The left has deployed every economic trick it knows. Even a trillion dollars blown on FDR-style “shovel ready” programs did nothing to budge unemployment, which remains at 9.1 percent. The reason this didn’t work is hardly mysterious. The private sector isn’t going to invest or hire as long as new regulations continue to pour out of Washington. Each new rule makes it harder to set a long-term business plan with any degree of certainty.
Entrepreneurs who can’t make a reasonable estimate of future costs won’t risk their capital on new opportunities. That means less economic activity, fewer jobs and an economy that stays in the doldrums.
According to the Government Accountability Office (GAO), 195 major rules were reported to Congress by federal regulatory agencies in the first two years of the Obama administration. These are rules that have an expected impact on the economy of $100 million or more, or a major increase in costs for consumers or producers, or a significant adverse impact on the competitiveness of an industry, among other factors. This compares with 178 such rules in the last two years of the George W. Bush administration.
The raw numbers mask the scale of the latest wave of regulations, the worst of which has yet to hit. The Dodd-Frank financial regulation bill will create an accounting nightmare. Obamacare rules will play a critical role in determining the cost of each employee to an employer. There also are a series of upcoming environmental regulations that will substantially increase the cost of doing business.
The Heritage Foundation tallied the impact of complying with the 43 major rules imposed in fiscal 2010. Based on estimates from regulators themselves, this cost is at least $26.5 billion. This does not include the cost of regulations that individually have an estimated impact of less than $100 million. Because there is no end to such rules from hundreds of federal entities, they add up to a substantial burden. New rules also force the private sector to buy new equipment, implement new procedures and undertake new reporting methods - a considerable investment of physical capital and human skills. Heritage estimates the first-year cost for the 2010 rules at $3.1 billion.
That’s why the White House regulatory czar Cass R. Sunstein’s claim that the administration has trimmed $1 billion in regulatory costs isn’t progress - net costs are on the rise. The elimination of 1.9 million hours of redundant reporting to the Occupational Safety and Health Administration is a step in the right direction, but it isn’t going to help if businesses are saddled with twice as much red tape from other agencies. As a 2007 GAO report stated, “[E]very president since President Carter has directed agencies to evaluate or reconsider existing regulations.” Even President Clinton succeeded in eliminating about 16,000 pages of the Federal Register.
Obamacare, Dodd-Frank and the Environmental Protection Agency’s latest rules will slam every corner of the economy, and nobody will really know what damage will be done for years. Entrepreneurs are neither irrational nor foolish. Seeing the dark clouds on the horizon, they hold on to their funds until the skies clear. If President Obama wants to get the economy back on a growth path, he needs to direct his bureaucracy to stop the job-killing regulations already in the works.