Archive for the ‘#regulations’ Tag

$3000 more income per year   Leave a comment

Regulation under the Last Six Presidents

That last figure represents reduced regulatory costs of $23 BILLION by eliminated hundreds of burdensome regulations.

This represents a fundamental change in the direction of the administrative state after decades of unchecked growth.

For contrast, the Obama administration imposed more than $245 billion in regulatory costs on American businesses and families during its first two years.

The benefits are lower consumer prices and more jobs.

But is it safe to reduce regulation like that?

The questions we should be asking are:

What is the problem this regulation is trying to fix?

The answer to that question should be

Unless otherwise required by law, we move forward with regulation only when we can identify a serious problem or market failure that would be best addressed by federal regulation. President Bill Clinton recognized that “the private sector and private markets are the best engine for economic growth.”

Let’s look at some new research from the Council of Economic Advisers, which estimates the added growth and the impact of that growth on household income.

  • Before 2017, the regulatory norm was the perennial addition of new regulations.
  • Between 2001 and 2016, the Federal government added an average of 53 economically-significant regulations each year.
  • During the Trump Administration, the average has been only 4.

Even if no old regulations were removed, freezing costly regulation would allow real incomes to grow more than they did in the past, when regulations were perennially added. The amount of extra income from a regulatory freeze depends on (1) the length of time that the freeze lasts and (2) the average annual cost of the new regulations that would have been added along the previous growth path.

…In other words, by the fifth year of a regulatory freeze, real incomes would be 0.8 percent (about $1,200 per household in the fifth year) above the previous growth path.

As shown by the red line, removing costly regulations allows for even more growth than freezing them. As explained above, the effect, relative to a regulatory freeze, of removing 20 costly Federal regulations has been to increase real incomes by 1.3 percent. In total, this is 2.1 percent more income—about $3,100 per household per year—relative to the previous growth path.

Even modest improvements in growth lead to meaningful income gains over time.

Posted July 5, 2019 by aurorawatcherak in economics

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Regulatory Reducing Diet   Leave a comment

The last Western Union telegram was sent 11 years ago. Why? Because technology outstripped its usefulness a long time ago. But the FCC recently decided to end burdensome regulations that stifled telegraph technology. As Reuters reported:

 

AT&T Inc, originally known as the American Telephone and Telegraph Company, in 2013 lamented the FCC’s failure to formally stop enforcing some telegraph rules.

‘Regulations have a tendency to persist long after they outlived any usefulness and it takes real focus and effort to ultimately remove them from the books even when everyone agrees that it is the common sense thing to do,’ the company said.”

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Regulations are far easier to create than they are to dismantle, yet there has been an undeniable trend of repealing these types of regulations lately. We haven’t seen anything like it since the Reagan administration. Who is responsible for this housecleaning? None other than President Donald Trump.

 

Ronald Reagan left many legacies during his duration in the White House. I could grumble out his contribution to the War on Drugs, but I’m going to focus on his deregulatory accomplishments.  During the Reagan administration, both the Federal Register and federal regulations decreased by more than one-third. That’s a pretty impressive record, considering most presidents increase regulation, but Donald Trump has already shattered that record.

Yes, he’s been in office less than a year and has already accomplished more on this front than Reagan did in eight years. Upon taking office, Donald Trump signed an executive order telling federal agencies that they must cut two existing regulations for each new regulation proposed. Contained within this executive order was the demand that each federal agency create a task force with the explicit purpose of finding regulations worth slashing. This act was intended to help the newly sworn-in president reach his promise of cutting 70% of all federal regulations.

Regulatory cuts are typical GOP rhetoric, but the left immediately set about to fight this executive order. A coalition of left-leaning organizations even joined together in February to sue Trump on the grounds that his executive order would potentially “block or force the repeal of regulations needed to protect health, safety, and the environment, across a broad range of topics – from automobile safety, to occupational health, to air pollution, to endangered species.”

Trump doesn’t scare easily. He’s an old hand at lawsuits. He’s continued forward with his objective.

The score speaks for itself. During the same point of time of their respective presidencies, Obama’s regulatory tally was at 1,737 while Trump’s is 1,241. And while Reagan’s own regulatory cuts were admirable, they still don’t compare with Trump’s if you judge them by the same time frame.

Earlier this October, Trump announced his plans to further cut taxes along with red tape that negatively impacts both businesses and consumers. According to CEI, the current level of federal regulatory burdens have amounted to nearly $2 trillion. Business owners pay the initial costs, but regulatory burden inevitably trickles down to the consumer. When overhead costs are raised on entrepreneurs, the cost must be made up somewhere. These hidden costs account for about $15,000 per household in any given year.

As the 2017 fiscal year came to a close this month, the White House also released its initiative to cut more red tape to jump start the economy. Obviously, the “do nothing” method is a far cry from Obama’s overbearing regulatory intervention. This is pleasing Trump supporters, the business sector and economics geeks like me who are fed up with a decade of economic stagnation, but recognize that Congress has yet to act on any substantial reform in either the House or the Senate. This is all being done by executive order. Regulations, by the way, are the one area where Presidents may act without the advise and consent of Congress. Regulations are an Executive Branch function.

The White House has continued its efforts to encourage regulatory relief by pushing for three specific reform efforts, listed by CEI’s Clyde Wayne Crews as follows:

  1. Trump’s January executive order requiring agencies to eliminate at least two rules for every new regulation adopted, and that they ensure net new regulatory costs of zero;
  2. A sweeping  Reorganization Executive Order that requires the Office of Management and Budget to submit a plan aimed at streamlining and reducing the size of the administrative state generally. This plan will set the tone for Trump’s budget proposal next year.
  3. memorandum from the new Office of Information and Regulatory Affairs (OIRA) administrator Neomi Rao directing agencies, for the first time as far as I can tell, to propose an overall incremental regulatory cost allowance for the agency in the new edition of their “Unified Agenda” on regulations. This report will appear in the fall. Prior editions, since the 1980s, would label rules as “economically significant,” but never has there been such a “regulatory budget.” Rao says, “OMB expects that each agency will propose a net reduction in total incremental regulatory costs for FY 2018.”

So, let me guess – you haven’t heard about this, right? That’s because the media have largely ignored it. Yeah, they never miss an opportunity to criticize President Trump, but somehow this massive rollback of regulation has escaped their notice.

 

Without economic liberty there can be no general freedom, which is why a decrease in the regulatory state is so important. There are many areas where I deeply disagree with President Trump, but increasing economic freedom is no small feat and it deserves a standing ovation. 

How Regulation Eats the Economy   Leave a comment

I promised myself to be fair about the Trump presidency. I objected to the bombing of Syria, I praised Neil Gorsuch for SCOTUS, I’ve liked some of Trump’s cabinet picks and I’ve disliked others. I am pissed about not getting rid of Obamacare. I think Congress has chickened out and I see it absolutely eating the middle class until there are only poor people and rich and most of us will be poor, which by my definition is that we qualify for government subsidies and have no hope of ever aspiring to better our lives, because the minute we do, we lose our government subsidies and become poor again paying bills that we shouldn’t have to pay.

But Trump has done some truly good things in his few months in office. Most of those good things involve executive orders, which I normally oppose. I’ve been anti-executive order since Carter stole one-third of Alaska, so it’s a stretch for me to like Trump’s executive orders, but they’re different. I like many of Trump’s executive orders because they rollback federal overreach. Since when has a president sought to reduce his power over the states and individuals? Yeah, I got nothing. Even Reagan didn’t call for an investigation of national monuments, though he took office less than three years after Carter stole by proclamation one-third of Alaska.

The impact of regulation on economic growth has been widely studied, but most research has focused on a narrow set of regulations and industries. These studies typically rely on regulatory indexes that measure subsets of all regulation, on country-to-country comparisons, on short time spans, or on surveys in which experts report how regulated they believe their country or industry is. In order to better understand the cumulative cost of regulation, a comprehensive look at all regulations across many industries over a long period of time is imperative.

Remember Hazlitt’s maxim – we have to look at how any particular policy affects a broad range of society for an extended period of time. (Economics in One Lesson)

A recent study for the Mercatus Center at George Mason University used an economic model that examined regulation’s effect on firms’ investment choices. Using a 22-industry dataset that covered 1977 through 2012, the study found that regulation distorts investment choices that would otherwise have lead to innovation and creates a considerable drag on the economy, amounting to an average reduction in the annual growth rate of the US gross domestic product (GDP) of 0.8 percent. With GDP growing in the United States at 1-2% a year, that’s a significant anchor.

The problem is that we tend to focus on just one regulation, or a small set of regulations, as being either good for society or the economy, but we don’t pay attention to the accumulation of regulations over many decades. When regulators add more rules to the already heaping pile, analysts often consider the likely benefits and compliance costs of the additional rules, but ignore how they interact with or exacerbate impacts from previous regulations.

So, for example, the individual mandate of Obamacare seemed like a good idea, but it interacts with previous regulations restricting the purchase of medical insurance across statelines. The near-monopoly of medical insurance at the state level concentrates the cost of coverage into small pools, which drives up risk and premiums.

Regulations have a greater effect on the economy than analysis of a single rule in isolation can convey. The accumulation of regulations over time leads to duplicative, obsolete, conflicting, and even contradictory rules, and the multiplicity of regulatory constraints complicates and distorts the decision-making processes of firms operating in the economy while also confusing government employees tasked with managing those regulations. Firms respond to both individual regulations and regulatory accumulation by altering their plans for research and development, expansion, and updating equipment and processes.  Innovation and productivity suffer and because of the important role these play in an economy, these distortions have consequences for the growth of the economy in the long run.

Economic growth in the United States has, on average, been slowed by 0.8 percent per year since 1980 owing to the cumulative effects of regulation:

  • If regulation had been held constant at levels observed in 1980, the US economy would have been about 25 percent larger than it actually was as of 2012.
  • In 2012, the economy was $4 trillion smaller than it would have been in the absence of regulatory growth since 1980.
  • This loss amounts to approximately $13,000 per capita, a significant amount of money for most American workers. Assuming households with two incomes, that’s about one-third of most people’s household incomes every year … lost to regulation.

The study developed a multi-sector endogenous growth model that allowed a counterfactual experiment: What would have happened if federal regulation had been “frozen” at the levels observed in 1980? The model accommodated industry-specific variation in how regulation affects investment and growth, while specifying the determinants and relationships needed to estimate the long-run cost of the regulation for the economy overall.

The study concluded:

  • Economic growth is dependent on investment. Economic growth in a particular industry is determined by investment in research and development and other forms of knowledge creation. Such investment leads to innovation and increases in productivity. This means that regulatory interventions that affect investment choices have a greater effect on the economy than the simple sum of static costs associated with regulatory compliance.
  • Regulations have cumulative effects. A key insight of endogenous growth models in general is that the effect of government intervention on economic growth is not simply the sum of static costs associated with individual interventions—there are dynamic implications. The accumulation of regulation over time leads to greater and greater distortion of investment choices. Moreover, the investment choices of previous years affect growth in future years because knowledge that is not created cannot be implemented next year and the years after to be more productive.

While static analysis of individual regulations sometimes predicts beneficial effects for society, policymakers should consider the results of this study not only when creating new regulations, but also when considering reform of the regulatory process itself. By altering investment decisions and disrupting the innovation that comes from investment in knowledge creation, regulations have a cumulative detrimental effect on economic growth.

Over time, that has had a real negative impact on American families and workers. Think back on the whole idea that America’s middle class has not seen any real wage growth in the last 30 years. Here’s why. That’s where our prosperity went, middle-class!

So, Trump’s executive orders … while I still think they’re unconstitutional and Congress needs to allow a constitutional amendment to stop executive orders in general from occurring … have been an overall good thing because they haven’t advanced presidential power so much as they have reduced the power of the regulatory state … which, by the way, the president is supposed to have authority over. The “executive branch” is within his purview. Most presidents have acted like that wasn’t their job and I appreciate President Trump for recognizing that it is.

Regulators Are Trying to Derail the Success of our Private Railroads | Ian Adams   Leave a comment

Found on FEE

By virtually any measure, America’s freight rail system is one of the best in the world. In fact, rail transports a full 40 percent of freight moved in the United States. But rogue federal regulators may change that.

Image result for image of a freight train

Since 1981, when a bipartisan congressional effort largely deregulated the nation’s freight rail providers, Americans have enjoyed a 45 percent decrease in rates for transport by freight train.

That means nearly twice as much freight can be moved on the rails today, compared to 35 years ago, for roughly the same cost. New rules under review by the U.S. Surface Transportation Board, however, largely would undo those striking gains.

The Rail Industry Doesn’t Need Micro Conductors

The Surface Transportation Board is considering implementing a “reciprocal switching arrangement” rule, better known as “forced access,” which would require railroads to grant competitors a right to use their rails.For decades, railroads have negotiated terms among themselves for interchanging traffic.

Supporters of the rule maintain the measure would improve competition. However, they seek to do so by reinstating the kind of pre-1981 regulatory regime that brought the railroads to the brink of financial ruin.

Before passage of the Staggers Rail Act of 1980, railroads were unable to account for the true costs of their services because of regulations that restricted their rates and practices. Similarly, forced access would prescribe how railroads interact, independent of the public’s interest in competition.

The case for forced access is built on two seemingly reasonable, but ultimately incorrect assumptions.

The first incorrect assumption is that rail lines are public property and should be treated the same as roads; they aren’t, and they shouldn’t be. In fact, for the most part rail lines are owned by private firms.

The second misconception is that railroads can’t already coordinate the use of each other’s rail lines on their own, even though they do it all the time.

In fact, for decades, railroads have negotiated terms among themselves for interchanging traffic. The Surface Transportation Board is asked to intervene only when one railroad complains that another is charging rates that are excessive.

Why Fix What Ain’t Broken?

This system has worked well. The public benefits from rails being held in private hands, as that arrangement has provided incentives for private capital to be invested in maintaining those lines.Forced Access would lead to less private railroad investment, and consumers would feel the pain.

Compared to other major industries, railroads invest one of the highest percentages of their own revenues to maintain and add capacity to their systems, according to the Federal Railroad Administration. This has saved taxpayers billions.

Compelling railroads to open their routes to other operators under terms dictated by the government would render railroads’ billions in private investment less valuable. Over time, they would have less and less reason to invest, and consumers would feel the pain.

Of course, proposals for forced-access regulations would be unthinkable were the railroads in the state they found themselves in before the Staggers Rail Act’s reforms, in the wake of eight large railroads filing for bankruptcy.

As is often the case, memories of past foibles fade quickly. The cost of forgetting the past, and the great benefits that liberalization has brought, would be a return to worse service, expensive taxpayer subsidies, and, perhaps, outright nationalization of our railroads.

That would be a move in the wrong direction.

Source: Regulators Are Trying to Derail the Success of our Private Railroads | Ian Adams

Posted October 7, 2016 by aurorawatcherak in economics

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