Stimulate Economy Through Deregulation

The economy is contracting at a rate of more than 6 percent this year to date. This is hurting the country and especially Michigan, whose 12.9 percent unemployment rate is the nation's highest. America's troubled economy needs a boost, but politicians are taking the wrong approach.

The American Recovery and Reinvestment Act works — or rather, doesn't work — by taking money out of the economy, wasting some of it on bureaucracy and then putting it back in. The $787 billion in new debt it is creating will have to be paid back with higher future taxes, which will hurt growth down the road.

There is a better way. Congress should act immediately to implement a deregulatory stimulus.

Businesses spent $1.17 trillion in 2008 to comply with federal regulations. The government spent another $49.1 billion to enforce them. The total spent on regulation is right up there with Canada's entire 2006 gross domestic product of $1.265 trillion.

The 2008 Federal Register weighed in at 79,435 pages, an all-time record. More than 60 agencies passed 3,830 new rules last year. The federal regulatory pipeline now has 4,003 rules at various stages of implementation. Of those, 783 affect small businesses.

The government calls a regulation "economically significant" if it costs $100 million or more. One hundred and eighty such rules came onto the books in 2008, costing the economy at least $18 billion. This is an increase of 13 percent over 2007, which in turn was up by 14 percent from the year before.

Doing business in America is becoming very expensive. No wonder there is less of it.
A deregulatory stimulus would lighten regulation's heavy hand. Thousands of new rules come into effect every year, but very few are ever repealed. One of President George W. Bush's most long-lasting legacies will likely be the more than 30,000 regulations enacted under his watch.

Given the rapid pace of technological change, a lot of obsolete rules are cluttering the books. A key plank of any deregulatory stimulus would constitute the inclusion of sunset provisions in all new rules. A regulation should automatically expire after five years unless specifically renewed by Congress.

Second, President Barack Obama should appoint a commission to review old rules. Rules deemed obsolete, or that fail a cost-benefit test, should be packaged together for elimination, subject to a single up-or-down vote by Congress. This approach has already been used successfully to close unneeded military bases.

The third deregulatory stimulus plank would require Congress to reassert its rulemaking authority. Congress likes to delegate, since that allows it to deflect blame for unpopular or burdensome regulations. It has gotten to the point where Congress passed only 285 bills last year, compared to 3,830 rules enacted by agencies.

If Congress is unwilling give up its delegation addiction, then it should at least vote on economically significant or especially controversial rules.

The tax-and-spend stimulus model has failed repeatedly under presidents from both parties. A deregulatory stimulus, by clearing unnecessary obstructions to doing business, would kick-start growth and pave the way for job creation. We need now more than ever.