—President Obama, Wall Street Journal op-ed, January 18, 2011
Last week the Washington Post published a front-page story intending to dismiss House Republicans’ contention that government regulations have an impact on jobs. On weak economic premises, the article attempts to convey that House Republicans’ Plan for America’s Job Creators and its focus on the Obama administration’s job-destroying regulations is overdone because, after all, according to the article, economists say “the overall impact on employment is minimal.”
But in trying to minimize the disastrous effect that the president’s regulatory onslaught is having on the economy, the article falls victim to a classic trap of Keynesian thinking and betrays support for a command-and-control energy policy that is disconnected from free market principles.
Regarding the impact of regulations written by Washington bureaucrats, the article almost flippantly notes: “Some jobs are lost. Others are created.” Apparently, in the reporter’s view, increasingly stringent emissions standards on utility companies are a demonstrable economic good as traditional coal-fired power plants are forced to install expensive emissions scrubbers.
The capital expenditures by those private companies could create hundreds of jobs to build the new facilities and retrofit the equipment—nevermind that those construction jobs are temporary or that the incidence of the costs are likely borne by consumers in the form of higher energy prices. All that matters to the supporters of the overactive EPA is that people appear to be hard at work. This is a version of 19th century political economist Frederic Bastiat’s “broken window fallacy.” To what more economically efficient use that private capital could have been employed—pay raises for union workers? dividends for investors?—no one will ever know. Point being that capital allocation driven by market dynamics rather than government directives will lead to more sustainable, long-term employment prospects and lower prices for consumers.
Of course, if the employment sugar high of new regulations were not enough, there is yet another reason Democrats support as much rule writing as possible: government knows which industries are better than others. The reporter points out, “more heavily regulated businesses such as coal shrink, giving an opportunity for cleaner industries such as natural gas to grow.” Economic considerations such as factor costs of production, consumer pricing impacts, and resource versatility are trivial to the “green” notion that the “cleaner” industry should be supported by bureaucrats in government.
Perhaps inadvertently, the article does indicate why more regulations are not always better. Mentioning conservatives’ frustration with government overreach, the article explains that the critique of regulations “comes after a string of disasters in recent years [financial crisis, BP oil spill, etc] that were tied to government regulators falling short.” (emphasis added) This is a distinction worth pondering: if it was a failure of the regulators, why add new regulations? The capacity for human error such as it is, a failure of individuals to adequately enforce the rules that already exist is no reason to write even more rules and add to the uncertainty facing America’s job creators in this time of record unemployment.
Alexis de Tocqueville offered an insight into the damage such a compulsion for rule writing can have on a society in his treatise Democracy in America:
It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd. (Vol. II, Book 4, Ch. 6)
The Obama administration’s regulatory mania would be farcical were it not so economically devastating to millions of Americans. As a recent Investor’s Business Daily editorial pointed out, “This high unemployment economy needs immediate relief from government micromanagement.”
What are House Republicans doing?
House Republicans are focused on continuing efforts to turn around the Obama economy by passing major elements of the House Republican Plan for America’s Job Creators. Next week the House is expected to consider two pieces of legislation to rein in federal regulations. As part of the agenda to restore regulatory accountability, H.R. 3010, the Regulatory Accountability Act, would require agencies to assess the costs and benefits of regulatory alternatives and, in most cases, to adopt the least-costly alternative to achieve the regulatory objectives of Congress. Additionally, H.R. 527, the Regulatory Flexibility Act, would require federal agencies to identify and reduce the costs new regulations would impose on small businesses. Both bills were introduced by Rep. Lamar Smith (R-TX) and were approved by the House Committee on the Judiciary.