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August 27, 2014 / 1 Elul, 5774
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Overregulation: The Problem We Can’t Outproduce

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Photo Credit: Serge Attal/Flash90

http://hotair.com/greenroom/archives/2012/08/13/overregulation-the-problem-we-cant-outproduce-with-some-words-from-reagan/

In the period between 1950 and about 2005, Americans continuously sustained a hefty downpayment on our federal, state, and local governments’ spiraling debt, by upping our productivity, our economic output, and the scope of opportunity for everyone.

Overregulation and implied state ownership of what we produce has been a problem for us since Woodrow Wilson’s terms in office.  But until the last half-decade, the American people shouldered and outproduced greater and greater burdens of regulation and/or taxation, costly credit and inflation, and victim politics and litigation.  Operating in the conditions of relative economic and political freedom – more than most of the world, if not more than in our own past – the American people were a productivity engine unmatched in the history of man.  Spend more?  We’ll produce more.  Tax receipts will skyrocket.  If our governments can’t pay their bills, it won’t be because the American people aren’t producing.

The burdens have now caught up with us, however.  Tax rates, while they have gone up and down in the last 30 years, have hovered around a mean established in the 1980s.  Top rates have not skyrocketed as they did at some points in America’s past.   Yet the American productivity engine is faltering.  Unemployment remains high at over 8%, and America’s labor force participation rate has dropped to its lowest level since 1981 (which was in the trough of a major recession).

Credit is harder to get, but people don’t want that much of it anyway.  Consumers aren’t spending.  Housing values have plunged into an abyss, with no end in sight.  (A home virtually identical to mine was listed last week for about half what I paid for mine in December 2002.  Six months ago it would have been listed at about 65% of my original purchase price.)  In the current heat wave in the Southwest, California power companies that announced “flex alerts,” during which customers are asked to use less power, have been surprised that usage was well below what they thought it would be.  People can’t afford to pay for air conditioning as they once would have – and many homes are still standing empty after three, four, or five years.  Similar low demand has hit the US Northeast.  (This means, incidentally, that the power companies aren’t getting the revenue they were expecting.  Down the road, that isn’t going to be a good thing.)

It’s easy to say that people don’t want to work.  It’s also cheap and easy to talk about “fatcat” business owners who don’t want to hire people, or who are just being rich while the rest of us are miserable.

But most new jobs – about 70% — have always been created by small businesses in America, and those small businesses are being steamrolled by regulation.  Regulation is having a serious impact even on big business, and all its costs are passed on to the customer.  “Business” doesn’t pay for anything; you pay for it all.  If you don’t, the business isn’t viable, and you don’t have those big, clean grocery stores with thousands of products, or gas stations charging competitive prices on every corner.  Either you pay all the costs of regulation, or the product isn’t available.

One particular American president was closely attuned to the costs of regulation, and you won’t be surprised that it was Ronald Reagan.  Several times in the late 1970s, he spoke about this problem in his radio spots.  The points he made then resonate as if they were made at 10:00 this morning.

One 2 March 1977, Reagan talked about “Added Inflation” caused by government regulation*:

To inflation and taxes let us add another cost to all of us which is the indirect inflation brought about by excessive regulation and government statutes.

He went on:

… in 1974 the Federal Register needed 45,422 pages to list all the new U.S. Government decrees and regulations that year…

Those regulations add to the cost of doing business in a variety of fields and many ways which means they add to the cost of the things we buy.  For example Congressman Bill Armstrong of Colorado estimates, “Restrictive rate policies of the Interstate Commerce Commission add $5 billion per year in excess freight rates passed on to the consumer.”

Reagan cited other specific costs of regulation in this radio spot.  On 8 November 1977, he did a spot on the travails of the Greyhound bus company, which had had some very unfortunate encounters with federal regulators:

Greyhound happens to have the best safety record in the transportation business. …

About the Author: J.E. Dyer is a retired US Naval intelligence officer who served around the world, afloat and ashore, from 1983 to 2004.


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6 Responses to “Overregulation: The Problem We Can’t Outproduce”

  1. Colleen Loughmiller says:

    Dyer (retired US Navy – intelligence) writes in Jewish Press that America cannot bear any more over regulation and has reached the end of its very productive economy! Another voice saying what Mitt is saying: Time for a change in the White House before America sputters and stops.

  2. Charlie Hall says:

    "Housing values have plunged into an abyss, with no end in sight."

    As they should have in places like Nevada and the Central Valley of California — there was never any justification for them having been so high in the first place. In my own neighborhood in NYC, housing prices have rebounded to pre-crash levels, or higher.

    And California could help its real estate market out a lot by repealing the "Welcome, Stranger!" provision of Prop 13, where a new purchaser can pay five times the real estate taxes of the house next door. No wonder why nobody wants to buy a house there!

    "Restrictive rate policies of the Interstate Commerce Commission ".

    Interstate bus service was deregulated in 1980, and the ICC itself was abolished in 1996 — both actions under Democratic Presidents. Unfortunately, we need better regulation of motorcoach services, as the last year's horrible crash in the Bronx showed. That bus should not have been on the road and 15 people are dead as a result. A lot of regulation is literally life-saving.

    "regulation itself is mostly a bad thing".

    The Torah would disagree. It mandates far more restrictions on business conduct than any regulatory system. Rabbi Dr. Aaron Levine z'tz'l wrote convincingly that following the Torah mandates would have prevented the 2008 crash.

    "Our freedom to start businesses has been seriously degraded."

    I sure don't see that — I see lots of businesses getting started here in the Bronx every year, mostly by immigrants who ignore propaganda like this.

    And some of those companies might get big: Three of the four largest companies in America — Apple, Microsoft, and Walmart — did not exist when I was born in 1957. Google, #8 on the list, is less than 15 years old.

  3. Charlie Hall says:

    And one might have thought that the author might have been able to have come up with some specific examples that are more recent than 30+ years ago, from an agency that doesn't even exit. The Clinton administration really did reduce regulation dramatically, and unfortunately in the financial sector it went too far in that. Note that Canada and Israel, which did NOT deregulate, did NOT have a banking crisis, and have robust economies today.

  4. Todd Kadish says:

    I'm surprised because I usually find articles in the Jewish Press to be models of integrity and deep, non-partisan analysis…

  5. Charlie Hall says:

    One can make a case that the US has overregulated some areas of the economy, although not the financial sector. But this doesn't make any case at all! I'm surprised the newspaper accepted it.

  6. Charlie Hall says:

    BTW regarding the JP's non-partisan nature, the JP usually endorses Democrats in local elections.

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