Uncoiling the American Economy
The cover of this week’s Economist is a topic that’s tackled almost daily here: the overregulation of America. Rule after rule after rule, mostly all well-meaning, grips the economy, squeezing out its vitality.
In particular, the Economist editorial calls out the Dodd-Frank law for its complexity:
At 848 pages, it is 23 times longer than Glass-Steagall, the reform that followed the Wall Street crash of 1929. Worse, every other page demands that regulators fill in further detail. Some of these clarifications are hundreds of pages long. Just one bit, the “Volcker rule”, which aims to curb risky proprietary trading by banks, includes 383 questions that break down into 1,420 subquestions.
The result is “financial firms in America must prepare to comply with a law that is partly unintelligible and partly unknowable.”
Next in the Economist’s sights is the 2010 health care law which has its share of ridiculousness:
Next year the number of federally mandated categories of illness and injury for which hospitals may claim reimbursement will rise from 18,000 to 140,000. There are nine codes relating to injuries caused by parrots, and three relating to burns from flaming water-skis.
That gives a new meaning to “Smoke on the Water.”
While the regulatory pile-on is bipartisan, this chart from the Jobs Creators Alliance shows the number of “economically significant rules” has gone up more steeply in the last few years under the current administration. The White House concedes their new rules have cost businesses $25 billion, more than double the costs from the two previous administrations.
The complexity of all these rules squeezes the air out of the economy. For example, the Economist notes that the Sarbanes-Oxley financial law caused America’s share of initial public offerings (IPOs) to drop from 67% to 16%. In addition, more rules prevent businesses from investing in projects, growing, and hiring workers. Then Gallup found almost half of small businesses say government regulations are keeping them from hiring. And we’re surprised unemployment is as high as it is?
A step toward a solution is also bipartisan, the Regulatory Accountability Act, sponsored by Sens. Rob Portman (R-OH), Mark Pryor (D-AR), and Susan Collins (R-ME). It would require agencies to weigh the costs and benefits of proposed rules, add more transparency and public input to the rulemaking process, and ensure agencies use sound scientific and technical data in their analysis.
It’s a way to uncoil the regulatory python around the American economy, allowing it to spring free to create jobs and prosperity.