Free Markets, Free People

compliance

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

Who loves ya, small business?

Well despite all their talk, it isn’t the Democrats. Speaking of the "party of no"Yesterday they killed an amendment offered by Sen. Mike Johanns (R-Neb.) that would have dropped the requirement for increased 1099s issued by business thereby saying "no" to saving huge compliance costs for small businesses.

Johanns said Section 9006 of the ObamaCare bill, requires a "2,000 percent increase" in mandatory filings of 1099 tax forms for businesses, charities, state and local governments, and even churches.

That means that in 2012:

…all organizations will be mandated to issue 1099 tax forms not only to contracted workers, but to any other group or business from which they purchase at least $600 worth of goods or services in a given year. They’ll also be required to send a copy of each 1099 document to the IRS. Johanns called the entire process "punishing" to businesses and cited a July report from the IRS’ independent taxpayer watchdog arm warning that Section 9006 "may impose significant burdens" that it labeled "disproportionate" and perhaps unenforceable.

Also killed was a proposal by Sen. Bill Nelson (D-Fla.), which would have raised the minimum annual threshold for 1099 requirements from $600 to $5000, and would have exempted businesses with 24 or fewer employees. 

Now, just sit back and imagine the compliance cost this will require.  If you ever wanted an example of why businesses have no confidence in government, this should help you with that understanding.  This is as much an unfunded mandate as any.  And it will have businesses wondering if they want to spend the money if they have to report just about everything they do via 1099. 

As usual, a duplicitous White House is involved as Guy Benson reports:

Johanns was especially critical of the White House’s role in torpedoing his amendment. Yesterday afternoon, he told Townhall.com that the president’s stated support for repealing Section 9006 was a bluff. "The White House is panicking. They know it’s a disaster, and they wanted to send a signal that they’d cede ground knowing full well my amendment and [Nelson's] wouldn’t pass," he said.

So as you sit in your office at 9pm filling out 1099s or paying someone else overtime to do it, remember who brought you the onerous and costly task.  Then do what you must.

~McQ

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