- - Sunday, July 17, 2016

ANALYSIS/OPINION:

On its face, government regulation is good. It delivers clean air and water. It stops black lung and other diseases. It interdicts miscreants who would lure you into bad investments and disciplines those who falsely promise million-dollar investment returns. Government is your protector, your friend.

That is now not so common wisdom. As Ronald Reagan opined, “Government is the problem, not the solution.”

Mr. Reagan not only embraced lower tax rates, but understood the need for less government regulation as well. Regulation is another form of taxation. Government imposes cost burdens on businesses and job creation — and on the ability of workers to increase “take home pay.” When Mr. Reagan entered office in 1981, he intuitively understood that regulation retarded economic growth, but at the time not by how much. Now we know.

Speaker Paul Ryan’s House Republican Task Force on Regulation gives us solid insight in their recently issued report. A huge bonus stimulated by the Ryan report is a House Budget Committee hearing last Thursday on regulation costs and how to control and constrain them. Key witnesses and earlier studies proved invaluable:

The Competitive Enterprise Institute conducts an annual study by serious academic economists of the cost of regulation. Their latest estimate is $1.9 trillion per year. That is equal to the total amount of federal income taxes for 2016, individual and corporate.

In a path-breaking 2013 Journal of Economic Growth study, John Dawson of Appalachian State University and John Seater of North Carolina State calculated, based on a simulation model of the U.S. economy, that these regulatory costs reduce economic growth by 2 percentage points a year. Analyzing federal regulatory costs from 1949 to 2011 (62 years) these costs had reduced the economy from $54 trillion to $15 trillion, just 28 percent of what it would have been otherwise. Your family’s income was consequently reduced to just over one fourth of what more robust economic growth would have made it.

A more recent comprehensive study by the Mercatus Center at George Mason University closely examined the regulatory cost impact on 22 major industries to produce a database called RegData 2.2. Their economic modeling concluded that regulatory costs were reducing GDP growth by 0.8 percentage costs per year. That would compound since 1949 to reduce GDP by 41 percent, so your family’s income is reduced to just over half of what it would be otherwise pursuant to their calculations.

We know our economy today is in long-term stagnation, with no real recovery from the last severe recession. Three major regulatory burdens are greatly contributing to that:

The worst with the greatest long term threat is President Obama’s regulatory war on American energy sources, the same sources that fueled the industrial revolution and so enriched mankind. Fevered hysteria seeks to scaremonger the planet back into mass poverty. But objective scientists, rather than today’s political soothsayers, have confirmed that fossil fuel use poses no significant threat to the planet. Thousands of pages of peer reviewed science in Climate Change Reconsidered II, published by the Heartland Institute, underscore that conclusion.

The second is the gross regulatory burdens of Obamacare, which is today forcing the American people to pay more for less health insurance coverage, while ultimately depriving millions of full time work. Republicans have recently proposed comprehensive plans to replace Obamacare with far superior Patient Power freedom of choice.

Third is the severe overregulation of finance imposed by the Dodd-Frank legislation which, combined with nearly a decade of government-administered zero interest rates, is starving small and medium businesses of the essential credit needed for recovery.

The House Republican Task Force on Regulation offered specific solutions to counter gross overregulation. Most prominent and promising is the REINS (Regulations of the Executive in Need of Scrutiny) Act. That bill would require approval by both Houses of Congress of any regulation costing the private sector more than $100 million individually before it can become effective.

The Republican report also proposes revisiting the original legislative grants of regulatory authority to Executive Branch agencies. Another promising Republican proposal would impose a global annual regulatory budget capping the total costs federal regulators can impose on the economy each year. The proposal should include granting standing to any private party to raise the cap as a defense to any alleged violation of a federal regulatory requirement.

Removing the economic burden of federal overregulation would restore America’s long-term economic growth rate to 4 percent, which would double the size of the economy, and your family’s income, every 17 years. That should be our target.

Lewis Uhler is founder and chairman of the National Tax Limitation Committee and the National Tax Limitation Foundation. Peter Ferrara is senior fellow and policy adviser for budget and entitlement policy at the Heartland Institute.

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