deregulatory stimulus

Sunstein and Obama, Deregulators?

by Ryan Young on May 26, 2011

in Deregulate to Stimulate, Economy, Regulation

Winston Churchill observed that “Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.” We may finally be seeing a small step in that direction. The Bush and Obama administrations have tried fiscal stimulus to speed up economic recovery. It didn’t work. The Federal Reserve tried increasing the money supply, which they called “quantitative easing” because it sounds much more pleasant than “printing money.” That didn’t work. Then they tried it again. That didn’t work, either. What to do?

We at CEI have been pushing a deregulatory stimulus for years. Now that all other possibilities are exhausted, the administration appears to be taking small steps in that direction. Regular readers are aware that federal regulation costs about $1.75 trillion, and that the Code of Federal Regulations is over 157,000 pages long. Both of those numbers grow every year, as over 3,500 new rules hit the books annually. This morning, OIRA chief Cass Sunstein is announcing a 30-point plan that would “save American companies billions of dollars in unnecessary costs,” according to The Washington Post.

This new initiative stems from Obama’s Executive Order from earlier this year that ordered agencies to comb their books and recommend obsolete or harmful rules for elimination. Agencies hardly have an incentive to reduce their size or scope, which is why an independent commission would be a better vehicle for getting rid of old rules. The rules Sunstein is proposing to eliminate are very modest. But it’s better than nothing.

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Expensive Jobs

by Ryan Young on August 27, 2010

in Deregulate to Stimulate, Economy, Stimulus to Nowhere

Through June, the government spent about $620 billion of stimulus money. The Obama administration claims that the spending has saved or created 2.3 to 2.8 million jobs.

For the sake of argument, let’s assume those job creation numbers are true. In fact, let’s pick the rosiest number — 2.8 million jobs.

At a price of $620 billion, that comes out to $221,428.57 per job. Startlingly inefficient.

Now consider that that $620 billion had to come from somewhere else. Some of that money came from taxes. That leaves less money left over for consumers and businesses to spend. Some of the stimulus money was borrowed. That leaves less capital for private companies borrow.

The private sector tends to spend less than the government to create a job. Since stimulus spending is spending more money to create fewer jobs than the private sector, it is actually causing net harm to the job market.

In place of the spending stimulus, I humbly offer a deregulatory stimulus. CEI VP Wayne Crews and I offer some specific proposals here.

New “stimulus plan” brewing in Congress

by Michelle Minton on July 8, 2010 · 1 comment

in Culture, Deregulate to Stimulate, Economy, Employment, Odds & Ends

It is actually less of a “stimulus” plan and more of a “get government out of the way and stop inhibiting growth” plan. A bi-partisan group of Senators led by John Kerry (D-Mass) introduced S. 3339 in mid-may, a bill that would, among other things, reduce the federal excise tax that small brewers must pay per barrel they produce.

For the congressmen and Senators selling this proposition, it probably wasn’t the brightest idea to associate the tax-cutting-proposal with the word “stimulus” which now evokes memories of massive taxpayer-funded bailouts to government favored businesses that probably should have failed years ago due to inefficiency and sheer ineptitude.

Unlike the auto, construction, and real estate industries, small brewers in the US have made great strides in the last decade despite heavy taxes, discriminatory regulations, layovers from prohibition, and a recession. Craft beer is more popular among US drinkers than ever before. Given the opportunity in a free market, small The Three Beersbrewers could collectively take a large chunk of the market away from the monolithic “big beer” companies like Anheuser, Coors, Budweiser, etc. They could lower prices, increase production and distribution, hire more workers and contribute more in tax revenue. But there’s a built in disincentive for small brewers to grow–if they get too big they loose the one advantage they have over bigger brewers: the tax benefit.

So yes, cutting taxes will help small breweries stay afloat and grow, but it isn’t enough for true stimulation of the beverage industry. To create jobs, increase the number of small brewers, increase competition, and massively reduce the cost of purchasing beer, congress should eliminate the tax on beer.

Consider that brewers not only pay the federal excise tax, but also a state excise tax in addition to all the other fees and costs. In 2004 the Beer Institute estimated that taxes represented over 40% of the retail cost of beer. Imagine that! Without the tax burden on producers your craft brew would cost just $3.50 instead of $6, your Budweiser would cost $1.50 and a miller high life would only cost you your dignity (just kidding, I drink high life).sam-of-dogfish-head

And for some states protecting the small brew business is especially vital. Take Oregon, for example, which has more microbreweries per capita than almost any other state. Small brewers alone provide the state with nearly 5,000 jobs and over $2 million in revenue. In fact Oregon has more small breweries. While some legislators hear those numbers and can only see ways to leech off that success (as I wrote about back in February 2009) it is good that other legislators seem to understand the principle that if you get government out of the way of business, there are more jobs, more money, and more stuff. Perhaps if they could just apply that logic to all other businesses, including big brewing companies, we’d be a lot better off.

How Much Would a Congressional Pay Cut Save?

by Ryan Young on May 18, 2010

in Deregulate to Stimulate, Economy, Politics as Usual

Rep. Ann Kirkpatrick is proposing a 5 percent pay cut for members of Congress.

“In the face of our ever-deepening federal debt, the federal government must follow their example by finding common-sense solutions to do more with less,” she told The Hill.

A noble sentiment. And one that would save $8700 per member. With 535 members of the House and Senate, the total savings are $4.65 million.

The federal government is on track to spend about $3.8 trillion this year. Trimming $4.65 million means that for every $816,502 the federal government spends, it would save one dollar.

Rep. Kirkpatrick is proposing a 0.00122 percent spending cut. That’s not even a rounding error.

I do not intend to mock Rep. Kirkpatrick. Her spending cut is better than nothing, and I am glad she is proposing it. But placed in proper context, it is very, very small. It is a largely symbolic proposal, and should be treated as such. A 5 percent pay cut for Congress is no austerity measure.

More fundamental solutions would involve fundamental entitlement reform paired with a deregulatory stimulus. Cato’s Chris Edwards has some other spending cut ideas that deserve a serious look. They total $380 billion, or ten percent of federal spending.

Will the Jobs Bill Create Any Jobs?

by Ryan Young on March 18, 2010

in Deregulate to Stimulate, Economy, Employment, Politics as Usual, Regulation

Over at the American Spectator, I explain why it won’t, but a deregulatory stimulus would. Main points:

-Anything that Washington giveth, it must first taketh away from somewhere else. The jobs bill is a zero-sum game.

-When government borrows more, less investment capital is left over for the productive sector.

-Taxes will have to be raised later to pay for today’s increased borrowing.

-Deregulation is a better approach. The biggest obstacles to job creation and economic growth are all in Washington.

Increase small biz lending not gov spending

by Michelle Minton on February 16, 2010

in Bailout Watch, Deregulate to Stimulate, Economy, Politics as Usual, Stimulus to Nowhere

President Obama seems to genuinely want to help people and improve the economy. However, he also seems to genuinely believe that the best and most effective way to accomplish these goals is through government intervention and wealth redistribution. In his State of the Union address, President Barack Obama pinpointed several particular policy-goals, one of which was to stimulate increased lending to small businesses. How does Obama propose to encourage such lending? Someone with a different perspective might look for ways to remove regulatory barriers to increase lending, but President Obama’s plan is to simply shuffle $30 billion in TARP funds to community banks, no doubt with many strings attached.

However, there’s a much simpler way to increase small business lending, one that requires zero taxpayer dollars and presents no risk to the financial system: allow credit unions to increase their lending to small businesses and low-income residents.

Throughout the economic crisis, while banks and other financial institutions withdrew lines of credit and gave questionable bonuses to their executives, credit unions have continued to lend. They could lend even more if not for the regulations that prevent them from doing so.

Like banks, credit unions offer a mix of financial services, including checking and savings accounts (credit unions  call them “share accounts”), credit cards, and loans. However, credit unions differ from banks in that they are limited to serving a specific consumer base, known as their “field of membership.” This could be defined as the employees of a company, residents of a defined geographical region, or members of a church.

Credit unions are also more limited than banks on the types of loans they are allowed to write and the rates that they may charge. Additionally, credit unions are non-profit organizations that do not seek to generate a profit and do not pay federal income taxes-any returns earned from member business lending is returned to the members or used for the operation and growth of the credit union.

Credit unions have been fighting for a decade to lift the cap on the amount of lending that they are allowed to engage in. As recently as September 2009, the Credit Union National Association issued a letter to the president asking for him to support a measure in Congress that would life the cap on credit union business lending from 12.25 percent of their assets to 25 percent and that would allow them to include “underserved” areas as part of their field of membership. The bill, the Promoting Lending to America’s Small Businesses Act of 2009 (HR 3380), has been stuck in the House Financial Services Committee since July 2009.

Increasing credit unions’ ability to lend will not solve all of our economic woes-they control only around 6 percent of the country’s total deposits. However, freeing up credit unions to use their capital to stimulate and sustain small businesses can only help, and it will have a significant impact on areas of the country underserved by banks, at no cost to the taxpayer.

If Congress and President Obama are serious about increasing access to credit right away, they should focus less on redistributing taxpayer dollars and more on freeing the institutions that have capital and want to lend to small businesses.

LibertyWeek 74: TSA Under Fire

by Richard Morrison on December 29, 2009

in CEI Projects, Podcast

Richard Morrison, William Yeatman and Ryan Young join forces to bring you Episode 74 of the LibertyWeek podcast. We investigate the Department of Homeland Security’s antiterrorism efforts, China’s climate change conundrum and California’s chance at closing her budget gap. We finish with some dangerous snowballing in the streets and the last echoes in the Ballad of Kwame Kilpatrick.

Should the Anti-Stimulus Package be tan or beige?

by Wayne Crews on February 7, 2009 · 7 comments

in Bailout Watch, Deregulate to Stimulate, Personal Liberty, Politics as Usual, Regulation, Stimulus to Nowhere

President Obama more than once last week called it “inexcusable” for Congress to get “bogged down in distraction, delay or politics as usual” over the anti-stimulus legislation. Actually, there never was such a bog-down, since the bill already passed the House by the Democratic majority, and he never needed much Republican support to make a package of substantial magnitude happen in the Senate. Obama is seeking a sheen of bipartisanship, but if he’s convinced it’s right and he occupies the moral high-ground, it’s not entirely clear why he would talk about an imaginary bog-down of what’s become a “faith-based initiative” that no one can or will stop. Obama’s right–he did win in November, as he taunted detractors last week, and nobody can stop him. It’s just curious that he feels the need to seek rivals’ approval of a highly destructive measure like this when it’s a train that can’t (or won’t) be stopped anyway.

I remember a comedy called “Moon Over Parador;” you could vote for the dictator…but only the red-tinted picture of him or the blue-tinted one. That’s how I felt watching the “debate” this past week over the size of the package:  The House passed a package of $819 billion; the Senate, after hyped-up wrangling, appears set to vote on one of $780 billion late Monday afternoon. Rounding them, they’re still both $800 billion.

The bottom line is we’re getting a trillion-dollar stimulus once interest is taken into account, and the past week’s battle has been about shaving off some cost, but not the underlying premise or the fundamental merit of political stimulus.

Senate Majority leader Harry Reid said, “We are passing a bold and responsible plan that will help our economy get back on its feet, put people to work and put more money in their pockets.”

This kind of statement embodies the essence of the policy crisis our country faces. It’s hardly “bold and responsible” to redistribute other people’s wealth: it’s the easiest thing in the world to do when you’re a career politician; it’s dismally less “bold” when that wealth hasn’t even been created yet and must be borrowed from our descendants who have no recourse against you now. So the package is actually reckless and irresponsible beyond Thunderdome. Like much government spending, whether routine or that squandered during past recessions, it’s politically motivated and unconnected to economic recovery.

And for Reid’s comment to “put more money in…pockets”; Apart from what he’s taking from our descendents, that’s where the money is now. To implement the anti-stimulus, he has to take it out of pockets of some to give it to others. Behold, leadership during a crisis. The many alternative “liberate to stimulate” ideas we and others have been proposing for months are ignored by the political class (only as they can get away with it!), because they don’t increase the power of politicians. Alas, politicians are now salivating at the prospect of the greatest one-time lurch in the size of the State they’ve ever known. This is a stimulus for politicians and the State, not the economy.

Deregulatory Bailout

by Iain Murray on December 12, 2008 · 10 comments

in Bailout Watch, Economy, Mobility

There are hundreds of regulations that Congress and agencies have imposed on the auto industry, driving up their costs unnecessarily. As an illustration, these are the new rules from the DOT identified by Wayne Crews in the 2008 edition of Ten Thousand Commandments:

– Reform of the automobile fuel economy standards program.
– Light-truck Corporate Average Fuel Economy standards (2012 model years and beyond).
– Upgrade of head restraints in vehicles.
– Rear center lap and shoulder belt requirement.
– Monitoring systems for improved tire safety and tire pressure.
– Automotive regulations for car lighting, door retention, brake hoses, daytime running-light glare, and side impact protection.

Plus these from the EPA:

– Rulemaking to address greenhouse gas emissions from motor vehicles.
– Clean air visibility, mercury, and ozone implementation rules.
– Review of National Ambient Air Quality Standards for lead, ozone, sulfur dioxide, particulate matter, and nitrogen dioxide.
– National emission standards for hazardous air pollutants from … auto paints.

These rules and all those from previous years need to be reanalyzed in the light of the industry’s troubles to see whether they should be repealed, suspended or weakened. In particular, attention should be paid to their aggregate effect on the industry. A deregulatory bailout would save the industry billions, and also save thousands of lives.