Tag Archives: deregulation

CEI Podcast for October 6, 2011: How to Deregulate the Economy

Have a listen here.

Vice President for Policy Wayne Crews is author of the new CEI study, “The Other National Debt Crisis: How and Why Congress Must Quantify Regulation.” He discusses a few of his many ideas for deregulating the economy, including a regulatory budget, improved cost analysis, and lowering the threshold of “economically significant” regulations from $100 million to $25 million. This would require OMB to review more than the roughly 5 percent of new rules that it currently analyzes. The other 95 percent should not slip through the cracks.

CEI Podcast for May 26, 2011: President Obama Proposes Deregulation

Have a listen here.

Cass Sunstein, President Obama’s regulatory czar, announced today that the administration intends to repeal regulations from 30 different agencies. CEI Vice President for Strategy Iain Murray thinks this is a good step, though a small one. He estimates today’s proposal would save about $1.5 billion, which is one-tenth of one percent of the $1.75 trillion total burden of federal regulation.

Alfred E. Kahn, 1917-2010

The man who deregulated air travel passed away yesterday at age 93. That man, Alfred Kahn, was a Cornell economics professor who did far more than teach. He revolutionized the role of economics in regulatory policy. He also did important work on electricity deregulation in addition to his famous work on deregulating air travel.

Kahn’s most famous book was The Economics of Regulation, which pointed out that regulations often hinder competition, not help it. His use of the economic way of thinking was distinctly unfashionable at the time. One of his greatest legacies is righting that wrong.

As a lifelong partisan Democrat, Kahn had credibility in political circles at a time when regulatory skeptics were shooed away from the corridors of power. After chairing the New York Public Service Commission, President Carter appointed him to lead the Civil Aeronautics Board in 1977, which he dismantled.

Before Kahn, airlines had to get permission from the CAB to establish new routes or terminate old ones. The CAB set ticket prices, not the market. This prevented profitable or high-demand routes from being given adequate service, and kept money-losing, little-traveled routes open. It prevented airlines from keeping up with their customers’ ever-changing needs.

The CAB was also a wonderful device for keeping pesky startups from competing with established industry giants such as Pan American. Southwest Airlines, for example, would only fly routes inside the state of Texas to avoid CAB regulations.

Once the CAB was abolished, Southwest and other small airlines tried out new business models and offering lower fares. Some of them prospered; others did a poor job giving people what they wanted and ceased to be. Today, air travel may not have the amenities it used to, but it cheaper, more flexible, and more adaptable than it was under the CAB.

Washington could use more people like Alfred Kahn. He had his successes in a few choice sectors of the economy, but many more still have Civil Aeronautics Boards of their own stopping them from reaching their potential. Let us learn from his example of a life well lived; a good place to start is Thomas McCraw’s Prophets of Regulation.

New CEI Podcast: Creating High-Tech Jobs

Ryan Radia, CEI’s Associate Director of Technology Studies, talks about obstacles and opportunities for job creation in the high-tech sector. Regulatory uncertainty is making companies wary of making long-term investments. The sheer number of regulations makes it very expensive to hire workers. According to an article Ryan and I coauthored at RealClearMarkets, rolling back the regulatory state could pave the way for more jobs.

Have a listen by clicking here.

Clearing the Way for High-Tech Jobs

Over at RealClearMarkets.c0m, my colleague Ryan Radia offer some ideas for how to create more high-tech jobs. Our main points:

-Do more with less. This often involves cutting workers who aren’t productive enough to offset their wages. Sounds like bad news. But it’s actually crucial to job creation. That’s because in the long run, automation frees up resources — and employees — for new opportunities.

-Hiring new employees means jumping through countless regulatory hoops. According to a 2005 study by economist W. Mark Crain, compliance costs average $5,282 per employee at large companies. Small businesses pay $7,647 per employee. Some of those resources could have been spent hiring more employees. Over-regulation causes unemployment.

-Politicians can’t create jobs. But they can help to foster better conditions for wealth and job creation. Regulations cost businesses and consumers $1.17 trillion last year alone. Congress should roll them back. Some companies fear potential clampdowns on their businesses. Congress should leave them alone. Some failing businesses are eating up resources that could be better used elsewhere. Congress should stop bailing them out.

Expensive Jobs

Through June, the government spent about $620 billion of stimulus money. The Obama administration claims that the spending has saved or created 2.3 to 2.8 million jobs.

For the sake of argument, let’s assume those job creation numbers are true. In fact, let’s pick the rosiest number — 2.8 million jobs.

At a price of $620 billion, that comes out to $221,428.57 per job. Startlingly inefficient.

Now consider that that $620 billion had to come from somewhere else. Some of that money came from taxes. That leaves less money left over for consumers and businesses to spend. Some of the stimulus money was borrowed. That leaves less capital for private companies borrow.

The private sector tends to spend less than the government to create a job. Since stimulus spending is spending more money to create fewer jobs than the private sector, it is actually causing net harm to the job market.

In place of the spending stimulus, I humbly offer a deregulatory stimulus. CEI VP Wayne Crews and I offer some specific proposals here.

The Myth of Bush the Deregulator

Here’s a letter I sent recently to The New York Times:

May 14, 2010

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Your May 12 article “With Obama, Regulations Are Back in Fashion” (page A15) asserts that the Bush administration had a “deregulatory agenda.” If that is true, then President Bush failed miserably in executing it.

His administration added 31,634 new regulations to the books, and repealed hardly any. The cost of complying with federal regulations exceeded $1 trillion for the first time on Bush’s watch. 587,321 new pages were added to Federal Register during the Bush years.*

Even the regulation-intensive Obama administration is passing new regulations at a pace nearly ten percent slower than President Bush.

Contrary to the article, the Bush administration was the best friend regulators have had in a generation or more.

Ryan Young
Warren T. Brookes Journalism Fellow
Competitive Enterprise Institute
Washington, DC

*All data from Wayne Crews, Ten Thousand Commandments.

Will the Jobs Bill Create Any Jobs?

Over at the American Spectator, I explain why it won’t, but a deregulatory stimulus would. Main points:

-Anything that Washington giveth, it must first taketh away from somewhere else. The jobs bill is a zero-sum game.

-When government borrows more, less investment capital is left over for the productive sector.

-Taxes will have to be raised later to pay for today’s increased borrowing.

-Deregulation is a better approach. The biggest obstacles to job creation and economic growth are all in Washington.

Did Deregulation Cause the Great Recession?

Over at RealClearMarkets, I explain why the answer is a resounding no:

Rep. Phil Hare argues that “reckless deregulation” is one of the causes of the current economic crisis. That isn’t actually true. This year’s edition of the Competitive Enterprise Institute’s Ten Thousand Commandments report found that 3,830 new regulations came into effect in 2008 alone.

Over 30,000 total new rules passed during the Bush years. Hardly any were repealed. Businesses currently dole out the equivalent of Canada’s entire 2006 GDP – about $1.2 trillion – just to comply with federal regulations.

Where is the deregulation?

263,989 people make their living working for federal regulatory agencies, according to research from the Mercatus Center. That’s an all-time high.

12,190 of them regulate financial markets from Washington. More are based in New York and other financial centers. None of these figures include state and local rules and regulators. Those cost extra.