By Brenda Wenning
How many laws have you broken today?
It’s impossible to know for sure, given that regulations now affect just about every facet of our lives. That’s doubly true for businesses, which were not exactly coddled by the Obama Administration (although exceptions were made for generous Democratic donors, such as Goldman Sachs and Tom Steyer).
The federal tax code alone is now 74,608 pages long, or 187 times longer than it was a century ago. Depending on what you include and how you count the pages, the Affordable Care Act (ACA) has produced anywhere from 10,000 to 20,000 pages of new regulations, while the Dodd-Frank Wall Street Reform and Consumer Protection Act, developed to increase oversight of the financial industry and reduce risk, has produced more than 22,000 pages of regulations.
The regulatory state was taken to a new level by President Obama, who didn’t even bother getting support from Congress during his second term. He and the bureaucratic brethren (and sistren) he appointed to regulate worked overtime and broke all records for creating new laws to restrict our freedom, stifle economic growth, concentrate power in Washington and prevent the new Republican administration from doing its job.
That making America great again isn’t the goal of the Obama Administration is made clear by the volume of new regulations being approved. Last August he set a record by becoming the first president to approve 600 major rules (e.g., rules that each impose a cost of more $100 million). While George W. Bush was no slouch, having approved 496 major rules during his two terms as president, Obama blew past him and just kept going.
The American Action Forum noted that in the 36 working days between the election and year end, he approved 41 more major rules—or 145 new regulations in all, which is a tad over four per day.
“The Obama Administration’s midnight regulation bender has been something to behold,” The Wall Street Journal noted.
The odds that he’s read any of those new regulations, never mind analyzing them, are about zero, which is why it’s safe to conclude that he’s merely trying to gum up the works for the other party.
Trump, Republicans Uniting on Deregulation
Whether you’re in mourning over Hillary Clinton’s loss or are a diehard Trumpkin, one thing you should consider supporting during the new Republican Congress-Trump presidency is the effort to deregulate.
The Competitive Enterprise Institute estimates that regulatory compliance costs the average family $14,976 a year, or about 29% of the family budget. It exceeds the amount spent on health care, food and transportation. It also exceeds the amount the IRS expects to collect in both individual and corporate income taxes—by more than $160 billion a year.
Based on data provided by federal agencies, the American Action Forum calculated that the economic cost of just the new regulations imposed by the Obama administration adds up to $743 billion per year.
The new Congress is already taking up a potential repeal-and-replace or at least a serious revision to the ACA, which has failed to achieve its projected level of enrollment, while causing major increases in premiums for those signing up through the federal government. And, of course, you can’t keep your doctor.
Congress is also seeking the authority to expand the 1996 Congressional Review Act so that Congress would be able to wipe out multiple midnight regulations in a single vote, rather than having to hold individual votes to repeal them. The outcome was unclear as we wrote this, but even if no changes take place, the act will allow Congress to expedite some level of deregulation.
In addition, President Trump has created the position of Special Advisor on Deregulation, naming shareholder activist Carl Icahn to fill it, while Paul Atkins, a former member of the Securities and Exchange Commission, has been named to lead deregulation of the financial sector.
Regulation Slowing Economic Growth
We’ve frequently railed against the overabundance of regulation we’ve witnessed in recent years, claiming that its slowing economic growth. Common sense would suggest as much, but now studies are beginning to back up our claim.
A recent analysis reported in The Wall Street Journal says that regulatory risk for corporate America has increased nearly 80% during the past six years, causing a drop in both corporate investment and employment. Even as the Federal Reserve Board held interest rates close to zero, capital expenditures fell by nearly $32 billion between 2010 and 2015, while major corporations cut more than 1.1 million jobs, the analysis found.
Studies also show that expanding regulation slows down productivity growth, which is key to economic growth. In a 2014 study, the Mercatus Center at George Mason University found that the least regulated industries outperformed the most regulated industries. The least regulated enjoyed 63% growth in output per employee, 64% growth in output per hour and a 4% decline in unit labor costs for the period 1997 to 2010. The most regulated experienced only 33% growth in output per employee, 34% growth in output per hour and a 20% increase in unit labor costs.
So it’s likely no coincidence that productivity growth has averaged just 1.3% a year since 2007, while it averaged twice that rate of growth during the pre-Obama years of 2000 to 2007.
The Competitive Enterprise Institute’s annual survey of the size, scope and cost of federal regulations found that Federal regulations cost American consumers and businesses an estimated $1.88 trillion in 2014 in lost economic productivity and higher prices.
So it’s reassuring that Donald Trump and the Republican majority in Congress have chosen deregulation as a major goal.
Will Democrats play along? Not likely. They’re already digging in and trying to prevent changes to the ACA.
But some level of deregulation is highly likely to take place. President Obama’s new regulations made many things illegal. Fortunately, deregulation wasn’t one of them.
Brenda P. Wenning is president of Wenning Investments, LLC of Newton, Mass. She can be reached at Brenda@WenningInvestments.com or 617-965-0680. For additional information, visit her blog at www.WenningAdvice.com.