House Majority Leader John Boehner’s proposal for a one year moratorium on new regulations affecting business has the support of a plurality of voters, according to a new Rasmussen poll. The margin is slim: 38 percent approve of the idea, 34 percent disapprove and 28 percent don’t know. Many more people approve of the idea for regulations affecting small business than those affecting big business. What this suggests is that people know that regulation can make running a business unprofitable, but think that big business can absorb the cost. What they may not appreciate is that big business often lobbies for regulation for this very reason – it erects entry barriers against smaller maverick insurgents in their industry – and then pass on the cost of regulation to the rest of us.
The fact is that regulation now costs the US economy over $1 trillion a year, according to my colleague Wayne Crews. Every year, Wayne puts together a snapshot of the regulatory state called Ten Thousand Commandments. This year he found that regulation eats up 8.3 percent of the US economy and its cost is equal to 63 percent of corporate pretax profits. The burden of regulation on business dwarfs the burden of the corporate income tax.
So the one year moratorium is probably a good idea, slowing if not halting the regulatory juggernaut. However, we can go further and provide the stimulus the economy provides at zero cost by getting rid of some of this burden. We call this program “Liberate to Stimulate” and some of the measures we suggest are:
• Rather than trying to improve speeds by picking the particular R&D horses to run on the racetrack, improve the business and regulatory track so everyone can go faster, and let jockeys keep more of their earnings.
• Allow freer trade in skilled labor: Bright foreign workers want to stay and create U.S. jobs after graduating here. That’s a better way to address global competition.
• Avoid safety regulation that makes us less safe: Many frontier technologies like nanotech can make our environment cleaner. Exaggerating risks overlooks the hazards of stagnation.
• Liberalize capital markets: Capitalism ranks among the world's great democratizing forces, but post-Enron Sarbanes-Oxley regulation has severely distressed smaller companies. Exempting firms with small market capitalizations is just for starters.
• Privatize: During the 1990s, it was proposed that commercial aspects of federal labs be offered to the industries they benefit, or to allow research employee buyouts. Do that.
• Award “prizes” rather than grants as one element of a transition to private funding of science.
• Relax predatory and anti-consumer antitrust activism: Markets emphasize competition, but sometimes “collusion” is merely a “partial merger” instead of a full one. Constraining productive firms in ways the market never intended hobbles entire industry sectors, and undermines the wealth creation process itself.
• Reduce overregulation generally: More than 60 agencies issue 4,000 regulations a year within some 70,000 Federal Register pages. Congress should get busy implementing a bipartisan “regulatory reduction commission”; sunsetting old rules and putting an expiration date on new ones; requiring fast-track congressional approval for controversial agency rules; adding flexibility for smaller business; requiring supermajority points of order for unfunded mandates; and creating a basic regulatory report card to accompany the federal budget.
Deregulation has had a bad press. The fact is that most of the so-called problems caused by deregulation actually stem from partial deregulations, which simply magnified the effects of remaining regulations (see the California blackouts). If we’re going to get America back on the road to recovery we need to free up business, not set further roadblocks in its way. The time has come to liberate to stimulate.
Iain Murray is a Vice-President at the Competitive Enterprise Institute.