January 11, 2016 12:45 PM
On Tuesday evening, President Obama will give his final State of the Union address. In evaluating the state of the U.S., it’s useful to look at the state of economic freedom, including the ability for ordinary Americans to start and invest in a new business without undue government interference.
By several measures, economic freedom has declined rapidly since 2009. Though some harmful policies were enacted in during the Bush administration, such as the Sarbanes-Oxley accounting mandates that made it so much more difficult smaller companies to go public, the Obama administration has not reversed those policies and pushed through many new detriments to economic freedom. These include Obamacare, which makes it difficult for small and midsize firm to hire new employees to due to the expensive and prescriptive insurance coverage mandates, and the Dodd-Frank “financial reform,” which has crippled the ability of community banks and credit unions to lend to Main Street consumers and businesses.
According to the Kauffman Foundation, new business formation has plunged 30 percent since 2008, and business deaths now outpace business births for the first time since the 1970s. In the most recent Index of Economic Freedom, produced annually by the Heritage Foundation and Wall Street Journal, the U.S. ranked 12th among countries, falling from a rank of 6th when President Obama took office. In the Canadian Fraser Institute’s 2015 “Economic Freedom of the World” survey, the U.S. slipped to 16th. As Per Bylund, Records-Johnson Professor of Free Enterprise at Oklahoma State University’s School of Entrepreneurship, writes, “As recently as 2000, we held the No. 2 slot and now we've fallen below countries like Canada and the United Kingdom.”
January 11, 2016 11:01 AM
This week on RealClear Radio Hour: common sense reforms, the cost of government policy mistakes, and an entrepreneurial mother taking on the Department of Labor.
My first guest this week is Salim Furth, research fellow at the Heritage Foundation’s Center for Data Analysis. Salim looks at the cost of government policy mistakes on the average American family, including burdensome land use regulations, licensing requirements, and energy mandates. Common sense reforms, he calculates, could save the average American household over four thousand dollars every year.
In the second half of the show, I’m joined by mom, entrepreneur, and founder of Children’s Consignment Events, Rhea Lana Riner. Rhea tells the story of how she grew her business from a living room sale to a nationwide franchise. Riner is now being forced to defend her business model in a lawsuit against the Department of Labor, which claims her local volunteer consignors should be categorized as employees owed back wages, even though no volunteers complained or even responded to government solicitations to file suit.
January 11, 2016 8:21 AM
After a record-setting 2015, 2016 got off to a slow start, with new rules covering everything from vending machines to Nebraskan sludge. Even so, it may be a busy few months until May 17 or so, when a soft deadline for Congressional Review Act enforcement comes into effect. Congress could potentially block most rules issued after that date, so agencies are likely to hurry as many of this year’s rules as possible. Think of it as an early midnight rush.
On to the data:
- Last week, 32 new final regulations were published in the Federal Register, after 67 the previous week.
- That’s the equivalent of a new regulation every five hours and 3 minutes.
- With 32 final regulations published so far in 2016, the federal government is on pace to issue 1,600 regulations in 2016.
- Last week, 1,113 new pages were added to the Federal Register, after 1,401 pages the previous week.
- Currently at 1,113 pages, the 2016 Federal Register is on pace for 27,825 pages.
- Rules are called “economically significant” if they have costs of $100 million or more in a given year. No such rules have been published so far in 2016.
- That means this year’s running compliance cost tally stands at zero. 2015’s estimated tally ranges from $6.18 billion to $8.69 billion.
- 3 final rules meeting the broader definition of “significant” have been published this year.
- So far in 2016, 6 new rules affect small businesses; 1 of them is classified as significant.
January 8, 2016 11:12 AM
Yesterday the House passed the Sunshine for Regulatory Decrees and Settlements Act (H.R. 712) by a slightly bipartisan 244-173 vote. The bill targets “sue and settle” litigation, which ranks among the most harmful, yet least understood issues in contemporary energy and environmental policy.
At heart, sue and settle is an affront to federalism. Virtually all of the Environmental Protection Agency’s (EPA) regulatory programs are “cooperative federalism” regimes, meaning that Congress split the responsibility for environmental protection between state and federal governments. With sue and settle, the EPA and environmental and advocacy groups shut out the states from the policy making process. This is outrageous because states are co-sovereign governments with a congressional delegation to work with EPA on environmental protection, whereas environmental groups like Sierra Club and the Natural Resources Defense Council are ideological special interests that spend untold resources on manipulating both the legal process and electoral politics.
In practice, sue and settle is a function of two interrelated legislative devices: statutory deadlines and citizen suits.
It starts with a surfeit of statutory deadlines. During the early 1970s, when Congress passed most of the EPA’s enabling statutes, lawmakers tried to micromanage the agency by including thousands of date-certain duties in these laws. Unfortunately, the agency has a woeful record achieving these deadlines. For example, in a recent study, I found that the EPA missed 98 percent of its 200 most important Clean Air Act deadlines since 1994. On average, the agency was more than five years late on these deadlines, so it’s not like the agency was even coming close.*
January 7, 2016 4:09 PM
As expected, the nutritional guidelines for 2015-2020 thankfully excised the long-standing warning against cholesterol-laden food in the wake of several decades of research demonstrating that the original warning was neither based on scientific evidence. However, the updated guidelines still advise Americans limit saturated fat and, in attempt to push Americans toward a plant-based diet, limit meat consumption. The consequences of such advice might not only fail to improve Americans’ diets, but may exacerbate the obesity problem in America.
While stopping short of recommending that Americans eat a plant-based diet for the health of our bodies and the environment (a proposed recommendation that set off a bit of a firestorm), the recommendations only implicitly advise people to eat less meat (using the euphemism of “saturated fat” and protein) and explicitly advise we eat more vegetables and other “under-consumed food groups.” While the recommendations aren’t as strong as some would like, there’s definite message within them: animal products and processed foods are bad, vegetables and fruits are good.
That message isn’t terrible. Americans could definitely stand to add more vegetables into their diet. But there’s a fundamental calculus that the dietary guidelines, and in fact most government nutritional advice, seem to not understand. There are only three fundamental macronutrients: fat, protein, and carbohydrate. To reduce one, you must increase one or both of the others. Vegetables are awesome (I’m a pescatarian myself), but they are also expensive and time-consuming compared to other kinds of meals. If HHS and USDA are sending the message that animal products (fat and protein) should be reduced what are Americans most likely to replace those calories with? The hope, of course, is that plant-based foods will replace meat calories, but it is easier and cheaper for families to replace them with carbohydrates.
While many assume that Americans eat more meat today than ever before and that this is a driving factor in obesity, this is incorrect. Our ancestors in the 19th century ate almost twice as much meat as we do today. In 1851, Americans ate between 150 and 200 pounds of meat per person per year (even slaves were allocated an average of 150 pounds of meat a year). Compare that to the 100 pounds of meat the average American adult eats now. The dietary recommendations advise that when we do eat dairy, it should be reduced fat and when we eat meat we should eat “lean,” meaning poultry or meat with fat trimmed off. However, Americans in 1851 almost never ate chicken or turkey, which were seen as “luxury” meats eaten only on special occasions. On the other hand, of the 100 pounds the average American eats today, about half is poultry. So, Americans now are eating half (or less) the amount of red meat as Americans in the 19th century and yet we are obese.
January 7, 2016 12:13 PM
The House is voting on two pieces of regulatory reform legislation today, the Sunshine Act and the SCRUB Act. Both will likely pass, then it’s on to the Senate, though veto threats to both bills complicate matters. Over at RealClearPolicy, I break down both bills. The Sunshine Act would reform a regulatory practice called sue-and-settle:
In a typical sue-and-settle situation, an environmental-activist group sues the Environmental Protection Agency for not meeting deadlines or not enforcing certain regulations thoroughly enough. EPA officials, who may have been working with the plaintiffs behind the scenes, happily admit guilt and agree to a settlement that expands the agency's power and scope.
See also my colleague William Yeatman’s work on sue-and-settle reform. Meanwhile, the SCRUB Act would:
[E]stablish an independent commission to comb through the 175,000-page Code of Federal Regulations for old, obsolete, redundant, and harmful rules. Its goal is to "achieve a reduction of at least 15 percent" in cumulative regulatory costs. With that goal in mind, and given that federal regulations now cost nearly $1.9 trillion per year, a successful commission could save the American people around $285 billion per year.
Read the whole thing here.
January 7, 2016 12:11 PM
The EU is in a quiet crisis. For the first time it faces the prospect of a major economy leaving the EU voluntarily. Its internal structure for free movement of people is collapsing. Nationalist governments of one stripe or another are being elected. And a militarily assertive Russia provides another headache.
The problem is that the EU over-reached. It went from being a trade pact to a proto-federal state without the permission of the peoples it brought together. Its market harmonization turned into federal regulation. EU peoples felt disenfranchised as a result. They want more power over their borders and the economies. Europe has to find a way of granting that without falling apart.
That may be possible. David Cameron does not want the UK to leave the EU. He called the summit in February to find a way forward to end the will-they, won’t-they speculation over Britain leaving the EU and agreement over looser control over one nation could be applied to others.
The trouble is that Cameron’s demands are presently unacceptable to his European partners and unlikely to assuage the anger of British voters over high immigration levels. If he does reach agreement with his European partners the pro-Brexit forces are likely to brand him a sell-out. It’s hard to see a way Cameron wins. His best bet is get a better-than-expected deal and call a snap referendum.
January 7, 2016 10:56 AM
Last year, the Federal Aviation Administration’s two drone rulemakings got a lot of attention: their strange attempt to implement Congress’s airspace integration mandate and their unlawful drone registration mandate. CEI submitted comments in both (see here and here).
With 2016 being the final year of Obama’s presidency, we can expect a flurry of rulemaking activity—some good, but mostly bad. Below are expected 2016 U.S. Department of Transportation rulemaking events we’ll be closely following, broken down by agency, from the Fall 2015 Unified Agenda of Federal Regulatory and Deregulatory Actions:
Federal Aviation Administration
- Updates to Rulemaking and Waiver Procedures and Expansion of the Equivalent Level of Safety Option, NPRM expected January 2016, RIN: 2120-AK76 (CEI expressed strong interest in ELOS expansion in its April 2015 sUAS operation and certification comments linked below)
- Operation and Certification of Small Unmanned Aircraft Systems, final rule expected April 2016, RIN: 2120-AJ60 (CEI filed comments in response to the NPRM on April 24, 2015)
January 6, 2016 1:29 PM
On January 11, the U.S. Supreme Court will hear oral arguments in Friedrichs v. California Teachers Association, a case that could provide right to work protections to state and municipal employees across the nation—meaning public employees cannot be required to pay dues to a union or risk being fired.
At issue is whether government employee unions should be to compel non-members to pay “agency fees,” which cover the costs of collective bargaining, as a condition of employment, in lieu of dues. The current forced dues precedent was established under the 1977 Supreme Court case, Abood v. Detroit Board of Education.
This case is all about worker freedom. No worker should have to pay money to any organization in order to keep his or her job—especially inherently political organizations like government unions.
It is also about the rights of voters and taxpayers. Many outcomes of collective bargaining should up to elected officials. Negotiations between unions and state and local government officials should not determine whether public funds go toward contributing to public employee pensions, other municipal needs, or necessitate the raising of additional funds. Those decisions should be left exclusively to elected officials, not private organizations like government unions.
Further, a large number of public employees who are forced to pay dues never had a chance to vote on whether they desired union representation in the first place. Research finds that most public employees never voted for the union that represents them and collects dues from them. As Heritage Foundation labor policy analyst James Sherk notes, “Fully 99 percent of the teachers in Florida’s largest school districts had no choice about being represented by their union.”
Labor unions contend that they need to collect agency fees because non-members still benefit from collective bargaining, contract administration, and grievance procedures. Therefore, union officials claim that if they were not allowed to compel non-members to pay agency fees, those workers would be “free riders” who benefit from union representation.
This is a bogus argument for two reasons.
January 5, 2016 3:00 PM
This week we learned that U.K. craft brewery Camden Town was the latest in a long string of purchases by the international mega-brewery AB-InBev (makers of Budweiser). Predictably, craft beer “purists” were immediately out on social media calling Camden Town’s owners “sellouts” who are betraying consumers and the craft beer spirit. While fans of the brewery are understandably worried that their beloved beers might change, these kinds of transactions are good and necessary for the continued growth of the craft beer sector.
The profit motive and ethics aren’t exclusive. It is possible for someone to build a business that follows a strict set of principles and have that business make them money. For entrepreneurs, it doesn’t always make sense to maintain a particular venture indefinitely when they could sell a business, make money, and then use that profit to fund their other creative ideas. In the craft beer market, having one brewery purchased by another larger brewery can sometimes be the only way for that brewery to get to the next level. It often gives their brand more capital for expansion, advertising, and access to a bigger distribution network and a wider consumer base—not just those focused on buying local beer. Also, it makes room for new local artisanal breweries to enter the market and shows investors that craft beer start-ups are worth investing in, meaning more potential craft breweries!