President Obama Reverses Course, For Now, and We're Better Off For It
“We’ve come too far to turn back now.” That’s been President Obama’s response, in his weekly address and elsewhere, to the jobs numbers from last month showing the lowest unemployment rate of his presidency. He and his supporters have expressed a similar reaction to other slightly positive economic news of recent — from housing starts to stock market gains.
Yet the President’s actions belie his rhetoric as over the past year, the Obama administration has itself turned back, ever so slightly, from new rules and mandates through waivers, delays, and exemptions. This mini-reversal may have given employers just enough breathing room to create this modest, but better-than-expected, increase in jobs. It’s a slight start, but much more regulatory relief is needed, and even these small measures may be temporary.
Unemployment in September fell to 7.8 percent, and the Labor Department’s household survey found the biggest one-month growth in employment in 30 years. The bulk of this growth, however, was in part-time jobs, and the payroll or “establishment” survey conducted by the department reflected normal seasonal growth for September. Still, economic consultant David Malpass, a former Reagan administration Treasury official, writes that these figures show “steady but very slow gains” in the labor market.
The media made much of the fact that Republicans lost a talking point regarding 8 percent unemployment, though the new rate is just below that figure. Some of the president’s opponents made this slight uptick seem a bigger deal than it was through baseless charges of data manipulation.
Yet, to the extent they wish to claim vindication, it is supporters of the stimulus, bailouts, and general growth in government whose narrative is most at risk. For months, they blamed the stalled economy on “gridlock” in Washington. Now they are saying that these policies had an extensive timedelayed effect, though they still say growth would have been bigger had Mr. Obama gotten more of what he wanted, such as increased government spending from his proposed American Jobs Act.
A more likely explanation of why the growth is occurring now is that the stalling of Washington has allowed the private sector to get moving again, albeit slowly. My Competitive Enterprise Institute colleague Wayne Crews estimates the non-tax cost of government intervention in the economy to be more than $1.8 trillion annually.
But since Republicans took control of the House in 2010, Congress has at least not added substantially to the cost of the regulatory state. And, as noted, the Obama administration has granted waivers from or delayed implementation of some of its most costly rules until the next presidential term.
Take the waivers from Obamacare, also known as the Affordable Care Act, which were rammed through Congress in 2010. According to The Hill, more than 1,200 businesses, unions, and nonprofits received such waivers, covering about 4 million employees, from the law’s restrictions on benefit caps. Many of these waivers expire at the end of 2013, thus giving a large group of selected employers relief from the law’s expected costs, temporarily easing the burden on hiring or retaining workers.
Wider relief comes from delays in the most expensive rules from the regulatory agencies. At Mr. Obama’s request in September 2011, the Environmental Protection Agency postponed its stringent proposed limits on ground-level ozone—estimated by the agency itself to cost the economy more than $90 billion a year—and announced that the rule will be “revisited” in 2013. This is one of many costly EPA rules delayed. As Sen. James Inhofe (ROkla.) details in a new report, “President Obama has spent the past year punting on a slew of job-killing EPA regulations.”
Over at the Department of Labor, officials put off a new “fiduciary rule” that would have limited choices and raised costs for holders of individual retirement accounts and 401(k)s and cut off their access to investment advice. But as Sen. Rob Portman (R-Ohio) wrote in the Wall Street Journal in August, “the Labor Department has told interested parties to stay tuned for another iteration of this rule.”
There are also more than 100 unfinished rules from the 2010 Dodd-Frank financial overhaul, as well as potential new rules from that law. Agencies have delayed Dodd-Frank rules due to successful court challenges, bipartisan concern over provisions covering everything from mortgages to agricultural derivatives, and just plain unrealistic deadlines in the statute. While DoddFrank has still done tremendous damage and caused many small banks to quit making mortgages for fear these will be deemed “unqualified” or “abusive,” in the law’s vague and arbitrary terms, the temporary reprieve from even more onerous rules has given banks and business some breathing room. Also loosening the regulatory chokehold on entrepreneurs is the one piece of bipartisan liberalization legislation to become law this session of Congress: the Jumpstart Our Business Startups (JOBS) Act. The Act’s “on-ramp” provision, which went immediately into effect when Mr. Obama signed the law in April, gives “emerging growth” firms—those with less than $700 million in market cap and $1 billion in revenue—that launch initial public offerings (IPOs) a five-year exemption from onerous provisions of Dodd-Frank, as well as from the draconian Sarbanes-Oxley Act signed by Mr. Obama’s predecessor, George W. Bush.
In the six months since the JOBS Act’s enactment, more than 60 companies have gone public with the “emerging growth” designation to get these exemptions. These include well-known young firms such as online travel site Kayak and retailers Five Below, both of which are trading above their IPO prices.
Yet in recent weeks, President Obama has barely talked about his achievement in signing the JOBS Act, instead launching a full-throated defense of Dodd-Frank, Obamacare, and the regulations his administration has pushed through. These conflicting signals, combined with the ad hoc nature of regulatory relief to date, mean that entrepreneurs still face a great deal of uncertainty as to what will happen next year. This may explain why so many of the new jobs are part-time.
The modest number of jobs created in response to this ever-so-slight regulatory reprieve is real and should be celebrated. But to get dynamic job growth going again, we need a permanent rollback of the regulatory state.