To Stimulate the Economy, Let it be Free
Lobbying is about the only sector of the economy experiencing a boom right now. This is a predictable effect of the tax-and-spend stimulus model favored by both major political parties.
Taking money out of the economy, wasting some of it on bureaucracy, and then putting it back in is not going to spark economic growth. About the only thing that has been sparked is a lobbying feeding frenzy over stimulus funding. Even the Democrat-controlled Congressional Budget Office (CBO) admits that the American Recovery and Reinvestment Act will hurt long-run economic growth.
It is time for a change. Congress should instead 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 those regulations. The total amount spent on regulation is on par 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; 180 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 14 percent from the year before.
Among these $100 million-plus gems are rules for right whale ship strike reduction, reducing open-flame ignition of bedclothes, and at least $600 million worth of energy conservation requirements for everything from pool heaters to battery chargers.
When doing business becomes more expensive, there is less of it. Unfortunately, most regulations do just that.
A deregulatory stimulus would bring the economy back to life. Thousands of new rules come into effect every year, but few are ever repealed.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.
Too many obsolete rules are cluttering the books in today’s fast-changing world. A deregulatory stimulus would prevent them from multiplying further by requiring sunset provisions for all new rules. A regulation should automatically expire after five years unless specifically renewed by Congress.
President 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.
Finally, Congress needs to reassert its rulemaking authority. Congress likes to delegate that away, since it can shift away the blame for mistakes. It has gotten to the point where Congress passed only 285 bills last year, compared to 3,830 rules enacted by agencies.
At a bare minimum, Congress 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.