Deregulate to Stimulate

Post image for Professional Licensing: A Risk to the Free Markets and Freedom of Speech

From physicians to dentists to lawyers, the licensing requirements of many professions are well known—but for bloggers? A recent case in North Carolina demonstrates the dangers that mandatory occupational licensing poses to liberty and how established interests use such requirements to protect their bottom line.

North Carolina resident Steve Cooksey was ill, obese, and struggling with type 2 diabetes. In 2009, after being rushed to the hospital, nearly in a coma, he decided to do everything in his power to get healthy. By following a low-carbohydrate diet, Cooksey claims he was able to drop 45 pounds and get off insulin and drugs. He documented his story on his personal blog, where he provided advice to others practicing the “paleo” diet that he believes saved his life.

That sounds like a win-win situation, but not according to the North Carolina Board of Dietetics and Nutrition (NCBDN), which decided to go after Cooksey for the “crime” of offering nutritional advice without a dietitian’s license. In 2011, it sent Cooksey a letter, claiming that his blog, by giving readers “unlicensed dietetic advice,” even for free, violated North Carolina law. The NCBDN included a 19-page copy of his online writings with comments in red ink pointing out what he could and could not say.

Even more surprising, the notice asserted that Cooksey’s private conversations with readers and friends via email and telephone also constituted a violation of the state’s dietitian licensing law!

Unfortunately, Cooksey’s case is far from an isolated incident. In just about every state, there is a dizzyingly long list of jobs that require would-be workers to go through a long, expensive, and sometimes arduous process to earn the privilege of entering into a given profession. While the stated reason for requiring occupational licenses is public safety, established players operating under existing licensing schemes usually fight tooth and nail to maintain occupational license requirement in place, to make it harder for potential competitors to enter the market.

Today, roughly 30 percent of jobs in the U.S. require some form of license (a sharp increase from a low back in 1950, when the share was only 5 percent). Fortunately, some workers are fighting these licensing regime—and many are winning.

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Post image for Why Is Obama’s Report to Congress on the Benefits and Costs of Federal Regulation Delayed?

In April 2013, the White House Office of Management and Budget (OMB) issued its Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations, which covered rules and regs issued in fiscal year 2012. The final 2013 edition never appeared; now, the Draft 2014 edition is due. I’m not holding my breath.

President Obama claimed again as recently as February 2013 that “this is the most transparent administration in history.”

But getting this important document, as well as the oft-delayed Unified Agenda of Federal Regulatory and Deregulatory Actions, is like pulling teeth. Part of the recent House-passed ALERRT Act addressed the Agenda’s tardiness; it’s naturally stuck in the Senate. (The Agenda is an obscure but important document wherein federal departments and agencies reveal their priorities along with disclosing recently completed rules.)

The 2013 Draft Report revealed that costs of major rules jumped under Obama; The 14 rules added during the fiscal year ended September 2012 imposed costs of from $14.8 billion to $19.5 billion (that’s in the 2001 dollars OMB uses, which look better than 2012 dollars).

The OMB breakdown incorporates only benefits and costs of a handful of major rules which the OMB or agencies have expressed in quantitative and monetary terms. It omits numerous categories and cost levels of rules altogether, and rules from independent agencies are entirely absent.

OK, that’s worrisome, but normally, final reports look fairly identical to draft reports, so the reluctance to release it is unclear. We presumably already have the “bad news.” In any event, normally by April OMB has issued the year’s Draft Report, as can be seen in the list below. There were two big exceptions: one during Obama’s first year, one during George W. Bush’s last.

April is upon us, and without the final 2013 report, it’s not looking likely that the Draft 2014 we need to see is imminent. Regarding final reports, they always appeared by year-end up through 2005. Since then, apart from 2010 and 2011, a given year’s report hasn’t appeared until the following year. But they have only been this late twice (in 2012 under Obama, and in 2007 under Bush). Even when final reports were delayed into the subsequent year, we usually had them by January.

It should be adequate that regulation is allowed to grow without much restraint; the lack of timely disclosure of the relative handful of rules that get scrutiny in the only formal report on regulatory costs is too much.

Here is a list of Draft and Final reports’ dates of appearance since 2002.

Date Draft Final
2014 Due Now n/a
2013 April Overdue
2012 March April 2013
2011 March June
2010 April July
2009 September January 2010
2008 September January 2009
2007 March June 2008
2006 April January 2007
2005 March December
2004 February December
2003 February September
2002 March December

A mixed economy like ours does not remain static.

Economic activity increasingly shifts toward government outright (health care, retirement, education) or exists under “Mother-May-I” constraints like energy production does.

The greatest threat to job creation, wealth and prosperity is that we extend these anti-freedom regulatory policies into tomorrow’s innovations in communications, robotics/automation, manufacturing, and sciences and technology.

When more and more activity falls within the ambit of government rather than that of private competitive enterprise, rules and regulations, executive orders and “notices” take on ominous new significance. This is worsened by policymakers continually dodging the constitutional imperative that an elected body (Congress) create legislation.

Newly significant too are President Barack Obama’s “pens,” “phones” and “years of action” self-consciously operating outside the normal legislative process and even normal Administrative Procedure Act public-input thresholds.

The president just extended the deadline on signing up for Obamacare marketplaces, for example. Exemptions multiply, no matter what the statute says. Meanwhile, what could have been a healthy integrative private health provision and insurance market crumbles.

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Post image for Draconian Dodd-Frank Durbin Debit Controls Need Not Be More Destructive, Court Rules

As the weather finally turns to spring, the D.C. Circuit Court of Appeals today blew a nice cool breeze of common sense.

A bipartisan three-judge panel unanimously overturned district Judge Richard Leon’s July 31 ruling that the Federal Reserve had not made the price controls stemming from Dodd-Frank’s Durbin Amendment draconian enough. Today’s decision by Clinton-appointed Judge David Tatel found that the Federal Reserve “reasonably construct[ed]” the law in considering costs in setting the price caps, and the ruling in fact opens the door to allowing banks and credit unions make retailers pay more of the costs of processing debit cards.

In the wake of cybersecurity attacks on credit and debit cards, this ruling came in the nick of time. In what I had called incredible chutzpah, the trade associations for some of the nation’s largest retailers argued in federal court even after the Target breach that retailers should pay less for fraud prevention and cleanup after fraud losses. That, of course, would mean that innovation would continue to lag behind and even more of the costs of payment processing would be shifted to consumers, as they had ever since the passage of this amendment, which had been inserted into the 2010 Dodd-Frank financial overhaul by Senate Majority Whip Dick Durbin.

The interchange fees that banks and credit unions charge merchants for debit card transactions — what retailers pejoratively call “swipe fees” — have been subject to price controls ever since then. Dodd-Frank’s Durbin Amendment, which came about as a result of heavy lobbying by Target, Wal-Mart and other big retailers, states that the debit interchange fees charged to retailers must be “reasonable and proportional to the cost incurred by the issuer [bank or credit union issuing the card] with respect to the transaction.”

CEI opposed the Durbin Amendment from the start, because we believe price controls are a violation of individual property rights and turn out to be impractical. But many who voted for the Durbin Amendment believed that the price-setting process would be similar to rate regulation of electricity and phone service, in that the fee set would allow for infrastructure and service costs plus what is judged as a “reasonable rate of return.”

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Post image for New Data: Code of Federal Regulations Expanding, Faster Pace under Obama

The annual Code of Federal Regulations (CFR) is the “codification of the general and permanent rules published in the Federal Register by the departments and agencies of the Federal Government.”

The page count for final general and permanent rules in the 50-title CFR seems less dramatic than that of the oft-cited Federal Register, which now tops 70,000 pages each year (it stood at 79,311 pages at year-end 2013, the fourth-highest level ever). The Federal Register contains lots of material besides final rules.

Still, the CFR “Archive-Of-All” is big. Very big. Back in 1960, the CFR contained 22,877 pages in 68 volumes.

The pace picked up. The CFR stood at 71,224 pages by year-end 1975, in 133 volumes.

Now, new data from the National Archives shows that the CFR stands at 175,496 at year-end 2013, including the 1,170-page index. (See the breakout below.)

That’s a 146 percent increase since 1975. The number of CFR volumes stands at 235 (as of 2012; the 2013 count remains unavailable for the time being), compared with 133 in 1975.

More recently, at the end of President George W. Bush’s second term (2008), there were 157,974 pages in the CFR.

That means President Obama has added 17,522 pages of regulations in his five years in office; one president growing the regulatory state 11 percent increase in five years.

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Post image for Reining in the Executive Branch Bureaucracy, Part 11: Sunset Regulations and Implement a “One In, One Out” Procedure

Since the Federalist Papers, America has debated “Energy in the Executive.” But President Obama’s 2014 agenda framed by his State of the Union address heralds a class warfare agenda, one fusing an “income inequality” theme with federal industrial policy and other activism.

When I can act on my own without Congress, I’m going to do so,” Obama promises. This spend-and-transfer fixation makes Americans poorer and dependent except for the lucky few running things.

Others have argued for federal budget rationality as essential to any anti-poverty agenda. This series proposes a greater prosperity enhancing opportunity, streamlining the nearly $2 trillion regulatory state and ending the uncertainty, wealth destruction and job loss it creates.

What if regulations went away occasionally?

Review and sunsetting requirements built into laws and regulations might be used to incentivize agencies to repeal outdated rules.

Sunsetting clauses essentially put an expiration date on new regulations such that they phase out unless their extension is justified through a review process (yes, most will call for continuation, which is a massive problem with the idea). Such procedures could encourage efficiency, boost accountability and foster more productive versions of reports like the Office of Management and Budget’s Reports to Congress on Regulatory Benefits and Costs.

The United Kingdom, which, among other nations, is experimenting with bulk regulatory reduction commission mechanisms and other “Better Regulation” programs, has created sunsetting and review options to apply to new regulations.

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Post image for Reining in the Executive Branch Bureaucracy, Part 10: Congress Should Create an Annual Regulatory Reduction Commission

Since the Federalist Papers, America has debated “Energy in the Executive.” But President Obama’s 2014 agenda framed by his State of the Union address heralds a class warfare agenda, one fusing an “income inequality” theme with federal industrial policy and other activism.

When I can act on my own without Congress, I’m going to do so,” Obama promises. This spend-and-transfer fixation makes Americans poorer and dependent except for the lucky few running things.

Others have argued for federal budget rationality as essential to any anti-poverty agenda. This series proposes a greater prosperity enhancing opportunity, streamlining the nearly $2 trillion regulatory state and ending the uncertainty, wealth destruction and job loss it creates.

Congressional accountability and even something as dramatic as passage of the REINS Act (to require Congress to affirm major agency rules) would target future mandates rather than the existing regulatory state.

The Office of Management and Budget (OMB) pegs costs at up to $84 billion as of 2013 (Draft Report on Benefits and Costs of Federal Regulation, p. 3), a far from inclusive underestimate.

To deal with the existing enterprise of hundreds of billions of dollars annually, Congress should implement an ongoing Regulatory Reduction Commission to streamline aggregate regulation. Former Senator Phil Gramm (R-Texas) first proposed such an idea, modeled on the military Base Closure and Realignment Commission (BRAC).

The Progressive Policy Institute has embraced a similar idea, calling it a Regulatory Improvement Commission, perhaps making this now bipartisan idea capable of the most traction in a regulatory reform campaign.

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Post image for Obama FY 2015 Budget: Aviation Funding Recommendation Not Great, But a Step in the Right Direction

President Obama released his Fy 2015 budget today. Like his past budgets, as I noted in a previous post discussing the highway and transit budget, continuing congressional gridlock means this package will almost certainly go nowhere. I’ll leave more sophisticated and comprehensive commentary to the budget analysts, but I will highlight one additional transportation provision: airport funding. Exactly like the FY 2014 budget from the White House, the FY 2015 budget calls for cutting Airport Improvement Program funding to $2.9 billion and increasing the cap on the Passenger Facility Charge (PFC) from $4.50 to $8.

AIP currently provides major airport infrastructure grants. These funds come from a variety of taxes and segment fees. However, while user-based to an extent, AIP funding is complex and less transparent, features that are generally undesirable in user fee frameworks — in addition to relying on some non-user revenue (see page 20 of the AIP Handbook for a breakdown of revenue sources). AIP funds are also not segregated by facility, leading to wasteful grants to low-value airports.

In contrast, the PFC is a direct and transparent user charge. The money collected from passengers goes directly to the facility. Ideally, as the president suggests, AIP should be phased out with PFCs picking up the slack. Unfortunately, the federal government currently caps PFCs at $4.50 per enplanement. The president’s proposed PFC increase to $8 is better than nothing, but it still fails to restore the PFC purchasing power to the level when it was last raised to $4.50 in 2000. As the American Association of Airport Executives notes, the PFC should at a minimum be raised to $8.50 in order to restore its previous buying power.

Rather than endless fights over the “appropriate” PFC level, Congress should eliminate the PFC cap all together. Federal policies force airports to be heavily reliant on airlines for funding. The effect of these policies is that airports have little leverage in negotiations with airlines over gate access, the result being a proliferation of long-term exclusive- and preferential-use gate leases. The impact on competitiveness and air fares is large. Exclusive- and preferential-use gate leases (as opposed to common use open entry) result in gate under-utilization by allowing incumbent airlines to essentially prohibit most new entry from outside carriers. It is estimated that air fares are more than $5 billion higher annually (in 2013 dollars) because of artificial barriers to airport access.

Hopefully, the president and Congress will move ahead with reforming the PFC system. Ideally, this would mean eliminating the cap, but restoring the PFC purchasing power to 2000 levels should be a bare minimum no-brainer.

Post image for Reining in the Executive Branch Bureaucracy, Part 9: Congress Must Affirm Final Agency Rules before They Are Law

Since the Federalist Papers, America has debated “Energy in the Executive.” But President Obama’s 2014 agenda framed by his State of the Union address heralds a class warfare agenda, one fusing an “income inequality” theme with federal industrial policy and other activism.

When I can act on my own without Congress, I’m going to do so,” Obama promises. This spend-and-transfer fixation makes Americans poorer and dependent except for the lucky few running things.

Others have argued for federal budget rationality as essential to any anti-poverty agenda. This series proposes a greater prosperity enhancing opportunity, streamlining the nearly $2 trillion regulatory state and ending the uncertainty, wealth destruction and job loss it creates.

To improve regulatory cost accountability, the 104th Congress passed the Congressional Review Act (CRA). That law sets up a 60-day period following agency publication of a regulation during which the rule will not take effect. That 60-day pause affords Congress an opportunity, should it desire, to pass a resolution of disapproval to halt the regulation.

It rarely has that desire. The CRA was a symbolic nod toward congressional accountability for regulations. But it amounts to a 2/3 supermajority requirement to strike a law that Congress never made in the first place when the president vetoes a disapproval resolution. And since Congress benefits from delegation and no rollback reaches the president’s desk anyway, the law doesn’t work. (Well, OK, the CRA did halt an “ergonomics” rule, on repetitive motion injuries.)

The superior approach to ensuring congressional accountability is to require that no major or economically significant agency rule (or controversial rule) becomes law until it receives an affirmative vote by Congress. An expedited approval process along with en bloc voting on regulations could suffice.

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Post image for Reining in the Executive Branch Bureaucracy, Part 8: Create a Culture of Repealing Regulations

Since the Federalist Papers, America has debated “Energy in the Executive.” But President Obama’s 2014 agenda framed by his State of the Union address heralds a class warfare agenda, one fusing an “income inequality” theme with federal industrial policy and other activism.

When I can act on my own without Congress, I’m going to do so,” Obama promises. This spend-and-transfer fixation makes Americans poorer and dependent except for the lucky few running things.

Others have argued for federal budget rationality as essential to any anti-poverty agenda. This series proposes a greater prosperity enhancing opportunity, streamlining the nearly $2 trillion regulatory state and ending the uncertainty, wealth destruction and job loss it creates.

Agencies and the OMB review process should face a higher burden of proof regarding rules’ value.

What bureaucracies do has become untethered from economic efficiency and public safety. Their “regulation” does not necessarily make people safer, environments cleaner, or markets efficient.

One mild attempt at dealing with Rules Gone Wild was the January 2011 Executive Order 13563 on “Improving Regulation and Regulatory Review. It called for agencies to develop and execute plans to:

[P]periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency’s regulatory program more effective or less burdensome.

Mild doesn’t work anymore, and modification and streamlining doesn’t happen. When agency analyses appear not to justify a rule or simply don’t exist, which is the normal case, reviewers at OMB should be more forthright about say so, and make doubts plain. Yet even as over 3,500 rules and regulations accumulate annually, Congress, agencies, the president and the Office of Management and Budget stand by idly, reluctant to recommend legacy regulations to eliminate.

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