical and persuasive. In fact, it might well get you off scot free if only it were delivered to the right jury. But you don’t have the right jury. Because of the fee schedule, your lawyer skimped on jury selection way back at the beginning of your trial.
This is why you don’t want to pay a lawyer, or any other professional, by task. You want your lawyer to be able to reallocate her time — in this case, from the summation speech to the voir dire proceeding. If each hour of her time is compensated at the same rate, she will feel free to allocate the last hour spent on your case to its highest valued use rather than to the activity that is paid the highest fee.
None of us would ever want to pay a lawyer by task, would we (not talking about a will or legal document production here, but instead some form of defense against charges which necessitates a jury trial and requiring the accomplishment of many tasks)? We’d instead insist upon paying them for a package of services designed to do whatever is necessary to defend us to the best of their ability with the ultimate goal of us walking free.
Right?
So why is it we can’t demand the same of doctors? Why can’t we demand a package of services designed by them to address all of our medical problems?
Well if your stuck with Medicare or Medicaid, you’re stuck with government price fixing and payment by task, that’s why. First the price fixing:
Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.
Yet Medicare is potentially setting about 6 billion prices across the country at any one time.
OK? Bad enough that Medicare has completely removed the price mechanism from the process. As economist Dr. Mark Perry notes:
These problems sound a lot like the deficiencies of Soviet-style central planning in general when the government, rather than the market, sets prices, see Economic Calculation Problem.
Exactly and stultifyingly obvious, correct? In fact, it’s something one shouldn’t have to point out. Nor, would it seem, should it be something that we’re doing either. But we are. You just have to remember, our government doesn’t care about history, because, well, you know, it will get it right where all these other governments have failed. Just watch.
If the price fixing isn’t bad enough, it has also hit upon a procedure that actually inhibits the delivery of good health care rather than incentivizing it.
Medicare has strict rules about how tasks can be combined. For example, “special needs” patients typically have five or more comorbidities — a fancy way of saying that a lot of things are going wrong at once. These patients are costing Medicare about $60,000 a year and they consume a large share of Medicare’s entire budget. Ideally, when one of these patients sees a doctor, the doctor will deal with all five problems sequentially. That would economize on the patient’s time and ensure that the treatment regime for each malady is integrated and consistent with all the others.
Under Medicare’s payment system, however, a specialist can only bill Medicare the full fee for treating one of the five conditions during a single visit. If she treats the other four, she can only bill half price for those services. It’s even worse for primary care physicians. They cannot bill anything for treating the additional four conditions.
So, for example, if you have diabetes, COPD, high blood pressure or any combination of a number of other chronic diseases, tough cookies, your doc can only treat one per visit – unless, of course, he or she wants to work for free on the others.
Don’t believe me?
[When Dr. Young] sees Medicare or Medicaid patients at Tarrant County’s JPS Physicians Group, he can only deal with one ailment at a time. Even if a patient has several chronic diseases — diabetes, congestive heart failure, high blood pressure — the government’s payment rules allow him to only charge for one.
“You could spend the extra time and deal with everything, but you are completely giving away your services to do that,” he said. Patients are told to schedule another appointment or see a specialist.
Young calls the payment rules “ridiculously complicated.”
That has nothing to do with being complicated. It has to do with stupidity overruling common sense and the stupidity being enforced by an uncaring bureaucracy. “Rulz is rulz, Doc”. Do what is best for your patient and do it for free – that’s one way to lower costs, isn’t it?
But don’t forget – government involvement will mean better care at lower cost. That’s the promise, right?
Instead government is now redefining “better” to mean “their way or the highway”. It has nothing to do with what is better for the patient or the doctor. It has to do with what is better politically. And, of course, better for the bureaucracy. In this case, that means squeezing the doctor for everything they can get at the expense of the patient. Since you don’t have a choice about Medicare when you reach 65, any doctor you see doesn’t have a choice about how he or she treats you.
The only choice you have?
Live with it … if you can.
~McQ
Twitter: @McQandO
EPA: When reality meets bureaucratic inertia
What if you passed a law that required the use of alternative fuels from particular sources to be blended with petroleum based fuels to help “break our dependence” on petroleum from “unfriendly countries” (and cut greenhouse gases). And what if, a few years later, new and abundant sources of domestic oil and gas were found, plus even more from secure allies like Canada?
Wouldn’t it makes sense to reconsider the original legislation in light of the new finds.
Oh, and one more thing … what if one of the alternative fuels mandated to be mixed with gasoline hadn’t yet materialized commercially? Would you exempt refiners or fine them?
Common sense says you exempt them. The EPA has, instead, chosen to fine them.
When the companies that supply motor fuel close the books on 2011, they will pay about $6.8 million in penalties to the Treasury because they failed to mix a special type of biofuel into their gasoline and diesel as required by law.
But there was none to be had. Outside a handful of laboratories and workshops, the ingredient, cellulosic biofuel, does not exist.
Somehow that appears to be considered the fault of the refiners. And the EPA is requiring the fines be levied and paid.
Any guess as to who will end up paying those fines?
The 2007 law requires three types of bio fuels be mixed: “car and truck fuel made from cellulose, diesel fuel made from biomass and fuel made from biological materials but with a 50 percent reduction in greenhouse gases” according to the NY Times.
But cellulosic fuel is commercially unavailable. There simply is none to be had.
Michael J. McAdams, executive director of the Advanced Biofuels Association, said the state of the technology for turning biological material like wood chips or nonfood plants straight into hydrocarbons — instead of relying on conversion by nature over millions of years, which is how crude oil originates — was advancing but was not yet ready for commercial introduction.
Of the technologies that are being tried out, he added, “There are some that are closer to the beaker and some that are closer to the barrel.”
But the requirement – and the fines – remain.
Meanwhile, time has marched on and guess what?
Mr. Drevna of the refiners association argued that in contrast to 2007, when Congress passed the law, “all of a sudden we’re starting to find tremendous resources of our own, oil and natural gas, here in the United States, because of fracking,” referring to a drilling process that involves injecting chemicals and water into underground rock to release gas and oil.
What is more, the industry expects the 1,700-mile Keystone Pipeline, which would run from oil sands deposits in Canada to the Gulf Coast, to provide more fuel for refineries, he said.
But the EPA is unmoved by that or the fact that cellulosic fuel is unavailable:
But Cathy Milbourn, an E.P.A. spokeswoman, said that her agency still believed that the 8.65-million-gallon quota for cellulosic ethanol for 2012 was “reasonably attainable.” By setting a quota, she added, “we avoid a situation where real cellulosic biofuel production exceeds the mandated volume,” which would weaken demand.
Hmmm … expert: “We’re closer to the beaker than the barrel”. Bureaucrat: “Even though the product is not commercially available, we still believe the mandate for this year is reasonably attainable.”
Yet there is nothing on the horizon for commercially available cellulosic ethanol in 2012:
One possible early source is the energy company Poet, a large producer of ethanol from corn kernels. The company is doing early work now on a site in Emmetsburg, Iowa, that is supposed to produce up to 25 million gallons a year of fuel alcohol beginning in 2013 from corn cobs.
And Mascoma, a company partly owned by General Motors, announced last month that it would get up to $80 million from the Energy Department to help build a plant in Kinross, Mich., that is supposed to make fuel alcohol from wood waste. Valero Energy, the oil company, and the State of Michigan are also providing funds.
Yet other cellulosic fuel efforts have faltered. A year ago, after it was offered more than $150 million in government grants, Range Fuels closed a commercial factory in Soperton, Ga., where pine chips were to be turned into fuel alcohols, because it ran into technological problems.
Yes that’s right folks, Government Motors is sucking up $80 mil in taxpayer dollars for a startup on a product that experts say isn’t ready for prime time and, as demonstrated by the Georgia plant, still has technical problems which apparently prohibit the commercial production of the desired alternate fuel (after it sucked up $150 mil of tax payer money).
This is ideological agenda driven madness abetted by bureaucratic stupidity. However, no one has ever claimed bureaucracies deal in reality. They’re fall back for such absurdities is process. Fining companies for not using a product that isn’t available but mandated simply underlines how decidedly absurd they can be. The EPA is on a mission. It has been directed to push that agenda by whatever means necessary.
Meanwhile the changes that should be reflected in the new reality – more abundant domestic and safe oil and gas, are being roundly ignored and their exploitation mostly hindered. And you, Mr. and Mrs. Taxpayer, are being fined and looted to push this absurd agenda.
~McQ
Twitter: @McQandO
Is being a slacker now a disability?
The regulatory state again finds a new way to try to handicap businesses. This time it is the EEOC:
Employers are facing more uncertainty in the wake of a letter from the Equal Employment Opportunity Commission warning them that requiring a high school diploma from a job applicant might violate the Americans with Disabilities Act.
The development also has some wondering whether the agency’s advice will result in an educational backlash by creating less of an incentive for some high school students to graduate.
The “informal discussion letter” from the EEOC said an employer’s requirement of a high school diploma, long a standard criterion for screening potential employees, must be “job-related for the position in question and consistent with business necessity.” The letter was posted on the commission’s website on Dec. 2.
Job related things like a modicum of assurance, supposedly offered by high school completion, that a candidate might be able to read and write?
And if that isn’t a necessity anymore, then why do it. Of course that means no college so no studying OWS for credit, but hey, Wal-Mart may have to take you.
Many, many, many people, upon the passage of the feel good Americans With Disabilities Act warned that stupidity such as this was the inevitable and logical end game of the regulators.
As you can see, and as usual, they were right.
Maria Greco Danaher, a lawyer with the labor and employment law firm Ogletree Deakins, said the EEOC letter means that employers must determine whether job applicants whose learning disabilities kept them from obtaining diplomas can perform the essential job functions, with or without reasonable accommodation. She said the development is “worthy of notice” for employers.
“While an employer is not required to ‘prefer’ a learning-disabled applicant over other applicants with more extensive qualifications, it is clear that the EEOC is informing employers that disabled individuals cannot be excluded from consideration for employment based upon artificial barriers in the form of inflexible qualification standards,” she wrote in a blog post.
So, it is the job of the company, according to Danaher, to make these sorts of determinations because the EEOC thinks it is discriminatory to simply require a high school diploma which has always been used to filter candidates?
One assumes then that requiring a college degree would fall in the same category, no? I mean most of those who require it, other than wanting someone who has demonstrated the intelligence and perseverance to complete a prescribed course of study satisfactorily (and the sort of positive traits that relate to work that such an accomplishment brings), really have no “job related” requirements except the usual: the ability write, read and do basic math. How dare they?
This is an “informal discussion letter”, better known among those who follow politics as a “trial balloon”. The EEOC has every intention of trying to make this a regulation. What they’re doing now is similar to the “public comment” portion that is supposed to give the public the ability to point out the huge downside of their proposal before they make it a regulation anyway.
Oh, and about that incentive to finish high school being lessened by something like this? Hand wave away:
“No, we don’t think the regulation would discourage people from obtaining high school diplomas,” said Peggy Mastroianni, legal counsel for the EEOC. “People are aware that they need all the education they can get.”
Are they? That explains the 8% drop out rate I guess. But look at that statement. Pure assertion on both ends of it. “We don’t think” … famous last words of the stereotypical bureaucrat. There’s never been a regulation that had unintended consequences, has there?
~McQ
Twitter: @McQandO
How clueless? This clueless
Rep. Keith Ellison, a Democrat member of the House from MN, explained why he thought creating more and more regulations was a good idea. You see, the more you pass, the more people businesses have to hire to comply with them, per Ellison:
"I think the answer is no," Ellison said when asked if he believes regulations kill jobs. "And here is why: When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement."
"I believe if the government says, look, we have got to reduce our carbon footprint, you will kick into gear a whole number of people that know how to do that or have ideas about that, and that will be a job engine. I understand what you mean, because if anything adds a cost to a business, you could assume that that will diminish that business’s ability to hire. But I don’t think that’s actually right. I think what businesses want is customers and what — if they are selling product, if they have a product to sell they will do well even if they have some new regulations to meet," the Congressman said.
The economic ignorance in that statement is dumbfounding. The man obviously has no idea of what productive vs. non-productive work entails. Bureaucrats don’t “produce” anything but cost. They impose a cost burden that the producer must pass on or eat.
Most producers choose to pass on the cost burden in the price of what they produce (it obviously depends on the competitiveness of the market, profit margins, etc.). So in essence, every new regulation that imposes a compliance cost on a producer means those who consume the product end up paying the compliance cost in the price of the product at some point or another. And the man hours that could have been used in a productive job are wasted in seeking compliance with bureaucratic regulation.
These are the guys in Washington DC making decisions about your future. They’re deciding what portion of what you earn you should be allowed to keep. And they have no idea of what makes an economy run.
Here’s a representative that figures a job is a job. And he actually thinks he’s creating jobs what will benefit the economy by increasing regulation and bureaucracy.
Unfortunately his type are more prevalent that you might imagine. And our present situation is beyond their understanding. How does one go on a national television network and make statements like that and think they’re being profound when in fact what they say is profoundly ignorant? He obviously doesn’t know that. That’s just scary.
When all is said and done about our current situation, when the hindsight evaluations are made and the scope of the disaster is understood, it will be clear that people like Rep. Keith Ellison were as responsible as anyone for our economy’s inability to recover.
And he won’t even know it.
~McQ
Twitter: @McQandO
Its official–a supermajority think we’re over-regulated
And frankly, I think they’re right:
– There is little appetite among American voters for additional regulations coming out of Washington. Three quarters (74%) of voters throughout the country believe that businesses and consumers are over-regulated. Further, another two thirds (67%) believe that regulations have increased over the past few years. These percentages include majorities of all partisan affiliations, with 91% of Republicans, 75% of Independents and 58% of Democrats saying businesses/consumers are over-regulated.
Now you may argue that “over-regulation” may mean different things to different groups. However in each case the term “over” has specific meaning – it means there’s too much regulation. While they may argue about the degree of over-regulation, it appears that each and every group sees over-regulation in the same and proper light.
– A key fear among voters is that regulations will hinder job creation, as most believe the result of new regulation will be either job losses (47%) or increased prices for American made goods and services (22%).
Or both. You see, businesses will absorb only so much (job losses) before passing along the cost of regulatory compliance in the cost of their goods and services. We’re well past the first part in this recession. Businesses are about as lean and mean as they can stand to be and still function well. Additional regulatory cost, then, is likely to be passed on to consumers – another among many reasons consumer confidence is down.
– More than two thirds (70%) believe increasing the number of regulations on American businesses will result in more jobs moving overseas. Also, majorities agree that the increasing number of regulations have created uncertainty for large and small businesses (66%), and that agencies who enforce regulations fail to consider how their decisions lead to increased prices for consumers and job losses (69%).
All three of these beliefs among those polled is on the money. The amount of regulation is a key consideration for businesses when they assess a business climate. Their cost is calculated in the cost of doing business there. And when that cost is deemed to be too much or too unreasonable, businesses look around for a less costly place to establish themselves. We’ve seen this right here in the US as states with more regulation and higher taxes lose businesses to states that impose a less costly regime of taxes and regulations. They don’t call the Midwest the “Rust Belt” for nothing.
And those polled are right when they say they believe those who impose regulations “fail to consider how their decisions lead to increased prices for consumers and job losses”. But while regulators may not consider it, voters apparently do:
– One of the highest points of agreement in the survey is the fact that 73% concur that “every time the federal government mandates a new regulation on America’s large and small business, the prices of American made good and services like gasoline and food go up.” Only 22% supported the view that “while many federal regulations might be just another burden to operations of America’s large and small businesses, customers do not see major cost increases for American made goods and services like gasoline and food.”
In a study, The Small Business Association found that the regulatory burden on small business in this country was quite high:
The research finds that the cost of federal regulations totals $1.1 trillion; the cost per employee for firms with fewer than 20 employees is $7,647.
Under 20 employees is indeed a “small business” yet most would agree, $7,647 in compliance costs per employee is a lot of money. It is over $140,000 for the 20 employee firm. That money has to be made up somewhere, just to break even, much less turn a profit. And it is clear that depending on the type of firm and needs of the employer, any number of employees could be hired for that amount. And don’t forget, small businesses account for about 80% of the jobs in the US.
So it is clear that there’s a tremendous regulatory burden that has been placed on the businesses of America that most feel over-regulate them and cost jobs and increase prices.
There’s a move afoot within the Obama administration to cut regulation. That’s a good thing. But we have to remember, it’s the Obama administration where they usually talk the talk and never walk the walk. One way to get the economy moving is to lift some of the burdensome regulation and its related costs.
So who should be leading this charge? The executive branch. And, as the poll indicates, most voters don’t understand that it is at that branch the buck stops. But they are clear in what they want – much more consideration and an amended approval process before new regulations are imposed:
– Voters are simply unaware that Congress is not in a lead position with regard to regulation, as a majority say that Congress (52%) creates regulations. However, there is a strong desire for checks and balances in creating regulations, as two thirds (65%) favor requiring regulations be approved by Congress and the President before they are enforced. Voters do not want a regulatory process that takes away legislative duties reserved for Congress – just as they do not want judges legislating from the bench. This strong support for Congressional involvement is consistent across partisan groups, including among Democrats (67%), Republicans (65%) and Independents (64%).
Of course that would mean that most oppose the unilateral imposition of new regulation by the executive branch as we’ve seen during this administration.
All that is not to say that at some level, most Americans see some necessity for regulation:
– There are some positive connections to regulations, with solid majorities saying they are positively impacted by those that require certain safety levels for drinking water (72%) or require controls to ensure better safety at schools and in the workplace (66%).
But, not like this:
– When presented with a lengthy explanation of the Boeing case — where the federal government has filed a lawsuit over the their motivations for locating a new facility in the non-union state of South Carolina — fully 78% of voters side with Boeing in agreeing that a business should be able to open a facility in any state, and that the government should not be involve in the decision about where Boeing or any company locates new plants.
A very interesting poll, and one that needs to be in front of every politician and department executive in government. Back off, unchain the engine of prosperity and listen to the people. They’re pretty clear here in what they want. A less costly and intrusive regulatory regime and government out of places it doesn’t belong – like in the Boeing example.
~McQ
Twitter: @McQandO
The growth of the regulatory state
While President Obama vacations on Martha’s Vineyard, he is supposedly committing to paper a plan to boost employment. During the recession unemployment has remained high, near 10%, and with the economy slowing again, that number is likely to go higher.
One area that hasn’t suffered jobs losses during Obama’s time in office is the government regulatory regime. In fact, it has managed to add a significant number of jobs, all, unfortunately, at the expense of business. While most Americans feel some level of regulation is necessary by the Federal government, over-regulation is always a danger. When that danger is realized, it is businesses who bear the brunt of the cost of compliance. And, of course, businesses pass their costs on to consumers in the price of their goods. So regulation compliance costs drive the price of goods up.
In the past three years of the Obama administration we’ve seen an explosion of regulations. Investors Business Daily brings you the gory details:
Regulatory agencies have seen their combined budgets grow a healthy 16% since 2008, topping $54 billion, according to the annual "Regulator’s Budget," compiled by George Washington University and Washington University in St. Louis.
That’s at a time when the overall economy grew a paltry 5%.
Meanwhile, employment at these agencies has climbed 13% since Obama took office to more than 281,000, while private-sector jobs shrank by 5.6%.
Michael Mandel, chief economic strategist at the Progressive Policy Institute, found that between March 2010 and March 2011 federal regulatory jobs climbed faster than either private jobs or overall government jobs.
Those agencies have churned out new regulations and rules at an amazing rate:
The Obama administration imposed 75 new major rules in its first 26 months, costing the private sector more than $40 billion, according to a Heritage Foundation study. "No other president has imposed as high a number or cost in a comparable time period," noted the study’s author, James Gattuso.
The number of pages in the Federal Register — where all new rules must be published and which serves as proxy of regulatory activity — jumped 18% in 2010.
This July, regulators imposed a total of 379 new rules that will cost more than $9.5 billion, according to an analysis by Sen. John Barrasso, R-Wyo.
And much more is on the way. The Federal Register notes that more than 4,200 regulations are in the pipeline. That doesn’t count impending clean air rules from the EPA, new derivative rules, or the FCC’s net neutrality rule. Nor does that include recently announced fuel economy mandates or eventual ObamaCare and Dodd-Frank regulations.
As mentioned above, regulations and rules impose a significant cost on businesses which must comply with them. In a time when the economy is staggering, these increases in costs delivers another body blow to any recovery. And most of them have been imposed via the Executive Branch through its various Departments and not Congress. The agenda brought to the White House by Barack Obama is being serviced by regulators and the legislators are being left out
"Our economy is continuing to sink," Sen. Barrasso said, "and it’s being weighed down by regulations coming out of this administration."
By 2008, the cost of complying with federal rules and regulations already exceeded $1.75 trillion a year, according to a 2010 study issued by the Small Business Administration.
Worse, the SBA found that small companies — which account for most of America’s new jobs — spend 36% more per employee to comply with these rules than larger firms.
Of course the administration flatly denies what the reports above tell us is happening:
Cass Sunstein, who runs the White House Office of Information and Regulatory Affairs, denies the regulatory upsurge, writing recently that "there has been no increase in rule making in this administration." He also notes Obama ordered a comprehensive regulatory review in January that uncovered $1 billion worth of needless red tape.
As is always the case, never believe what the administration tells you, always look behind the curtain at the facts. And the facts are that 379 new rules have been imposed under this administration and it has 4,200 new regulations “in the pipeline” not counting the exceptions to that count noted in the IBD article. So, as usual, the numbers tell a different story.
If President Obama is serious about creating job opportunities, this is an area in which he obviously exercises direct control via the federal government and the executive branch. Rolling back the regulator regime, suspending all new rules until a comprehensive study can be made of their economic impact and generally getting regulators out of the way of businesses would be a very good start.
Somehow I doubt any of that will find its way into the jobs plan Mr. Obama presents after his vacation.
~McQ
Twitter: @McQandO
Green jobs? There’s just no market
If you don’t believe me, look at the California experience to this point. If there’s any state in the union more amenable to and focused on providing green jobs, it has to be the Golden State. Governor Jerry Brown pledged to create 500,000 of them by the end of the decade.
But as often the case when the central planners make their pledges, they are woefully ignorant of what the market wants. And so rarely does what they envision ever come to fruition. Green jobs in CA is a good example.
Remember Van Jones? Well, when Jones left the Obama cabinet as his “Green Jobs Czar” he landed in California and has been what the NY Times calls an “Oakland activist” apparently pushing for the creation of green jobs. And it’s not like California hasn’t tried. It has simply failed.
For example:
A study released in July by the non-partisan Brookings Institution found clean-technology jobs accounted for just 2 percent of employment nationwide and only slightly more — 2.2 percent — in Silicon Valley. Rather than adding jobs, the study found, the sector actually lost 492 positions from 2003 to 2010 in the South Bay, where the unemployment rate in June was 10.5 percent.
Federal and state efforts to stimulate creation of green jobs have largely failed, government records show. Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes, California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter, according to the State Department of Community Services and Development.
So a “stimulus” program that spent over $93 million dollars to create 538 jobs. Why so little in terms of takers? Well it seems the market wasn’t interested.
The weatherization program was initially delayed for seven months while the federal Department of Labor determined prevailing wage standards for the industry. Even after that issue was resolved, the program never really caught on as homeowners balked at the upfront costs.
“Companies and public policy officials really overestimated how much consumers care about energy efficiency,” said Sheeraz Haji, chief executive of the Cleantech Group, a market research firm. “People care about their wallet and the comfort of their home, but it’s not a sexy thing.”
You don’t say … the government didn’t have a clue at what the market potential of their boondoggle actually had, so they ended up spending $172,862 for each job. And you wonder where the money goes?
Example two:
Job training programs intended for the clean economy have also failed to generate big numbers. The Economic Development Department in California reports that $59 million in state, federal and private money dedicated to green jobs training and apprenticeship has led to only 719 job placements — the equivalent of an $82,000 subsidy for each one.
“The demand’s just not there to take this to scale,” said Fred Lucero, project manager atRichmond BUILD, which teaches students the basics of carpentry and electrical work in addition to specifically “green” trades like solar installation.
Richmond BUILD has found jobs for 159 of the 221 students who have entered its clean-energy program — but only 35 graduates are employed with solar and energy efficiency companies, with the balance doing more traditional building trades work. Mr. Lucero said he considered each placement a success because his primary mission was to steer residents of the city’s most violent neighborhoods away from a life of crime.
You see you can fund all the job training centers in the world and run umpthy-thousands through it. But if there is no market for the jobs, you end up spending a whole lot of money for nothing. Again, ignorance of the market and its demands means expensive mistakes. Of course Mr. Lucero thinks the program is a success – he got to spend free money, was employed and it didn’t cost him squat. It cost you.
Example three:
At Asian Neighborhood Design, a 38-year old nonprofit in the South of Market neighborhood of San Francisco, training programs for green construction jobs have remained small because the number of available jobs is small. The group accepted just 16 of 200 applicants for the most recent 14-week cycle, making it harder to get into than the University of California. The group’s training director, Jamie Brewster, said he was able to find jobs for 10 trainees within two weeks of their completing the program.
Mr. Brewster said huge job losses in construction had made it nearly impossible to place large numbers of young people in the trades. Because green construction is a large component of the green economy, the moribund housing market and associated weakness in all types of building are clearly important factors in explaining the weak creation of green jobs.
Market timing is pretty important too, isn’t it? If you introduce a product into a market in the middle of a market downturn, chances are slim you are going to be successful. While it may all look good on paper and sound good in the conference room, the “buy” decision is still made in the market place, and in this case it is obvious that the market has no room for these workers. Something which should have been, well, obvious. In fact, there is precious little market for traditional construction jobs in a “moribund housing market”. Yet there they are spending money we don’t have on job skills that are simply not in demand.
Finally there’s this bit of word salad to feast upon:
Advocates and entrepreneurs also blame Washington for the slow growth. Mr. Jones cited the failure of so-called cap and trade legislation, which would have cut carbon pollution and increased the cost of using fossil fuel, making alternative energy more competitive. Congressional Republicans have staunchly opposed cap-and-trade.
Mr. Haji of the Cleantech Group agrees. “Having a market mechanism that helps drive these new technologies would have made a significant difference,” he said. “Without that, the industry muddles along.”
You have to admire someone who tries to cloak central planning jargon in “market speak”. Imposing a tax on thin air to drive, from above, a behavior government wants is not a “market mechanism”. And beside, California passed it’s own version of this “market mechanism” with AB 32 in 2006. How’s that working out?
This is how:
A SolFocus spokeswoman, Nancy Hartsoch, said the company was willing to pay a premium for the highly-skilled physicists, chemists and mechanical engineers who will work at the campus on Zanker Road, although the solar panels themselves will continue being made in China. Mayor Reed said he continued to hope that San Jose would attract manufacturing and assembly jobs, but Ms. Hartsoch said that was unlikely because “taxes and labor rates” were too high to merit investment in a factory in Northern California.
Irony … central planning fails in CA while jobs end up in increasingly capitalistic China. Again, ignorance of the market causes disappointing results. Somehow I feel this came as a surprise to Mayor Reed … after he’d spent whatever of your money he’d committed to this project.
~McQ
Twitter: @McQandO
Obama administration drilling rules scrapped by federal judge
A federal judge has scrapped the Obama Administration’s rules for drilling. The new rule required oil and gas producers to do additional environmental studies for each new site (or if increased drilling was to be done at an existing site) even though such studies had been completed on the entire tract previously. Under the Bush-era ‘categorical exclusion’ rule, the existing studies and approval for the entire tract were sufficient and subsequent studies for new drilling on that tract were waived.
The Energy Policy Act of 2005 allows the BLM and Forest Service to invoke categorical exclusions and skip new environmental review for drilling permits under certain circumstances.
The circumstances include instances where companies plan to disturb relatively little ground and environmental review already has been done for that area. A categorical exclusion also can be invoked when additional drilling is planned at a well pad where drilling has occurred within the previous five years.
The Obama administration had issued new rules which revoked categorical exclusions (used extensively in the Western US until last year) and required new environmental studies for each new planned drilling or expansion of drilling, slowing the process to a crawl.
The plaintiff, Denver-based Western Energy Alliance, argued that the new rule had created delays that thereby added cost and materially hurt (and thereby created “recognizable injury”). The administration rejected the argument saying it was “speculative. However, the federal judge, U.S. District Judge Nancy Freudenthal , did not:
"Western Energy has demonstrated through its members recognizable injury," she said. "Those injuries are supported by the administrative record."
This, of course, is good news for the oil and gas industry, good news for job hungry Americans and, ironically, a ruling the “focused on jobs like a laser” administration is sure to appeal.
~McQ
Twitter: @McQandO