David Brooks’ article today in The New York Times belittles the cost of regulation to American businesses and the U.S. economy and praises the Obama administration for its “rigorous cost-benefit analyses” of proposed regulations. While he does note that “the Obama administration has significantly increased the regulatory costs imposed on the economy,” Brooks also says that it’s not clear that those regulations “have had a huge effect on the economy” or indeed on small businesses.
So more and more onerous regulations at higher and higher costs and greater economic uncertainty among businesses don’t have a dampening effect on hiring more workers or on capital investment? As CEI’s Clyde Wayne Crews and Ryan Young noted in a recent article:
There are more than 4,200 new rules at various stages of the federal regulatory pipeline right now. Companies, especially the ones too small to afford a Washington office, don’t know what’s coming next. No wonder they are skittish about making long-term investments, whether in employees or capital.
I’m fond of saying that the two iron laws of modernity are 1) things are getting better, and 2) people think they’re getting worse.
One more piece of evidence that these laws hold: this articlecomplaining about Siri. Siri is a voice-activated program that comes with new iPhones. Users can ask their phone where, say, the nearest Thai restaurant is. Just say it out loud. No typing. In seconds, Siri gives out a dozen options, with maps, directions, and even menus.
It’s an amazing piece of technology, and it will only improve in the coming years. And this guy grouses that Siri “won’t tell me how much battery life is left, or turn my Wi-Fi antenna on or off.” What an astonishing mindset. It is disheartening that when faced with such cool innovations, people invariably find ways to complain about them.
On the other hand, if consumers weren’t such harsh sovereigns, many of today’s innovations might never happen in the first place. Modernity’s second iron law — people think things are getting worse — is a double-edged sword.
RADLEY BALKO: “SWAT Raids, Stun Guns, and Pepper Spray: Why the Government is Ramping Up the Use of Force” “In February of last year, video surfaced of a marijuana raid in Columbia, Mo. During the raid on Jonathan Whitworth and his family, police took down the door with a battering ram, then shot and killed one of Whitworth’s dogs within seconds of entering the home and they wounded the other. They didn’t find enough pot in the home to charge Whitworth with even a misdemeanor. (He was, however, charged with misdemeanor possession of drug paraphernalia when police found a pipe.) The disturbing video went viral in May 2010, triggering outrage around the world. On Fox News, conservative columnist Charles Krauthammer and Bill O’Reilly cautioned not to judge the entire drug war by the video, which they characterized as an isolated incident.”
ROBERT H. FRANK: “Does Inequality Matter?” “Republicans have never wanted to talk about inequality, and many Democrats now seem afraid to. As a congressional Democratic adviser quoted by the New York Times reporter Jackie Calmes recently put it, the party is having difficulty articulating its position “in a way that doesn’t get us pegged as tax-and-spenders.’”
ARTHUR M. HAUPTMAN: “The Federal Role in Pricing” “Persistently rising college tuitions, high spending per student, and mounting student debt burdens have re-emerged as key issues in Washington. Secretary Arne Duncan has called on college and university officials to show more urgency in keeping down their prices and spending, the House subcommittee on postsecondary education has held another hearing to wring its hands about college unaffordability, and President Obama has now summoned a select group of college presidents and higher education thought leaders to consider what can be done.”
What’s the best way to reward individual innovation? In the latest episode of “Fred Weekly,” CEI President Fred L. Smith, Jr., says that entrepreneurial organizations are generally better than political institutions at rewarding those responsible for creating value. Watch below:
Andy Stern’s December 1 op-ed, “China’s Superior Economic Model,” blames America’s free-market fundamentalism for its economic troubles.
If America is indeed a free-market fundamentalist nation, it sure has a funny way of showing it. Federal, state, and local governments combine to spend roughly 40 percent of GDP. Washington indirectly spends another 12 percent of GDP by forcing businesses and consumers to comply with $1.75 trillion worth of federal regulations.
In his eagerness to attack free markets, Mr. Stern has confused the mixed economy’s crony capitalism for the real thing.
Ryan Young Competitive Enterprise Institute Washington, D.C.
CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.
CEI Weekly
December 2, 2011
>>Featured Story
The Supercommittee was charged with crafting real solutions for our nation’s budget problems—and they failed. CEI Adjunct Associate Matthew Melchiorre reports from his current home in Italy that the Supercommittee’s failure may bring the same economic woes to America that are now plaguing Italy. Read his op-ed on the issue here.
Here’s a letter I recently sent to The Washington Post:
Editor, Washington Post:
Anita Kumar’s November 29 Virginia Politics blog post “McDonnell recommends eliminating agencies, boards, commissions” incompletely details Virginia Gov. Bob McDonnell’s “ongoing effort to reshape and shrink state government.” By deregulating three professions, eliminating two state agencies, and merging 19 others, $2 million could be trimmed from the commonwealth’s budget if the legislature approves the proposal.
She does not mention that Virginia’s budget is set to increase by $1.1 billion in 2012. This new spending outweighs the proposed cuts by a factor of 550. Gov. McDonnell may be modestly reshaping government, but he certainly isn’t shrinking it.
Ryan Young, Washington The writer is a fellow at the Competitive Enterprise Institute.
Legendary labor leader Andy Stern has seen the future. There’s no freedom there, but he’s OK with that.
Stern, a former president of the Service Employees International Union (SEIU) and now senior fellow at Columbia University’s Richman Center, recently returned from a trip to China organized by the Center for American Progress. Stern had the opportunity on this sojourn to meet with “high-ranking” Chinese officials, who outlined for the former labor leader part of the authoritarian regime’s long-term economic plan.
Strern was so enamored with what he saw and heard in the Middle Kingdom that he wrote a slavish op-ed for The Wall Street Journal praising the communist country’s state-planned economy and urging the United States to embark on a similar path. Among the more revolting passages of Stern’s love letter to Leninism:
The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA’s results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic.
This should motivate leaders to rethink, rather than double down on an empirically failing free-market extremism. As painful and humbling as it may be, America needs to do what a once-dominant business or sports team would do when the tide turns: study the ingredients of its competitors’ success.
Ten years ago today, Enron Corp. filed for bankruptcy. Today, with all of its dealings with banks, it would probably have been deemed “too big to fail.”
But luckily, this was before Hank Paulson and Tim Geithner occupied the Treasury Department. Enron was allowed to fail, and its executives were punished for fraud under decades-old securities laws.
While there was certainly damage to employees and, temporarily, to surrounding businesses in Houston, the bankruptcy barely caused a blip to the larger economy. The economy, already reeling because of the 9/11 attacks three months earlier, soon had a remarkable recovery.
Rather, the most damaging action of the Enron affair occurred in the aftermath of post-Enron reform. This would be the Sarbanes-Oxley Act of 2002. Ten years later, even the Obama administration agrees that Sarbox’s crushing burden of accounting mandates is holding back economic growth.
And Sarbox has little to show in results for investors, having failed to stop Lehman Brothers, Countrywide and now MF Global, which was run into the ground by a former politician who had championed the 2002 law. Jon Corzine’s bio on the website BigThink.com states glowingly, “As a member of the United States Senate, Corzine co-authored the Sarbanes-Oxley Act, a piece of legislation designed to crack down on corporate malfeasance crafted in the wake of accounting scandals surrounding Enron, Tyco, WorldCom, and other major corporations.”
Yes, it turns out Corzine may have been more of an expert than we thought on alleged “corporate malfeasance.” And as noted in the October report of President Obama’s Council on Jobs and Competitiveness, Sarbox has crushed the dreams of thousands of honest entrepreneurs for every scandal it may have stopped (and I don’t know that it has stopped any.)
The Roman historian Tacitus wrote that “Laws were most numerous when the state was most corrupt.” Today, the U.S. Code is over 47,000 pages long. The Code of Federal Regulations runs over 165,000 pages. Matt Patterson, CEI’s 2011-12 Warren Brookes Fellow, applies Tacitus’ insight to U.S. politics and discusses what it will take for substantive reforms to become politically possible.
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