The economy is growing, but slowly. So is employment. The most recent data claim 1.9 percent GDP growth in the fourth quarter of 2016. Employment growth is similarly slow, with 227,000 jobs gained during January 2017, out of a workforce of more than 145 million. Here are a few ideas for allowing both the economy and employment to grow faster.
The biggest obstacle to economic growth is regulation. Whether as broad as restrictions on international trade, or as narrow as rules on where to place handrails on staircases, the 1.1 million restrictions in the 238-volume, 178,000-page Code of Federal Regulations hurt people. Federal regulations have a chilling effect on anyone who has a new idea for a product or service that might improve other people’s lives.
Despite the 227,000 new members of the workforce added in January, the 62.6 percent workforce participation is near a 40-year low. In the long run, regulations don’t affect the number of jobs so much—many rules need full-time employees to ensure companies are complying with them—but regulations do affect the types of jobs people have. Every hour spent filling out paperwork is an hour not spent serving customers, or coming up with a new idea. If you were that employee, how would you prefer to spend your time?
GDP growth and unemployment rates are not ideal measures of economic progress. But it is more than clear that the U.S. regulatory state, now larger than Canada’s entire economy, is one of the biggest obstacles standing in the way of people making life better for everyone, rich and poor alike. The new administration, while unpredictable, has already made a few positive strides. These include:
- A freeze on new regulations, which is common practice whenever the White House switches parties
- A one-in, two-out requirement for agencies issuing new regulations
- A regulatory budget, roughly similar to the spending budget the federal government is supposed to issue each year
Additional steps would include:
- A Regulatory Improvement Commission, which would comb through the Code of Federal Regulations each year and give Congress a repeal package for an up-or-down vote.
- Passing the REINS Act, which would require Congress to vote on each of the 40-to-50 new regulations each year which cost more than $100 million per year.
- Strengthening the Congressional Review Act. Congress can currently strike down one rule at a time. Enabling it to bundle several several rules together would save time, jobs, and opportunities.
Congress and the new administration have a real chance to make the economy grow faster, and to raise the labor force participation rate above its current anemic levels. They should take that chance. You can find more reform ideas in CEI’s Agenda for Congress and First Steps for the Trump Administration.