The Democrats demonstrate a disdain for capitalism, free trade and the validity of contracts. They cheer the restriction of certain types of speech on campus and in federal law….Lately, the Democrats have been popularly associated with principled opposition to waging war in far-flung corners of the globe. But evidence on the ground today tells a somewhat different tale.

As for the GOP, it has outwardly abandoned the limited-government principles of Barry Goldwater and Ronald Reagan. Little other evidence is needed than the Medicare prescription drug benefit — with its $13-trillion unfunded liability — passed with a strong-arm campaign by the Bush White House and a Republican congressional majority.

Crane put some of the blame for the GOP’s shift on the supply-side movement’s emphasis on tax cuts and economic growth: “Supporters of those ideas didn’t talk about spending cuts, much less the proper role of government. They had the effect of replacing ‘liberty’ as the motivating force behind the GOP with ‘growth,’ a somewhat less-inspiring ideal.” Indeed a gigantic government may still periodically balance it’s fiscal budget (as occurred in the U.S. from 1998-2001); so it’s important to maintain liberty itself as the goal, rather than “good government.”

It’s not clear how one votes for limited governement anymore, so I enjoy my “Abstain” shirt. But Non-interventionism–how nice a platform that would be, from either party.

But even a glance at their article shows how little substance there is to any of these promises.   No new nuclear power plants will be built unless there is somewhere to store the waste.  Here’s what Kerry and Graham say about that: “We must also do more to encourage serious investment in research and development to find solutions to our nuclear waste problem.”  In other words, not finish the Yucca Mountain site in Nevada that the federal government has already spent billions on, but which Majority Leader Harry Reid (D-Nev.) and President Obama oppose.  Carbon capture and storage technology is more than a decade away from being commercially available.  Even if it works and is affordable, environmental pressure groups will sue to block permits for the pipelines and underground storage sites necessary to transport and store the pressurized carbon dioxide.  Here’s what Kerry and Graham say: “…we need to provide new financial incentives for companies to develop carbon capture and sequestration technology. “  Not a word about limiting lawsuits that would block projects.

Kerry and Graham support a border tax to protect American jobs from products produced in countries that don’t commit to reducing their emissions.  That is an admission that energy prices are going to go up and so are the prices of goods and services that are produced with or use energy.  Consumers will be poorer as a result and hence will be able to afford fewer goods and services.  Bye-bye manufacturing jobs.  They also claim that their as-yet-to-be-written bill will reduce our imports of foreign oil.  That’s plausible, but not exactly correct.  As our economy declines, we will need less oil.  But it will reduce U. S. and Canadian production first because the production costs are much higher here than in Saudi Arabia.

Our take must be regarded as least serious of all, since we cling to the now-marginalized view that central governments ought not impose “national plans” in the first place; that the original spectrum scarcities that originally spawned the FCC are far less relevant today; that the agency should be vastly shrunken, and minor residual regulatory functions and disciplines be turned over to competitive enterprise, or at the worst the Federal Trade Commission (a general, not specific industry, regulator). The communications marketplace needs liberalization, not new and layered management from above, and the comment phase on the National Plan is an opportunity to make that case.

Unfounded regulation and “national plans” are damaging for the same reason all central economic planning is bad. It’s much deeper than a failure to know the price to set for any particular service, or where new communcations services ought to be deployed across a vast nation. Tacit knowledge of individuals about proper prices to be set and appropriate service areas to energize are not accessible to external observers and regulators; they emerge from the competitive process itself. And knowledge of past prices and market conditions are not predictors of the future in any way.

Regulation either sets quantity or price of goods or services; “market-based” approaches typically favor quantity standard that allows price to fluctuate. But there are grave problems with the government steering while the market rows. The communications system can end up embodying something entirely different that what simple free enterprise would have delivered more effectively.

As the Austrian economists tell us, without respect for private ownership and control of the means of production, and the human interactions that take place in competition for them, there cannot exist economic calculation and rational allocation of resources generally; but that’s especially true for cutting edge technolgies like communications that are so in need of liberalization. So for my part, it’s the belief in central planning itself that I consider “sloppy.”

A skeptical interpretation of antitrust’s realities—up to and including recent campaigns targeting Intel, Google, XM-Sirius; and earlier campaigns against Microsoft and the AOL Time Warner merger, as well as rejected mergers like Echostar/DirecTV—is that antitrust often advances the well being of various species of political predators rather than consumers.

Antitrust is a form of economic regulation. And like all economic regulation, it transfers wealth from somebody to somebody else, often in response to special-interest urging. Partly in recognition of such shortcomings, many economic sectors like transportation and telecommunications were (partly) deregulated and liberalized during the last quarter of the 20th century. But antitrust regulation typically gets a pass. Even in the “new economy,” this century-old smokestack era law is used to justify constraints and conditions imposed on vigorously competitive modern companies. Antitrust is wrongly seen as being in the public interest, as having a superior role to play in policing markets relative to the alternatives.

In antitrust cases the targeted company’s rivals have a direct financial, as opposed to spiritual, interest in the outcome. Appeals to antitrust as a public interest law do not change the fact that private motives of rivals, and even ambitious enforcers, are not simply lurking in the background, but running the show. The idea that antitrust helps consumers and that it has a role to play in the new economy deserves reexamination and challenge.

Under antitrust law, a laundry list of business practices (tying, bundling, discrimination, exclusive deals, and so on) are regarded suspiciously, some outlawed altogether. But business transactions are fundamentally voluntary, non-coercive dealings—unlike the forced antitrust interventions that rivals often seek. From this fresh perspective, one finds that even the most “despised” business behaviors—even collusion and mega-mergers—can be pro-competitive and pro-consumer. To the extent antitrust regulation strikes down practices that have misunderstood or ignored efficiency justifications, especially in an information-based economy, individuals and society are made unnecessarily poorer.

The list of vilified business practices is long, but needn’t be, and we often try to explain why. If anyone cares about economic recovery and jobs, today’s aim should be to “deregulate to stimulate,” so a list of vilified trustbuster practices woould be far more advantageous to consumers.

When I first read the piece today I didn’t’ think he had any government spending cuts or reductions in scope of govt at all, then noticed some welcome liberalization of offshore drilling, and some privatization. But apart from that, the Strategy outline doesn’t seem to contain much apart from rolling back some of the spending insults of the past 10 months to pay for tax cuts. Those make some sense; but along with no overarching vision of limited government–that is, the bounds of what Washington can and should do in our lives in our modern economy–there’s no “deregulatory stimulus.”

We do need tax reforms like we see in the Strategy outline, but also need to reduce the scope of government that leads to the calls for taxes in the first place. We haven’t even bugun to properly talk about the kind of sweeping spending cuts actually needed. We also need to “liberate to stimulate,” and at CEI have proposed numerous options in that regard. These include:

–A freeze on government regulation;
–A “Regulatory Reduction Commission” to weed out decades of bad rules;
–A radical abandoment of so-called “antitrust” law, a step essential to getting government off the backs of our economy’s greatest wealth-creating sectors
–Limiting the scope of meddlesome, turf-expanding agencies like the Federal Communications Commission
–A more ambitious “R3″ program at the Small Business Administration’s Office of Advocacy to give entrepreneurs an avenue to protest onerous rules pouring out of more than 60 agencies;
–The beginnings of “regulatory budgeting”;
–Ends to unfunded mandates on lower-level governments;
–Requiring congressional approval of any major or controversial new agency rule, henceforth.

There are many more steps to be taken, but the point is, any attempt to stimulate the economy today requires a vastly more radical commitment to rooting out statism’s underbrush than in this new Memo by Newt.

Such big problems require big solutions that spread the risk of political fallout, by assembling a bi-partisan package of cuts and requiring an up-or-down vote.

So, against the backdrop of a $3.5 trillion federal budget, trillions in deficit spending, and over $1 trillion in annual regulatory costs besides, comes H.R. 1023, the “Federal Agency Program Realignment and Closure Act,” introduced February 12 by Rep. John Sullivan (R-OK).

In a political environment ballooning with unrestrained new government programs, his bill would “establish a commission to recommend the elimination or realignment of Federal agencies that are duplicative or perform functions that would be more efficient on a non-Federal level.”

The proper response to the economic crisis is to “liberate to stimulate,” not just spend more taxpayer dollars. H.R. 1023 is one of the few attempts to implement economic liberalization and force government belt-tightening.

Of course, it will still take years to implement the commission’s actual reductions. Another difficulty is that the specific regulatory programs under each agency also have cheereleaders. So in the meantime, freezes, purges and the like should be actively pursued; those can be based on gleaning better information about just what it is that the dozens of agencies are up to. A “Regulatory Report Card” like the below is one way to do it.

Regulatory Report Card …with 5-year historical tables…

• Total major ($100 million-plus) rules and minor rules by regulatory agency
• Numbers/percentages of rules impacting small business
• Numbers/percentages featuring numerical cost estimates
• Tallies of cost estimates, with subtotals by agencies and grand total
• Numbers and percentages failing to provide cost estimates
• Federal Register analysis: Pages, proposed and final rules by agency
• Most active rule-making agencies
• Rules that are deregulatory rather than regulatory
• Rules that affect internal agency procedures alone
• Numbers/percentages required by statute vs. rules agency discretionary rules
• Rules for which weighing costs and benefits is statutorily prohibited
• Detail on rules reviewed by the OMB, and action taken

Alternatives to “spendulus” and the “Bailout to Nowhere” exist.  A “Liberate to Stimulate” campaign would include spending/tax reforms, “deregulatory stimulus,” infrastructure liberalization, financial sector reforms that shift risk back on the institutions rather than toward taxpayers, a “regulatory reduction commission” and much more. Starting from the basics–what exactly is it that limited government entails–can go a long way toward laying the right foundation for unimpeded economic recovery.

Consider regulation of business in America today: We’ve all heard of the trillions of dollars in new government spending. But the compliance costs generated by thousands of regulations pouring forth from over 50 departments, agencies and commissions impose trillions more. (See Ten Thousand Commandments for a survey.)

Agency bureaucrats don’t answer to voters. But Congress–although responsible for the underlying statutes that propel those agencies–can blame them for regulatory excesses that contribute to lackluster economic performance. So you get “regulation without representation.”

Evem reforms like cost-benefit analysis can’t tame the regulatory state so long as agencies themselves get to assess their own benefits, and so long as legislative or Constitutional constraints on the scope of the regulatory state as such are weak.

The latter—reducing the scope of government control in the economy–is the true end game. But so long as government control is pervasive, something like a “regulatory budget” could promote accountability by limiting the amount of regulatory costs agencies could impose on the private sector, and hold Congress responsible for those costs.

There are numerous methods; one probably overly detailed version I recall would require that Congress cap compliance costs for each newly enacted law or reauthorization of existing law. The Office of Management and Budget would assess private sector regulatory costs during the rulemaking phase. Any agency reaching its congressionally set cap would be unable to issue new rules unless it received explicit congressional authority. The real innovations of regulatory budgeting would be its reinforcement of congressional primacy in the legislative and rulemaking processes, and its potential to impose the consequences for the quality (or lack thereof) of regulatory decisionmaking on agencies rather than solely on regulated parties.

Of course, regulatory costs can never be precisely measured, and a budget cannot achieve and should not seek absolute precision. Moreover, enforcement will never be easy: agencies can have incentives to underestimate compliance costs, while regulated parties may have the opposite incentive. However, the enhancement of congressional accountability and limitations on the delegation of regulatory power will help. The key in the meantime is not to systematically understate costs.

As information (sorely lacking now) accumulates, Congress can begin to divide a “total” budget among agencies roughly in proportion to potential benefits, such as lives saved. Agencies’ incentives would be to rank hazards from most to least severe, and address them within their budget constraint. Unwise regulating could mean transfer of the squandered budgetary allocation to a “rival” agency. Congress would weigh an agency’s claimed benefits against alternative means of protecting public health and safety, giving agencies incentives to “compete” and expose one another’s “bogus” benefits. Agencies that today rarely admit a rule provides little benefit would be forced to compete for the “right” to regulate.

Explicitly recognizing that an agency’s basic impulse is to overstate the benefits of its activities, a budget would relieve agencies of benefit calculation responsibilities altogether. Agencies would concentrate only on properly assessing the costs of their initiatives and attempt to maximize benefits within its congressionally specified budget constraint.

Other ways to promote the success of a budget are to: start small; collect and summarize annual “report card” data on the numbers and costs of regulations in each agency; establish a regulatory cost freeze and set up a Regulatory Reduction Commission to assemble a package of regulations to cut; employ separate budgets for economic regulation and environmental/social regulation; and, finally, control indirect costs by limiting the regulatory methods most likely to generate them.

A regulatory budget will not magically reduce the current $1 trillion annual regulatory burden. But better information about the size of the regulatory state will aid future economic stimulus efforts just as compiling the federal fiscal budget–as catastrophically out of control as it is today–is indispensable to any effort to plan and control government spending and pull us out of the mire.

It’s a good to time to reflect on the question of why, exactly, it is that we erect governments in the first place. I don’t have the energy right now and won’t bother to try to answer the question; I just thought it’d be nice to have it hanging out there on this particular day, the day of our national Declaration of Dependence.

A long line of judge-made law since the Supreme Court’s New Deal era decision in Wickard v. Filburn (1942) says there is almost no limit, under the commerce clause of the Constitution, to the regulatory reach of the federal government.

Thus, a united president and Congress can, as a practical matter, do all or any of the following (plus much more): take your money and give it to someone else; tell businesses what to produce and sell, who to hire and what wages to pay; set all commodity, wholesale and retail prices; control all energy supplies, communication networks and financial markets; replace all private health-care with a government system; prescribe the curriculum for all schools; determine which students get a slot in elite universities; diminish political and other speech; and enroll all citizens above the age of 17 either in the military or in civilian corps for periodic instruction and service.

Anyway, we’ve called for wealth-creating alternatives to mega-spending packages, and various other reforms; virtually everything in the Anti-Stimulus actually merely stimulates government and political power, and each has a pro-free-enterprise mirror image that would grow the private sector and wealth instead–from irresponsible federal involvement in schools to infrastructure expansion. Today, since the regulatory state is such a huge component of Washington, I thought I’d point out again some ideas on how to “Liberate to Stimulate.”

Each year some 4,000 regulations pour out of Washington, imposing annual costs of $1 trillion (is that even a big number anymore?) Regardless, they need review and control; here are a few options (for detail, see the full report Jump, Jive an’ Reform Regulation: How Washington Can Take a Swing at Regulatory Reform):

–Halt Regulation Without Representation: Require Congress to Approve Costly or Controverial Agency Regulations
–Publish an Annual Regulatory Report Card
–Require that Agencies Calculate Costs, but not Benefits
–Lower “Major Rule” Thresholds for Formal Review
–Create New Categories of Major Rules to Improve Analysis
–Explore Regulatory Cost Budgets
–Publish Data on Economic and Health/Safety Regulations Separately
–Disclose Transfer, Administrative and Procedural Regulatory Costs
–Explicitly Note Indirect Regulatory Costs
–Agencies and the OMB Must: (1) Recommend Rules to Eliminate and (2) Rank Rules’ Effectiveness
–Create Benefit Yardsticks to Compare Agency Effectiveness
–Reconsider Review and Sunsetting of New and Existing Regulations
–Establish a Bipartisan Regulatory Reduction Commission to Survey Existing Rules and Assemble a Package to Eliminate

We’ll review all of these but the idea of a Regulatory Reduction Commission in particular is something we’ll return to here on OpenMarket shortly. Restoring government to something resembling it’s proper bounds will now require such major campaigns.

Rahm Emanuel, President Barack Obama’s incoming chief of staff, recently commented: “You never want a serious crisis to go to waste.” Now, we at the Competitive Enterprise Institute are at least as concerned about the nation’s current economic crisis—but we are even more concerned about bad policies that may come out of this crisis.

Still, Emanuel’s point is valid. Crises expose unexpected—and often misunderstood—weaknesses in current policies. While our statist friends see this as an opportunity—indeed, a duty—to expand the size and scope of government, we at CEI see it as a chance to challenge the entanglement of the private and political spheres.

Markets have appeared less resilient and less disciplined than we had hoped—but not because of a laissez faire ideal. The troubles besetting America’s financial sector are best understood as a tragic example of the inevitable consequences of the “mixed economy”—an ungainly mix of government mandates, regulations, subsidies, private sector rent-seeking, and socialization of risk.

The mixed economy model seeks to advance utopian social goals by harnessing the profit motive of capitalism. Thus, we see this crisis as an opportunity to dramatize the disastrous consequences of this collectivist approach, and to encourage policy makers to rethink the drift away from sound principles over the last century, to restore a world of freedom and responsibility—the essence of truly free markets.

Indeed, America’s success has been based on an adherence to sound principles: a government limited to its appropriate sphere—protecting property rights and the nation, enforcing the rule of law—and a voluntary sector enjoying the greatest possible ambit for both economic and non-economic exchanges.

Sadly, we have drifted far from those principles as “progressive” ideas have gained intellectual ground. This has led policy makers to push private enterprise to “do good”—voluntarily, if possible; coercively, if necessary. And the “good” is defined by the intellectual class, which has long championed bigger government.

Unlike in Europe, where socialists sought outright government ownership of industry, American progressives sought to leave in place the illusion of free markets, while imposing on businesses an array of “social” mandates to be enforced through taxes, regulations, and subsidies.

This had the effect that, in Europe, the costs of statist policies were apparent, and the blame for failure could be easily attributed to government. In contrast, the American regulatory welfare state hides its costs by shifting themon to businesses and consumers, so its failures are more likely to be attributed to the private sector. In America, these factors make it more difficult to reign in the regulatory state, and to discipline its excesses. Yet to do so is necessary now more than ever.

Civilization is the slow process of creating the institutions that allow greater freedom, allowing more of mankind to engage in voluntary exchange with others. For many years, America was the leader in this effort. We pioneered in expanding private property rights to all citizens–including subsurface mineral rights, which allowed entrepreneurial activity to move beneath the Earth, making possible the rapid growth in the mineral and energy sector. And as science found ways to harness the electromagnetic spectrum and the airwaves, those too began to move toward private ownership.

However, policy makers in the early part of the 20th century rolled back many of these efforts as progressive ideas supplanted those of freedom and responsibility. Voluntary exchange was compromised by America’s regulatory welfare form of central planning. Gradually, the boundary between government and voluntary exchange weakened, and it became common for policy makers to seek to combine maximizing profits with pursuing political goals, such as subsidizing politically preferred constituencies.

In the financial arena, an example of this is the creation of government sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac—nominally private profit-making firms that enjoyed an implicit government guarantee against losses. Those guarantees allowed the GSEs to dominate the low-risk sectors of the housing market, pushing private lenders into higher risk investments. In addition, politicians insisted that the GSEs make home loans to individuals with weak credit scores. Government could have honestly sought to increase home ownership for the poor through direct subsidies, but that would have made the policy’s costs transparent. Instead, the carrot and stick of subsidies and regulations, helped hide the costs. The resulting confused mix of politics and business became one of the primary factors behind the current financial crisis.

Now a new Democratic administration comes to Washington, promising “change we can believe in”—and that could be a good thing. The last few decades—of over-spending, over-regulating, and over-intervening—call for considerable change. Only a few years ago, a Republican team roared into Washington with its own ambitious reform agenda—and soon became mired in the bogs of Washington. If the Democrats replicate their Republican colleagues’ mistakes, their honeymoon will be brief.

Real change is needed. The economic emergency measures advanced by the Bush Administration have done little to alleviate the financial— or any other—crisis. It should be clear by now that such top-down solutions do not work—and are even unlikely to produce any political gains as economic pain turns public opinion sour.

CEI hopes to work with the administration and others on these issues. We hope to share with the new Congress our ideas on how to jump-start the nation’s economic engine—the American people’s entrepreneurial spirit. There is much to do.

Many sectors of the economy—electricity, telecommunications, airlines, and other network industries—have been hampered by botched, partial deregulations. The solution is not to revert to state control, but to truly liberalize.

We also hope to work with the new Congress to promote the health of the American people by reforming the Food and Drug Administration to speed the process of bringing new life-saving drugs to market.

With major change come major risks. As a Louisianan, I am well aware of populism’s something-for-nothing allure. Mistakes made in the name of “helping the little guy” can hurt everybody in the long run, by creating long-lasting economic damage. Proposals for one-size-fits-all mandates in areas like wages and prescription drugs threaten to undermine the dynamism of America’s market economy—and thus hurt those whom such measures are supposed to help. We will happily work with lawmakers of both parties to oppose bad ideas like those.

During the last Congress, Republicans massively expanded the federal government—and the voters punished them for it. Now the Democrats have been entrusted to set aright the ship of state. In a globalized world, they will retain their majority only by advancing a pro-growth agenda.

A revitalized economic liberalization program must be a part of that agenda. This volume offers policy reforms to lawmakers, of all parties, to help boost economic and personal liberties. It will be an interesting few years; we plan to be a part of the debate.

To read more of CEI’s Agenda for Congress, visit cei.org/congress