Multiple factors contribute to America’s faltering performance. But a major part of the problem over successive presidencies, and one that the Obama administration has sharply exacerbated, is the regulatory burden on the economy. Regulations function as a hidden tax on Americans, with the federal government’s own Small Business Administration placing the price tag at $1.75 trillion annually—much higher than the entire burden of individual and corporate income taxes combined.
How did we reach this state of affairs? A look across the landscape shows that federal agencies today have near plenary power to issue whatever regulations they see fit. Though most are nominally controlled by the president, in actual practice agencies are frequently able to act autonomously with little or no presidential oversight. The end result is an economy subject to the whims of unaccountable bureaucrats pursuing their own agendas. A new regulation can suddenly transform a profitable investment into an unprofitable one or render employees unproductive. This produces uncertainty with all its attendant economic ills.
President Obama’s expansive agenda has brought the costs of excessive regulation into high-resolution focus. A number of his major initiatives like Dodd-Frank and Obamacare represent a quantum increase in the scale of the regulatory burden on the American economy. Bizarrely, in the face of our economic travails, the most active regulator is the Environmental Protection Agency (EPA). The Obama administration’s war on carbon dioxide—what Time magazine has called “the most far-reaching environmental regulatory scheme in American history”—is the highest-profile EPA effort. But the EPA also continues to issue endless new regulations touching on countless other forms of economic activity—regulations that drive up costs, hinder investment, and destroy jobs.
In late August of 2011, Cass Sunstein, the White House’s regulatory czar, wrote an op-ed for the Wall Street Journal proudly announcing the results of an “unprecedentedly ambitious government-wide review” of regulations. The total annual savings? Approximately $2 billion. To put in context just how small this savings is, compare it to the more than $9 billion in new regulatory costs proposed or implemented by the Obama administration in just the prior month. Even worse, compare it to the estimated $1.75 trillion in regulatory costs that the federal government itself estimates are borne by the American economy each year. If the Obama administration can do no better than a one-tenth-of-one-percent reduction in regulation, it is past time to give up hope that they will ever understand the severity of our economic crisis and the need for fundamental reform.
Mitt Romney will treat regulatory costs like other costs: he will establish firm limits for them. A Romney administration will act swiftly to tear down the vast edifice of regulations the Obama administration has imposed on the economy. It will also seek to make structural changes to the federal bureaucracy that ensure economic growth remains front and center when regulatory decisions are made.
Eliminate Undue Economic Burdens
One of the greatest problems with the federal bureaucracy is that each incoming presidential administration leaves in place much of what its predecessor constructed. The result is layer upon layer of often unnecessary or inconsistent regulation. President Obama has compounded this problem with unprecedented federal power grabs over wide swaths of the economy. Obama-era laws and regulations must be rolled back, and pre-existing ones must be carefully scrutinized.
Reform Environmental Regulation
As president, Mitt Romney will eliminate the regulations promulgated in pursuit of the Obama administration’s costly and ineffective anti-carbon agenda. Romney will also press Congress to reform our environmental laws to ensure that they allow for a proper assessment of their costs.
Adopt Structural Reforms
An agency may be able to conceive of ten different regulations, each imposing costs of $10 billion while producing at least as much in social benefit. Moving forward might sound like a great idea to the typical regulator. But imposing those regulations, no matter what the social benefits, has a similar effect to raising taxes by $100 billion. Regulatory costs need to be treated like the very real costs they are.
Excessive government regulation stymies individual and business innovation necessary for strong economic expansion. The Club for Growth supports less and more sensible government regulation as a critical step toward increasing freedom and growth in the marketplace.
Mitt Romney's record on regulation is generally impressive. On the campaign trail, he has supported drilling in ANWR44 and opposed the burdensome regulations imposed by Sarbanes-Oxley45. As governor, he often clashed with the knee-jerk anti-business Legislature over his attempts to ease Massachusetts' regulatory burdens. Though some of his largest undertakings were ultimately crushed by liberal opposition, Governor Romney deserves praise for attempting to change the relationship between government and private enterprise for the better. These efforts include:
Governor Romney's regulatory record contains some flaws. Despite vetoing the Legislature's minimum wage increase, the Governor is on record supporting indexing the minimum wage to inflation.56 Romney also signed into law a measure banning smoking in the workplace including bars and restaurants (with exemptions for some private clubs)57; and implemented "comprehensive ocean zoning reform" that imposed new regulations on ocean front development.58
On balance, Romney's anti-regulation efforts reflect an intuitive appreciation for the free market and its important role in promoting economic growth. While many of his proposals were rejected by the State Legislature, he demonstrated strong support for private enterprise in a state where regulation is a way of life.
44 Boston Globe, 12/13/05
45 Mitt Romney, Club for Growth Winter Conference, 03/29/07
46 Telegram & Gazette, 08/01/06
47 Boston Globe, 02/26/03
48 The Sun, 06/02/05
49 Telegram & Gazette, 02/27/03
50 Boston Herald, 01/31/03
51 Telegram & Gazette, 09/05/04
52 Knight Ridder Tribune Business News, 02/27/03
53 The Berkshire Eagle, 08/04/06
54 Boston Globe, 09/12/03
55 Press Release, Mitt Romney, 11/21/05 & Telegram & Gazette, 11/22/05
56 The Patriot Ledger, 11/02/02
57 Press Release, Mitt Romney, 06/18/04 & The Patriot Ledger, 06/11/04
58 US Fed News Service, 03/18/05
REGULATORY RELIEF: Governor Romney Would Reinstitute A Regulatory Relief Board To Cut Back Regulations That Choke Off Growth. "Our regulatory burden is also overbearing. I'd re-institute a regulatory relief board to cut back the regulation weeds that choke off growth. One that deserves pruning is Sarbanes Oxley - it's driving away IPO's, depressing jobs, and requiring billions of unnecessary cost. Executives who violate the law should go to jail, but the entire economy shouldn't have pay an inordinate price for the sins of the few bad actors."
"Which course is better for America? A European model of high taxes and regulations? Or, low taxes and free trade - the Ronald Reagan model? That's the choice the next President will make. Some are already fighting to implement a massive tax increase. Instead, we should make the tax cuts permanent."