Wayne Crews

How to Have Enough Water for Everybody

by Wayne Crews on May 28, 2013 · 1 comment

in Economy, Environment, Natural Resources, Private Conservation, Property Rights

Last week I testified in the Water and Power Subcommittee in the House of Representatives (hearing linked here). The concern was water availability and federal funding for for research and development in desalinating (de-salting) seawater and brackish water for human consumption or use in irrigation or industry.

I argued against the funding and pointed out that water shortages are almost always rooted in poor pricing for water. Without market pricing, scarcities and havoc will rule. I call for the separation of water and state. My long-form written testimony is linked here, and my oral comment appears below.

I am Wayne Crews, VP for Policy at the Competitive Enterprise Institute and I thank the committee for the invitation to speak on federal desalination efforts that, while they won’t break the fiscal bank, distract from the infrastructure and regulatory liberalization actually needed, and embrace principles at odds with an adaptable and lightly regulated water sector.

Desalination does boast impressive working applications, but it is an energy-intensive, by-product-laden way to make expensive potable water.

Happily, water is not getting more scarce overall; it’s an earthly constant.

But pricing and allocation of that constant water supply do matter. We should avoid having Government Steer While the Market Merely Rows.

When linking any research to human needs, private investors can test low-probability projects, counting on the rare success to offset multiple failures. We have to be good at killing bad projects. That requires market processes.

Federal funding, further, fosters needless conflict: over the merits of basic vs. applied research, over government vs. industry science; over assignment of intellectual property, and here, even over coping with environmental harm associated with the sourcing and externalities of desalination itself.

Politics has trouble with tradeoffs: Why brackish groundwater desalination instead of seawater, or smaller scale solar still-type projects, or why not countless alternative water investments and strategies? The dilemma affects all policy areas; Why not nanotech? Or biotech? Or methane hydrates? Or Robotics?

Fortunately, taxpayer subsidies appear not to alter the ratio of GDP spent on R&D.

So we should avoid fostering any “Declaration of Dependence” on federal dollars in any sector.

Also, all innovations bring risks. Government funding can magnify risks and environmental problems by propelling technologies ahead of the free market’s ability to properly assimilate them. In genuine markets, disciplines like liability, insurance, waste stream recapture and environmental stewardship must evolve alongside frontier technologies.

Rather than the National Research Council’s recommendations and the National Labs “roadmap,” I advocate the separation of water and state.

Water resources and environmental amenities should be better integrated into the property-rights, wealth-creating sector, an evolution derailed in the progressive era.

First, better pricing of existing supplies can make shortages vanish. Despite everything, gallons cost less than a penny, but they fill swimming pools and quench lush lawns in arid areas.

Second, improving water infrastructure can reduce the waste that now depletes some 17 percent of the annual supply, as noted in a Competitive Enterprise Institute report by Bonner Cohen.

Third, better transport, including pipelines and canals, trucking, and crude oil carriers can secure supply more cheaply than desaliniation.

Fourth, improved trades between cities, farmers and private conservation campaigns can be essential to pricing and value.

All these can supplement direct sourcing alternatives including gray and wastewater treatment and reclamation, stormwater harvesting and surface storage.

And obviously, we should address onerous permitting regulations that inflate desalination’s costs and defy the good in the process.

A couple quick general observations:

First, as CEI’s founder Fred Smith puts it, instead of trying to improve speeds by picking the particular R&D horses to run on the economic racetrack, we should improve the business and regulatory track so everyone can go faster, and let jockeys keep more of their earnings.

That means tax and regulatory reform. In my written testimony, I cover options to liberalize and enable a private sector flush with research cash.

Second, this is the water and power subcommittee, and I think it’s vital to step back and explore dismantling regulatory silos that artificially separate our great network industries like water, rail, electricity, transportation and telecommunications. Investment in desalination while leaving antique 19th and 20th century infrastructure regulation intact is curious policy.

As a free society becomes wealthier, cross-industry creation of infrastructure should become easier, not harder. The vastly poorer America of 100 years ago built overlapping, redundant tangled infrastructure; we might have had eyesores, but never a natural monopoly problem.

Again our primary challenge is to integrate modern water resources further into the market process and the sophisticated property rights and capital market systems of the modern world. We need competitive markets to discover, not merely desalination’s value relative to sourcing alternatives, but to discover the true value of water itself.

Costs Rise In Obama’s New 2013 Draft Report To Congress On The Benefits And Costs Of Federal Regulations

by Wayne Crews on April 23, 2013

in Deregulate to Stimulate, Economy, Regulation

Last year, the Obama Office of Management and Budget’s 2012 Draft Report to Congress on the Benefits and Costs of Federal Regulations surveyed 10 years of regulatory costs and benefits and pegged the cumulative costs of 106 selected major regulations during 2001-2011 at between $43 billion and $67 billion. Meanwhile, the estimated range for benefits spanned from $141 billion to $701 billion.

OMB just released the new 2013 Draft Report to Congress on the Benefits and Costs of Federal Regulations, and the burdens are increasing.

Consider just the past two years:

2012 Report: 12 rules were issued with benefits of between $34.3 billion to $89.5 billion annually, and costs of between $5.0 billion to $10.1 billion
2013 Report: 14 rules were issued with benefits of $53.2 billion to $114.6 billion annually, and costs of between $14.8 billion to $19.5 billion.

Observe the high cost estimates for each year; the Obama administration’s acknowledged new regulatory costs nearly doubled from $10.1 billion in 2012 to $19.5 billion annually in 2013.

This is significant; Recall the 2012 State of the Union Address when Obama wisecracked that he got rid of a regulation that classified spilled milk as an “oil.”

He further boasted:

In fact, I’ve approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his. (paused for applause.) I’ve ordered every federal agency to eliminate rules that don’t make sense. We’ve already announced over 500 reforms, and just a fraction of them will save business and citizens more than $10 billion over the next five years.

That meager $10 billion in cost savings over five years, worthy somehow of the State of the Union, yet in reality a tiny sliver of the real regulatory burden of $1.8 trillion annually, was just swamped in one year in the new Report to Congress.

OMB’s cost-benefit breakdowns incorporate only benefits and costs that agencies or OMB have expressed in quantitative and monetary terms, omitting numerous categories and cost levels of rules altogether. There are far more rules, and far more costs, in reality. Costs of rules from independent agencies are entirely absent in this report for example. Cost-benefit analyses are also sensitive to basic assumptions about how regulations translate into benefits.

The federal government doesn’t tell us what we need to know about regulation, but what it’s owning up to points in the wrong direction.

State Of The Union? Try “Over-Regulated”

by Wayne Crews on February 12, 2013

in Regulation

In his 2013 State of the Union address, President Barack Obama cannot be expected to pledge to roll back government in any manner whatsoever, a stance that helps account for the state of our union.

We’ve often addressed the heavy flow of rules out of Washington, but below I’ve compiled and highlighted some of the notable ones recently completed and on tap.

Just scan the list for your favorite agency; and remember, this is just a sample.

Department of Agriculture

  • Mandatory country-of-origin labeling of beef, pork, lamb, fish, and peanuts
  • National School Lunch and School Breakfast Programs: Nutrition Standards for All Foods Sold in School; and Certification of Compliance With Meal Requirements for the National School Lunch Program (as required by the Healthy, Hunger-Free Kids Act of 2010)
  • Rural Energy for America Program
  • Rural Broadband Access Loans and Loan Guarantees
  • Inspection regulations for eggs and egg products
  • Performance standards for ready-to-eat processed meat and poultry products
  • New poultry slaughter inspection regulations
  • Regulations concerning importation of unmanufactured wood articles (solid-wood packing material)
  • Bovine spongiform encephalopathy: minimal-risk regions and importation of commodities
  • Nutrition labeling of single-ingredient and on ground or chopped meat and poultry products

Department of Commerce

  • Right whale ship strike reduction
  • Taking of marine mammals incidental to conducting of geological and geophysical exploration of mineral and energy resources on the outer continental shelf

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The Cost Of Enforcing Government Regulation

by Wayne Crews on February 4, 2013 · 1 comment

in Economy, Features, Regulation

Post image for The Cost Of Enforcing Government Regulation

Regulatory cost estimates of around $1.8 trillion encompass compliance costs paid by the public plus economic drag. But but those estimates do not include the costs of administering the regulatory state, that is, on-budget amounts spent by federal agencies to produce rules and to police regulatory compliance are not accounted for there.

For that part of the “regulatory budget,” the Weidenbaum Center at Washington University in St. Louis and the Regulatory Studies Center at George Washington University in Washington, D.C., regularly examine the federal budget to excerpt and compile the administrative costs of developing and enforcing regulations. Because those funds are amounts that taxpayers pay to support agencies’ administrative budgets, rather than compliance costs paid by the regulated parties, the amounts are disclosed in the federal budget.

The newest report, “Growth in Regulators’ Budget Slowed by Fiscal Stalemate: An Analysis of the U.S. Budget for Fiscal Years 2012 and 2013,” finds that fiscal year 2012 enforcement costs incurred by federal departments and agencies stood at an estimated $61 billion (in constant 2012 dollars; here I’ve adjusted the figures from the original 2005 dollars). That represents an 8.6-percent increase over the previous year’s $59 billion.

Of this $61 billion, $10.8 billion was spent administering economic regulations. The larger amount spent for writing and enforcing social and environmental regulations was $49.9 billion. The Environmental Protection Agency alone spent $5.6 billion in this latter category, accounting for 9.2 percent of the total expected to be spent by all regulatory agencies. EPA used to dominate, but now the far newer Department of Homeland Security at $26.8 billion, accounts for over half.

Here are figures for the past decade:

Year Social Regulations ($B) Economic Regulations ($B) Total ($B)
2002 $34.6 $6.4 $40.970
2003 $44.5 $6.3 $50.868
2004 $39.2 $6.9 $46.054
2005 $39.2 $6.9 $46.192
2006 $40.6 $7.2 $47.829
2007 $41.0 $7.5 $48.483
2008 $43.3 $7.8 $51.164
2009 $46.5 $8.4 $54.911
2010 $47.5 $9.5 $56.958
2011 $46.5 $9.3 $55.798
2012 $49.9 $10.8 $60.615

Those $61 billion in agency costs help complete the picture of the federal regulatory apparatus. Adding the $61 billion in administrative costs tabulated by the Weidenbaum Center and Mercatus Center to the $1.806 trillion from the Tip of the Costberg placeholder estimate for compliance and economic costs brings the total estimated 2012 regulatory burden to around $1.867 trillion.

Incidentally, estimated full-time-equivalent employment staffing reached 283,615 in FY 2012, according to the Weidenbaum and George Washington University report — nearly 100,000 more tan a decade ago (185,205 in 2002). Much of the post-2002 surge apparent in their data may be largely attributable to the newly created Transportation Security Administration’s hiring of thousands of airport personnel; this fits with the huge homeland security costs just noted. Over the past year, overall staffing is up by 2.5 percent.

The Anti-Democracy Index

by Wayne Crews on January 29, 2013

in Deregulate to Stimulate, Economy, Regulation

In compiling Ten Thousand Commandments over the years (alas, February 8 is going to mark 20 years of this project) it long ago became apparent that the unelected do the bulk of the lawmaking.

That’s why we see legislative proposals to cope with over-delegation of power, the latest being Rep. Todd Young’s (R-Indiana) introduction of the REINS Act (with stands for Regulations from the Executive In Need of Scrutiny). REINS passed the House in the 112th Congress, but not the Senate. The 113 Congress will try again.

The re-introduction of REINS inspired me to peruse past annual editions of the Ten Thousand Commandments report with my research assistant. We’ve extracted, since 2003, the number of rules finalized in the Federal Register, and compared it to the number of laws passed by both Houses of Congress and signed by the president. Here are the results:

Year Bills Final Rules Multiple
2003 198 4,148 21
2004 299 4,101 14
2005 161 3,943 24
2006 321 3,718 12
2007 188 3,595 19
2008 285 3,830 13
2009 125 3,503 28
2010 217 3,573 16
2011 81 3,807 47

 

It’s quite eye-opening: Regulators issue vastly more rules than those elected to make law. Calling it unaccountable rulemaking is an understatement; it’s anti-democratic.

Agencies have never issued fewer than a multiple of 12 times as many rules as elected lawmakers, and in 2011, issued 47 times as many.

No big deal, just items for a federal constitutional republic with allegedly limited powers to ponder.

How Much Does Federal Paperwork And Tax Compliance Cost?

by Wayne Crews on January 28, 2013

in Deregulate to Stimulate, Economy, Features, Regulation

Post image for How Much Does Federal Paperwork And Tax Compliance Cost?

Regulations notwithstanding, the off-budget costs of tax compliance for individuals and businesses are said to account for most of the federal paperwork burden, although there might increasingly be cause to question that assumption given growing paperwork-heavy regulation in health care and finance.

In any event, for present purposes, government paperwork costs associated with regulation are presumably (but in actual fact perhaps not likely) accounted for in the Regulatory Impact Analyses for particular executive agency rules, and thus already reflected captured in OMB Costs and Benefits reports; however, again, here only major or economically significant rules and those cited as having a notable impact on small business get counted. So the paperwork associated with the bulk of rules may not be well tabulated.

Paperwork Hours and Hourly Costs
The Office of Management and Budget, in its 2011 Information Collection Budget of the U.S. Government, estimates that 8.783 billion hours is required to complete regulatory paperwork annually, up from 7.4 billion in 2000, but down from 2009. The OMB doesn’t focus on the projecting of cost estimates for all these hours, but does allow that “if each hour is valued at $20, the monetary equivalent would be $176 billion.” The Progressive Policy Institute reiterated this same figure in “When Paperwork Attacks! Five Ideas for Smarter Government,” noting that the figure would position “paperwork” as number five in the Fortune 500 based on “revenues” equivalence.

(Note: A newer Information Collection Budget report has just been released for FY2011, finding that “the public spent 9.14 billion hours responding to Federal information collections. This total represents a net increase of 355 million burden hours, or about 4 percent, from the estimated 8.78 billion hours that the public spent responding to Federal information collections in FY 2010.” Shortly this report will be used to update figures herein and in Tip of the Costberg and accompanying charts; clearly costs will be higher.)

With respect to OMB’s dollar cost number, one wonders when was the last time a lawyer was hired for $20 per hour. If one assumes $40 an hour, we’re looking at over $350 billion in paper-shuffling costs alone, let alone compliance with the underlying rules generating the paper.

Other hourly labor cost estimates abound. The National Federation of Independent Business conducts a survey of members with respect to paperwork compliance costs. The numbers vary depend on type of requirement.

Meanwhile, the Bureau of Labor Statistics (BLS) notes the following hourly wages for basic categories one might regard as relevant in keeping up with complex federal paperwork.

  • Business Human Resources professionals: $52.21.
  • Accountants and auditors: $33.15.
  • Compliance officers: $29.88.

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Federal Regulation Update: 224 Economically Significant Rules In The Pipeline

by Wayne Crews on January 16, 2013 · 1 comment

in Deregulate to Stimulate, Economy, Regulation

The federal government’s Fall Regulatory Plan and the Unified Agenda of Federal Regulatory and Deregulatory Actions finally appeared the Friday before Christmas (the Spring 2012 one never appeared).

In all, there are 4,062 rules at various stages in the regulatory/rulemaking pipeline. The last time there were fewer than 4,000 was back in 2007 (there were 3,882 then).

A portion of these rules are deemed “economically significant,” meaning they have impacts on the economy of at least (could be more) $100 million annually or significantly impact government operations. Those impacts could be to decrease costs, and it’s a cute sentiment, but that’s not how the regulatory enterprise usually works.

There are 224 economically significant rules in the pipeline now.

The Departments with the most (the top seven, in this instance) are as follows:

Dept. of Health & Human Services: 64
Dept. of Agriculture: 20
Environmental Protection Agency: 20
Dept. of Energy: 18
Dept. of Labor: 17
Dept. of Homeland Security: 15
Dept. of Transportation: 15

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Where Did All The Environmental Protection Agency Rules Go?

by Wayne Crews on January 15, 2013

in Deregulate to Stimulate, Economy, Energy, Environment, Regulation

The Unified Agenda of Federal Regulations has always been squishy and has never bound agencies to issue solely the rules contained within; but the decline in EPA rules in the Unified Agenda between 2011 and 2012 indicates a scrub of some sort before the tardy document was finally released.

Overall, the Agenda contains 4,062 across all the depts and agencies at the active, completed, and long-term stage. This is slightly down from the year before, but it doesn’t seem genuine; the Agenda should be bigger given the far higher number of EPA rules in the past decade.

Just look at EPA over the past couple years:

Year Total Active Completed Long-term
2012 223 117 71 35
2011 318 175 82 61

Where did all the rules go? Liberalization and deciding not to regulate has not been an Obama administration priority. EPA rules have never been lower than 2011′s 318 in the past decade. It seems we’re getting only part of the story and Congress should take a look. EPA omits any narrative on its Regulatory Plan on its homepage, unlike previous years.

A narrative does appear on a separate webpage — and is dated December 24, 2012, later even than the overall federal Unified Agenda of which this material should have been a component, and too late for a 2012 audit to have occurred.

Settlement: FTC Ends Google Antitrust Investigation

by Wayne Crews on January 3, 2013

in Economy, Property Rights, Regulation, Tech & Telecom

Today, the Federal Trade Commission (FTC) cleared Google of accusations of “Search Bias,” and inappropriately harming rivals.

The investigation lasted nearly two years. CEI released a statement today, “Web Users Dodge Bullet as FTC Closes Google Probe.”

Google rivals naturally object, but those protests are revolts against the objective reality that people like Google.

The FTC did secure certain concessions from Google, which will alter how it presents bits of information, such as that from review sites such as Yelp (a criticized practice it was already modifying in some areas); and Google will make it easier for firms to advertise across other search engines when they have an arrangement with Google.

Antitrust purports to address consumer harm, or compulsion. The FTC got it right; there is no harm created by Google reasonably address with top-down force. Options abound for consumers. If only the investigation had been avoided at the outset.

As my colleague Ryan Radia noted:

Today’s ruling…affirms that every company is free to compete by serving its users, no matter how high its market share or how much its rivals suffer as a result. America’s antitrust laws are designed not to punish companies for growing too big…but to ensure no company stifles competition itself. The thriving Internet sector — a bright spot in America’s otherwise lackluster economy — shows no signs of suffering from too little competition.

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2012′s Year-End Regulatory Report Card

by Wayne Crews on January 2, 2013 · 1 comment

in Deregulate to Stimulate, Economy, Features, Regulation

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Both 2011 and 2010 finished with over 81,000 pages in the Federal Register, as tallied in Ten Thousand Commandments. These were the highest page counts ever.

Of course page counts don’t tell you much; rules of a few pages might be burdensome, lengthy rules might impose comparatively less of a headache.

It’s now the second day of 2013. On December 31, 2012, the Federal Register added 441 pages. That brought the year’s total to 77,250 pages in the hard-copy (or PDF, as is customary for many readers today) edition. In my own adjusted tally, which will account for some skips and blanks, I find 76,875 pages.

So at least in terms of the page count, we’re not at a record level despite an imminent surge of rules affecting energy efficiency, health care, and finance. Rule flows slowed prior to the presidential election, and the question is is less if they will pick up but when.

Within those 76,875 pages, 3,706 final rules were issued by my tally. The Federal Register‘s own searchable database puts it at slightly more at 3,714, which I expect to drop a bit.

Roughly equivalent to 2011′s 3,781 final rules, the 2012 count is no record but exceeds the levels of President Obama’s first two years.

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