Regulation

Ten Thousand Commandments: An Annual Survey of the Regulatory State

by Iain Murray on May 15, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Regulation

The latest edition of my colleague Wayne Crews’s annual snapshot of the regulatory state, “Ten Thousand Commandments,” is out. This year’s lowlights include:

  • Estimated regulatory costs, while “off budget,” are equivalent to over 48 percent of the level of federal spending itself.
  • The 2011 Federal Register finished at 81,247 pages, just shy of 2010’s all-time record-high 81,405 pages.
  • Regulatory compliance costs dwarf corporate-income taxes of $198 billion, and exceed individual income taxes and even pre-tax corporate profits.
  • Agencies issued 3,807 final rules in 2011, a 6.5 percent increase over 3,573 in 2010.
  • Of the 4,128 regulations in the works at year-end 2011, 212 were “economically significant,” meaning they generally wield at least $100 million in economic impact.
  • 822 of those 4,128 regulations in the works would affect small businesses.
  • The total number of economically significant rules finalized in 2011 was 79, down slightly from 2010 but up 92.7 percent over five years, and 108 percent over ten years.
  • Recent costly federal agency initiatives include the Environmental Protection Agency’s Mercury and Air Toxics Standards Rule and the Department of Transportation’s Fuel Economy Standards.
  • While some people talk about Republican tentacles, this report clearly shows how vast the Leviathan of the federal government has grown, with its massive tentacles extending into every business — and every pocket — in the nation.

Direct link to the PDF is here.

More First Amendment Violations from Obamacare, Thanks to HHS

by Hans Bader on May 15, 2012 · 4 comments

in Healthcare, Legal, Personal Liberty, Regulation

Obamacare will drive up costs for most patients and insurance policyholders. Yet “health-insurance companies must tell customers who get a premium rebate this summer that the check is the result of the Obama administration’s health-care law, according to federal guidelines released Friday. . . .Rules finalized by the Department of Health and Human Services on Friday instruct insurers to notify recipients of rebates in the first paragraph of the mailing by writing: ‘This letter is to inform you that you will receive a rebate of a portion of your health insurance premiums. This rebate is required by the Affordable Care Act-the health reform law.’” Never mind that Obamacare has already caused sizeable hikes in insurance premiums for some policyholders.

Earlier, HHS Secretary Sebelius warned insurers not to inform policyholders that their premiums were rising due to Obamacare, even though that was the truth. Obama’s HHS secretary sought to gag insurers that disclosed how Obamacare’s mandates are increasing the cost of health insurance, even though such speech is clearly protected by the First Amendment, telling them if they did so, they could be excluded from health insurance exchanges. Prior to that, the Obama administration attempted to gag insurers from disclosing how Obamacare harms Medicare Advantage participants, drawing criticism from First Amendment experts like UCLA law professor Eugene Volokh, the author of two First Amendment textbooks.

Forcing companies to make politicized disclosures to customers implicates the First Amendment, as does interfering with the content of their speech to customers in billings. In International Dairy Foods v. Amestoy, 92 F.3d 67 (2d Cir. 1996), an appeals court struck down a Vermont law that required labeling for milk derived from animals treated with bovine growth hormones, where the labeling could not be justified on consumer deception or public health grounds.

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The Constellation Empire Strikes Back

by Rand Simberg on May 14, 2012 · 15 comments

in Space

Constellation, the Bush administration’s plan to return to the moon, was canceled a couple years ago. But not all of Constellation was canceled. The Orion crew module, designed to go to lunar orbit and back, survives, with plans to test fly on a Delta IV rocket in a couple years, and Congress, eager to preserve the Space Shuttle jobs base, demanded that NASA reinstitute a new heavy-lift launch vehicle to replace the canceled Ares V with the Space Launch System. So at this point, despite the cancellation, Constellation continues to waste money, except for the Ares I, the new crew rocket that NASA was developing. Derived from Space Shuttle and Apollo hardware, it used a new five-segment version of a shuttle solid rocket booster (SRB) as a first stage, with a new LOX/hydrogen upper stage. At the time of cancellation, it had been experiencing development issues, missing performance, cost and schedule milestones.

Now it looks like even it could be resurrected.
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The Highway Bill and Sen. Jeff Bingaman’s Anti-P3 Propaganda

by Marc Scribner on May 14, 2012 · 3 comments

in Labor, Mobility, Politics as Usual, Regulation

I’ve written extensively about federal surface transportation reauthorization, which is currently pending in conference. CEI, along with The Independent Institute and Reason Foundation, will be holding a Capitol Hill briefing tomorrow at noon titled, “Reforming Federal Surface Transportation Policy: Problems, Solutions, And A New Path Forward.”

The Highway Trust Fund is facing imminent insolvency. This is the result of keeping federal fuel excise tax rates at the same level since 1993. Since then, inflation has eroded about one-third of those dollars’ buying power. Rather than attempt to fix this very serious problem, the Senate’s Moving Ahead for Progress in the 21st Century Act (MAP-21) merely kicks the can down the road. We find this unacceptable.

In addition, MAP-21 — which is more accurately described as a 15-month extension relying on 10 years of revenue — contains some very undesirable provisions. It mandates the installation of electronic onboard recorders for commercial motor vehicles, something the independent trucking industry expects will cost $2 billion. Now is certainly not the time to saddle our nation’s small businessmen with additional, unnecessary regulatory burdens.

Non-germane policy changes include the RESTORE Act, which includes a seven-year reauthorization of the Department of Interior’s Land and Water Conservation Fund (Sec. 1701) — a land-grab tool used by environmentalists. In total, MAP-21 contains $6.8 billion in new non-highway program spending.

It also contains a particularly loathsome amendment offered by Senator Jeff Bingaman that attacks the public-private partnership (P3) model. Even some self-described fiscal conservatives are siding with Bingaman, relying on farcical misinformation that argues that P3s somehow constitute double-taxation. Nothing could be further from the truth. In reality, these P3s are friendly to taxpayers in that they reduce public costs and the risk associated with construction (cost overruns) and financing — while bolstering state treasuries in the short-run. If you have not read it already, I highly recommend Indiana Gov. Mitch Daniels’ excellent rebuttal to Sen. Bingaman’s falsehoods and distortions in The Washington Post.

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CEI’s Battered Business Bureau: The Week in Regulation

by Ryan Young on May 14, 2012 · 0 comments

in Features, Regulation

Just another week in the world of regulation:

  • 62 new final rules were published last week, down from 70 the previous week. That’s the equivalent of a new regulation every 2 hours and 43 minutes — 24 hours a day, 7 days a week. All in all, 1,384 final rules have been published in the Federal Register this year. If this keeps up, the total tally for 2012 will be 3,838 new rules.
  • 1,577 new pages were added to the 2012 Federal Register last week, for a total of 28,191 pages. At this pace, the 2012 Federal Register will run 76,606 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. The 20 such rules published so far in 2012 have compliance costs of at least $15.4 billion. Two of the rules do not have cost estimates, and a third cost estimate does not give a total annual cost. We assume that rules lacking this basic transparency measure cost the bare minimum of $100 million per year. The true cost is almost certainly higher.
  • One economically significant rule was published last week. There were a total of 5 significant actions last week, as defined by Executive Order 12866. So far, 152 significant final rules have been published in 2012.
  • 12 of last week’s final rules affect small business. So far this year, 259 final rules affect small businesses. 40 of them are significant rules.

Highlights from final rules published last week:

  • An economically significant rule from the Centers for Medicare and Medicaid Services implements section 2401 of the Affordable Care Act. It increases this year’s federal Medicaid spending by $820 million, and this year’s state Medicaid spending by $480 million. Since these costs are government spending instead of compliance costs, I am scoring it as zero-cost for this year’s compliance cost tally.
  • Just in time for summer, the FDA published a rule delaying implementation of an earlier rule amending its surprisingly detailed sunscreen regulations.
  • The EPA is liberalizing its [alpha]-[p-(1,1,3,3-Tetramethylbutyl)phenyl]-[omega]- hydroxypoly(oxyethylene) tolerance requirements for pesticides. A separate rule liberalizes “residues of ?-(p-nonylphenol)-?-hydroxypoly(oxyethylene) mixture of dihydrogen phosphate and monohydrogen phosphate esters and the corresponding ammonium, calcium, magnesium, potassium, sodium, and zinc salts of the phosphate esters and ?-(p-nonylphenol)-?-hydroxypoly(oxyethylene) sulfate, ammonium, calcium, magnesium, potassium, sodium, and zinc salts” in pesticides.
  • If you want to get a commercial driver’s license, you should be aware of new federal minimum standards.

For more data, updated daily, go to TenThousandCommandments.com.

FCC Delays Threaten to Hurt Wireless Consumers

by Joe Calascione on May 11, 2012 · 0 comments

in Features, Tech & Telecom

Post image for FCC Delays Threaten to Hurt Wireless Consumers

America’s communications regulatory regime is broken. Case in point: prior government approval is needed for what should be a run of the mill marketplace transaction. In order to get the FCC approval needed to consummate a proposed spectrum purchase from Cox and SpectrumCo, Verizon Wireless has offered to divest some of its most valuable spectrum licenses. But the Commission continues to drag its feet.

Faced with an impending spectrum shortage, many wireless carriers are aggressively seeking more spectrum. Verizon Wireless, for its part, wants to buy a chunk of spectrum that cable companies acquired in 2006 through a bungled FCC attempt to force competition in the industry by allowing cable companies to buy up wireless spectrum. But the cable companies’ wireless services were never launched, and the spectrum at issue lies fallow to this day.

The Commission launched its investigation of the proposed spectrum deal due to concerns about concentration – essentially an inquiry into how much spectrum is in how few hands – an approach borrowed from outdated antitrust analysis. As the Commission is only guided by what it determines to be in the “public interest,” (47 U.S.C. 310(d)) CEI filed comments stressing that putting unused spectrum to use could only improve the status quo. The Commission should be concerned with consumer welfare, not just the welfare of Verizon’s competitors.

Now that additional filings have come in, the Commission claims it needs another three weeks to render a decision, despite Verizon going above the usual requirements, providing all filings in an electronically searchable format. As there are no other potential buyers for this unused spectrum and the current owners have no plans to put it to use, it is difficult to see how the Commission could find the sale contrary to the public interest.

Instead of dithering over the spectrum deal, the FCC should give Verizon Wireless the green light. Trying to micro-manage the fast-moving mobile communications industry from Washington is a disservice to wireless device owners across the country who benefit from greater deployment of mobile services.

Framing the Debate on Chemical Regulation

by Angela Logomasini on May 11, 2012 · 1 comment

in Environment, Features, Regulation

Last week, CEI hosted a congressional briefing on chemical policy and regulation (the video of the event is forthcoming). A news story in Risk Policy Report covering the event proclaims: “Free- Free-Market Group Seeks To ‘Re-Frame’ Hill Debate Over Chemical Risk.” Indeed we do!

I presented on why Congress should not “modernize” the Toxic Substances Control Act (TSCA), Dr. Rick Belzer addressed the National Toxicology Program’s faulty carcinogen classification methodology, and Dana Joel Gattuso addressed why Congress need not impose onerous regulations on the cosmetics and personal-care product industries. Unfortunately, our views are unique, but they shouldn’t be. Even those industry groups who will be harmed by misguided chemical policy reforms are not fighting back.

Risk Policy Report [May 8] explains:

In particular, Logomasini highlighted the stalled legislation from Sen. Frank Lautenberg (D-NJ) that would amend the Toxic Substances Control Act to put the onus on industry to show chemicals are safe rather than in the current system, where EPA must show chemicals pose an unreasonable risk before it can restrict their use.

She argued that updating the statute with a “reasonable certainty of no harm” standard, as proposed by the Lautenberg bill, would effectively ban many products already on the market and make it difficult for new chemicals to be used. The current TSCA standard — that EPA cannot regulate a substance unless it is shown to pose an “unreasonable risk of injury to health or the environment” — is scientifically more sound and less economically burdensome, she said.

“I would argue that’s actually a more appropriate approach to chemical regulation,” Logomasini said in suggesting TSCA is fine as is. Logomasini said in the interview that the CEI event wasn’t inspired by any upcoming votes or hearings on the legislation.

CEI held the event even though the bill’s prospects in the current Congress remain dim. The political environment “means nothing could happen until after the election,” one industry source says. “If after the election the playing field is such that we can get some movement, we’ll work it.”

Industry, in which some groups seek to “modernize” TSCA but have too raised concerns with the proposed “reasonable certainty of no harm” standard, has yet to put together its own TSCA proposal despite the urging of key Democrats. “If we put out a bill, we won’t get to characterize it,” the industry source says. “The NGOs will characterize it as a sham or worse, as making TSCA weaker.”

Chemical industry groups, although they support TSCA “modernization,” are rightly concerned about the proposed legislation. Yet, they offer no alternatives because, as the source in this story explained, they fear greens will unfairly characterize their point of view! What kind of legislative strategy is that?

It’s time to re-frame the debate, and free-market groups like CEI need not act alone. Industry groups should join us by fearlessly defending their products and highlighting the value they bring to society. And they should fight all efforts to limit their freedom to continue marketing and developing their products. If they don’t, we all may suffer from higher prices, reduced consumer choice, inferior substitute products, and reduced innovation — all resulting from misguided regulations imposed by an over-empowered, unaccountable bureaucracy.

Why JPMorgan Chase’s Mark-to-Market Losses Don’t Bolster Case for Volcker Rule

by John Berlau on May 11, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Features, Regulation

Post image for Why JPMorgan Chase’s Mark-to-Market Losses Don’t Bolster Case for Volcker Rule

There is much still to be known about the $2 billion in losses JPMorgan Chase is reporting due to a flawed hedging strategy. But this lack of knowledge hasn’t prevented proponents of Dodd-Frank’s Volcker Rule, which bans banks from certain types of trading, from jumping into the fray and claiming this as a justification for their vaunted rule to keep banks from “gambling” with trading strategies as opposed to the “safe” activities of lending.

But just as due diligence is required by banks and investors, so it is by policy makers. $2 billion is a big number that attracts a lot of headlines, but it is dwarfed by the trillions in losses from the “traditional” bank activity of mortgage lending. Yes, these mortgages were traded, but bad underwriting of unqualified borrowers – encouraged by government subsidies through Fannie Mae and Freddie Mac — and mandates through the Community Reinvestment Act — was the root of the problem.

What’s still unclear is about JP Morgan is (1) what is the extent of the actual loss as opposed to the “mark-to-market” or paper loss, and (2) would JP Morgan’s trading fall under “proprietary trading” covered by the Volcker Rule or “hedging,” which regulators recognize that banks must do to attempt to minimize risk, even though these attempts aren’t always successful.

What we do know is that it’s not just JPMorgan Chase CEO Jamie Dimon that had criticized the Volcker Rule. A host of mid-size banks as well as respected scholars have warned that it could infringe on legitimate financial activity necessary for economic recovery, such as market making of initial public offerings of stock.

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Legacy Risks

by Fred Smith on May 10, 2012 · 0 comments

in Economy, Labor, Precaution & Risk

European and American political and private institutions have made many non-sustainable retirement promises over the last 50 years. These promises cannot be kept and that reality is forcing reform. One primary reform is a shift from defined benefit to defined contribution plans. Critics argue that would shift risks from the company or agency to the individual. But is this true?

While an individual may fail to set aside enough savings for retirement or invest poorly, that is also true for a firm or government entity. The firm or agency may have the resources to make up for a shortfall — but they may not. When firms and — increasingly — political jurisdictions go broke, they leave workers badly shortchanged. In the private sector, the federal Pension Benefit Guarantee Corporation caps benefit payouts for pensions it takes over. And around the country, financially strapped state and local governments are enacting reforms to lower their pension liabilities. In a still-struggling economy where bankruptcies are likely to increase, defined contribution plan that are independent of the resources of a larger entity may often be the less risky option.

Note that in Europe, to avoid crippling taxes during high-tax periods, part of workers’ compensation would be in kind, often in the form of a car or even an apartment. While these were nice perks, their being provided by the employer meant that to lose one’s job meant losjng not just income, but also access to critical necessities of life. The European nations that have better weathered the Great Recession are those that have liberalized their labor markets. Those reforms allowed workers in those countries to receive higher pay and gain these resources more securely themselves. Isn’t the same principle at work in the retirement area?

Intellectuals Are the Shoeshine Boys of the Ruling Elite

by Ivan Osorio on May 10, 2012 · 2 comments

in Culture, Economy, Features, Regulation

Post image for Intellectuals Are the Shoeshine Boys of the Ruling Elite

“Why do so many intellectuals lean politically to the left?”  CEI President Fred Smith has written extensively on that question. In today’s Wall Street Journal, Harvard economics professor Robert Barro makes a contribution to this conversation. Focusing on the ongoing austerity vs. stimulus debate, he remarks upon the persistence of Keynesian policy prescriptions, despite their sorry history.

Despite the lack of evidence, it is remarkable how much allegiance the Keynesian approach receives from policy makers and economists. I think it’s because the Keynesian model addresses important macroeconomic policy issues and is pedagogically beautiful, no doubt reflecting the genius of Keynes. The basic model — government steps in to spend when others won’t — can be presented readily to one’s mother, who is then likely to buy the conclusions.

Also likely to buy the conclusions are politicians seeking scientific-sounding schemes to engineer the economy. That helps to perpetuate the fatal conceit — among intellectuals that they could plan society and among politicians that they could effectively implement those plans. Thus, as Fred noted in 2010, “Intellectuals benefit psychologically and economically from the growth of the state — statism becomes the class interest of intellectuals!”

F. A. Hayek famously said that, “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” It’s no wonder that task is so difficult both political and academic elites find expansion of the state in their class interest.

Madison, Wisconsin’s Killdozer came closer to the truth than they probably realized when they chose the title of the first album.

For more on Hayek and the fatal conceit, see Fred’s recent article in Economic Affairs.

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