Can the Ideas in the RNC Platform Help Reform Regulation?

The Republican Party’s new platform, which contains planks on such pressing issues as “Protection Against an Electromagnetic Pulse (p. 54),” also has a lot to say about regulation. But will a GOP-controlled Congress act on them? That remains to be seen.

It is not enough to reform this or that financial or environmental regulation. The rulemaking process itself must be geared towards limiting the damage new rules can do, while regularly getting rid of obsolete, redundant, or ineffective regulations. After all, if you want better results, you need better rules. Here’s what the GOP platform proposes on that front:

  • A “bipartisan presidential commission to purge the [U.S.] Code and the [Code of Federal Regulations] of old ‘crimes,’” which is similar to the SCRUB Act that recently passed the House.
  • Occupational licensing reform—an issue where the GOP and President Obama agree. Maybe they can pass something before the next administration takes power.
  • Limit the executive branch’s power to issue regulations through executive order and other “dark matter” methods. CEI’s Wayne Crews wrote about this problem in a recent paper.
  • The REINS Act (though without mentioning it by name). REINS would require Congress to vote on all new major regulations before they can take effect. This would help to ensure agencies don’t go rogue, as the EPA did with cap-and-trade and the FCC did with net neutrality.
  • The Regulation Freedom Amendment, under which two thirds of states could vote to repeal federal regulations.
  • A regulatory budget, similar to the government’s annual spending budget. Wayne has also written on this reform.
  • A “one-in, one out” rule, under new agency regulations must be offset by repealing an equivalent dollar amount of old regulations.

All in all, not a bad list. And several of the planks have already passed the House. The trouble is that the Senate is unlikely to act on them, and the administration has issued veto threats on the REINS and SCRUB Acts. The Senate should pass them anyway to force the White House to publicly explain why they oppose regulatory reform. So in the short term, pessimism reigns.

After the election, the main task is keeping these reform ideas alive. It is important for each new Congress to keep reintroducing reform bills, and to vote on them, even in the face of veto threats. That way, when voters finally elect a president interested in regulatory reform, the legislation will already be right there for him or her to sign. So despite short-term pessimism for the next administration, the long-run future is bright for regulatory reform—so long as Congress is committed to keeping these bills alive.

The DNC Platform and Inequality

As the Democratic National Committee convention wraps up in Philadelphia, I took some time to look over theparty platform’s planks on inequality. Iain Murray and I counsel a “People, Not Ratios” philosophy on inequality in our recent study; the Democratic platform mostly takes the opposite approach.

Iain and I argue that from an ethical standpoint, the mathematical difference between rich and poor is irrelevant. What matters is making sure that all people, especially at the economic bottom, have enough to live comfortably and securely. The DNC platform instead is about ratios, ratios, ratios: “most new income and wealth goes to the top one percent (p. 3),” “the top one-tenth of one percent of Americans now own almost as much wealth as the bottom 90 percent combined (p. 10),” and so on. Some of the policies it proposes to reduce inequality ratios include:

  • Tax hikes on the wealthy. This would have the unintended effect of leaving less capital for small businesses and startups. The wealthy tend not to hoard their wealth like Scrooge McDuck or Smaug the dragon from The Hobbit. They invest most of their wealth, and as it circulates throughout the economy, and small-scale entrepreneurs, innovators, and other value creators benefit—as do their consumers.
  • Tax breaks for favored corporations. Intentional or not, this would be very good for lobbyists, and hardly anyone else.
  • Tax hikes for disfavored corporations. Ditto, as unpopular industries descend on Washington to try to avoid punishment. If the federal government is going to have a corporate tax, it should be as simple and uniform as possible. Of course, the ideal corporate tax rate is zero—companies pass on their costs to consumers, so it’s really you and me who pay corporate taxes, not GE or Microsoft.
  • A $15 hourly minimum wage. Iain and I discuss this in our other recent paper, “The Rising Tide.” Higher minimum wages would help some workers, but with severe tradeoffs. Some workers will find themselves working fewer hours, or even fired. Other workers, especially younger workers, will never be hired in the first place, denying them the chance to gain skills and experience that can lift them up the economic ladder as they get older. This could potentially increase inequality ratios over the long run. Workers would also see fewer on-the-job perks, such as free parking and meals, flexible vacation policies, and so on. The minimum wage is not a free lunch.
  • Expanded collective bargaining. Again, some workers will get a raise, but at others’ expense. Fewer jobs, higher consumer prices, and more are all among the tradeoffs. And again, increased unionization could increase inequality by giving privileges to union members at non-members’ expense.

Progressives and classical liberals share the same goal when it comes to poverty—ending it. Achieving that goal requires people across the political spectrum to focus more on people, and less on ratios. In that respect, the DNC platform has a long way to go. The most effective policies involve eliminating barriers to entrepreneurship. These include reforming occupational licensing requirements that now affect a third of American workers, as President Obama has suggested. We also recommend clearing vast swathes of the 175,000-page Code of Federal Regulations. Other helpful policies include affordable energy, easy access to capital, and a commitment to an honest price system. For more policy ideas, see Iain’s and my recent papers.

CEI’s Battered Business Bureau: The Week in Regulation

The big story of the week was the new proposed payday lending regulation, which ate up 356 pages of Friday’s 625-page Federal Register. It is open for public comment until October 7; submit yours here. The number of new final regulations for the year also passed the 2,000 mark. Other regulations for the week ranged from towboats to swimming pools.

On to the data:

  • Last week, 77 new final regulations were published in the Federal Register, after 70 the previous week.
  • That’s the equivalent of a new regulation every two hours and 11 minutes.
  • With 2,006 final regulations published so far in 2016, the federal government is on pace to issue 3,557 regulations in 2016. Last year’s total was 3,406 regulations.
  • Last week, 1,745 new pages were added to the Federal Register, after 1,810 pages the previous week.
  • Currently at 48,248 pages, the 2016 Federal Register is on pace for 85,547 pages. This would exceed the 2015 Federal Register’s all-time record adjusted page count of 81,611.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. 19 such rules have been published so far in 2016, none in the last week.
  • The running compliance cost tally for 2016’s economically significant regulations ranges from $3.82 billion to $6.02 billion.
  • 150 final rules meeting the broader definition of “significant” have been published this year.
  • So far in 2016, 370 new rules affect small businesses; 57 of them are classified as significant.

Highlights from selected final rules published last week:

For more data, see Ten Thousand Commandments and follow @10KC and@RegoftheDay on Twitter.

CEI’s Battered Business Bureau: The Week in Regulation

New regulations from the past week cover everything from Namibian meat to California raisins.

On to the data:

  • Last week, 70 new final regulations were published in theFederal Register, after 50 the previous week.
  • That’s the equivalent of a new regulation every two hours and 24 minutes.
  • With 1,929 final regulations published so far in 2016, the federal government is on pace to issue 3,546 regulations in 2016. Last year’s total was 3,406 regulations.
  • Last week, 1,810 new pages were added to the Federal Register, after 1,293 pages the previous week.
  • Currently at 46,503 pages, the 2016 Federal Register is on pace for 85,484 pages. This would exceed the 2015 Federal Register’s all-time record adjusted page count of 81,611.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. 19 such rules have been published so far in 2016, none in the last week.
  • The running compliance cost tally for 2016’s economically significant regulations ranges from $3.82 billion to $6.02 billion.
  • 144 final rules meeting the broader definition of “significant” have been published this year.
  • So far in 2016, 364 new rules affect small businesses; 54 of them are classified as significant.

Highlights from selected final rules published last week:

For more data, see Ten Thousand Commandments and follow @10KC and@RegoftheDay on Twitter.

Collective Bargaining Increases Inequality

I recently pointed out that minimum wage regulations increase inequality. That’s not what the “Fight-for-15” activists intend, but it is the result they would achieve. Collective bargaining is another unintentional inequality-increaser. The reasons why are pretty similar, as Iain Murray and I point out on pp. 10-14 of our recent paper, “The Rising Tide.” This week there were two opposing developments in Washington related to the issue: the National Labor Relations Board issued a decision that strengthens the hand of unions seeking to organize workers for representation via collective bargaining, but the House Appropriations Committee voted to defundrelated regulations from being implemented by both the Department of Labor and the National Labor Relations Board.

Just as minimum wages benefit some workers, so does collective bargaining. Union members tend to earn higher wages than their non-union peers working similar jobs. And just as with minimum wages, these benefits come with tradeoffs. Fewer jobs for non-members, higher consumer prices, and more are all part of the collective bargain. Some people make more, because other people make less and pay more.

According to a recent report from the Council of Economic Advisors about declining labor force participation, the U.S. is in the 90th percentile among OECD countries when it comes to union-friendly labor policies. But is only in the 62nd percentile for entrepreneurship-friendly policies (p. 30). Those percentiles are a useful priority guide for policymakers.

Another CEI study by Ohio University economist Lowell Gallaway and researcher Jonathan Robe finds that in union-heavy states such as Michigan, per capita income is as much as $11,000 lower than what it could be without powerful unions and their exclusionary policies. That’s nearly $28,000 per year for an average-size household—money that could be spent on better schools, housing, food, clothing, and much else. Instead, that money is never made at all.

There is also evidence that many union members don’t even want to be members. When Wisconsin gave many government employees a choice on whether or not to join a union, many of them decided against unions. In a painful bit of symbolism, the very first AFSCME local, founded in Madison in 1932, saw its membership decline more than 85 percent within just a few years after the law passed.

Many politicians and activists want to reduce economic inequality, and collective bargaining is one of the most popular policies for doing so. But not only does it actually increase inequality—union benefits come at consumers’ and other workers’ direct expense—the proper goal is to make the poor better off. Iain Murray and I aim at that goal in our recent papers, “People, Not Ratios” and “The Rising Tide.” We encourage others to join us.

CEI’s Battered Business Bureau: The Week in Regulation

It was a short work week due to the Fourth of July holiday, but agencies still managed to issue new rules covering everything from stormwater to seatbelts.

On to the data:

  • Last week, 50 new final regulations were published in theFederal Register, after 137 the previous week.
  • That’s the equivalent of a new regulation every one hour and 14 minutes.
  • With 1,859 final regulations published so far in 2016, the federal government is on pace to issue 3,548 regulations in 2016. Last year’s total was 3,406 regulations.
  • Last week, 1,293 new pages were added to the Federal Register, after 2,051 pages the previous week.
  • Currently at 44,693 pages, the 2016 Federal Register is on pace for 85,292 pages. This would exceed the 2015 Federal Register’s all-time record adjusted page count of 81,611.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. 19 such rules have been published so far in 2016, none in the last week.
  • The running compliance cost tally for 2016’s economically significant regulations ranges from $3.82 billion to $6.02 billion.
  • 141 final rules meeting the broader definition of “significant” have been published this year.
  • So far in 2016, 354 new rules affect small businesses; 53 of them are classified as significant.

Highlights from selected final rules published last week:

For more data, see Ten Thousand Commandments and follow @10KC and@RegoftheDay on Twitter.

Minimum Wage Increases Inequality, Decreases Labor Force Participation

The minimum wage actually increases inequality. It helps some workers, but only at others’ expense. The reasoning is simple: people can’t make money if you put them out of work. When the minimum wage goes up, some people get a raise, but only because other people get their hours cut, are fired, or never hired in the first place. Some people get more, just as many other people get less. The minimum wage’s results are exactly the opposite of its intentions.

That’s why a recent Council of Economic Advisors report, “The Long-Term Decline in Prime-Age Male Labor Force Participation,” misses the mark. On page 42, the report says: “To fight the long-run trend of increasing inequality, the President has proposed raising the minimum wage, giving greater support to collective bargaining, and helping ensure that workers have a strong voice in the labor market.”

There are two problems with this approach. The big one is the implicit assumption that inequality is automatically a bad thing. This is precisely the approach Iain Murray and I warn against in our recent paper, “People, Not Ratios.” The mathematical difference between rich and poor is ethically irrelevant, as Princeton University philosopher Harry G. Frankfurt also argues.

What is ethically relevant is how people at the economic bottom are doing. Do they have enough to live with comfort, dignity, and security? Are they becoming better off over time? What policies will help the poor become better off over time? These are the questions anti-poverty activists should be asking.

That’s a pretty big problem. The second problem is with a study quoted on the same page by David H. Autor, Alan Manning, and Christopher L. Smith, “The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment.”

Economists are famously divided on many issues, leading to President Harry Truman’s wish for a one-armed economist, who would be unable to say “on one hand… on the other hand…” The minimum wage is not a two-handed issue. A survey of professional economists finds overwhelming support for the statement “A minimum wage increases unemployment among young and unskilled workers.”

So not only did the CEA report have to cherry-pick a study that supported its ideological priors, that study’s support is tepid at best. This may be why the CEA report does not bother to quote it directly, which I do here:

We find that the minimum wage reduces inequality in the lower tail of the wage distribution, though by substantially less than previous estimates… These wage effects extend to percentiles where the minimum is nominally nonbinding, implying spillovers.

For more on how the minimum wage affects inequality, see Iain Murray’s and my recent paper, “The Rising Tide.” A future post will make similar arguments about the CEA report’s arguments on collective bargaining.