This Week in Ridiculous Regulations

Two big pieces of good news last week were the Senate’s decision to shelve the $1.7 trillion Build Back Better spending bill and the Federal Reserve’s announcement that it will begin tapering back money supply growth, which should help tame inflation starting next year. In sadder news, COVID-19 claimed its 800,000th death in the United States. It has killed more than 5.3 million people worldwide. Meanwhile, agencies issued new rules ranging from livestock herders to ulcer management.

On to the data:

  • Agencies issued 74 final regulations last week, after 77 the previous week.
  • That’s the equivalent of a new regulation every two hours and 16 minutes.
  • With 3,142 final regulations so far in 2021, agencies are on pace to issue 3,260 final regulations this year. 2020’s total was 3,218 final regulations.
  • Agencies issued 50 proposed regulations in the Federal Register last week, after 29 the previous week.
  • With 2,026 proposed regulations so far in 2021, agencies are on pace to issue 2,102 proposed regulations this year. 2020’s total was 2,102 proposed regulations.
  • Agencies published 422 notices last week, after 384 notices the previous week.
  • With 21,287 notices so far in 2021, agencies are on pace to issue 22,174 notices this year. 2020’s total was 22,480.
  • Last week, 1,101 new pages were added to the Federal Register, after 1,811 pages the previous week.
  • The average Federal Register issue this year contains 299 pages.
  • With 71,791 pages so far, the 2021 Federal Register is on pace for 74,483 pages in 2021. The 2020 total was 87,352 pages. The all-time record adjusted page count (subtracting skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. There are 25 such rules so far in 2021, one from the last week. Agencies published five economically significant rules in 2020, and four in 2019.
  • The running cost tally for 2021’s economically significant rules ranges from $8.94 billion to $14.06 billion. The 2020 figure ranges from net savings of between $2.04 billion and $5.69 billion, mostly from estimated savings on federal spending. The exact numbers depend on discount rates and other assumptions.
  • Agencies have published 356 final rules meeting the broader definition of “significant” in 2021, with four in the last week. This is on pace for 380 significant rules in 2021. 2020’s total was 79 significant final rules.
  • In 2021, 879 new rules affect small businesses; 94 are classified as significant. 2020’s totals were 668 rules affecting small businesses, 26 of them significant.

Highlights from last week’s new regulations:

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

Senate Shelves Build Back Better Spending Bill, For Now

The Senate will not vote on the Build Back Better (BBB) spending bill this year, though they might take it up again next year. It does not have 50 votes without Sen. Joe Manchin’s (D-WV) support, which appears not to be forthcoming. This is a good thing for two reasons. One is inflation. The other is that Gross Domestic Product (GDP) and unemployment numbers are well on their way to pre-pandemic levels. A stimulus bill was never needed in the first place. There are policies Congress and state governments should pursue, but more deficit spending is not one of them.

Monetary policy has a much bigger effect on inflation than does fiscal policy, such as stimulus bills. Even so, Build Back Better would likely have added between a quarter and a half a percentage point of inflation on top of what we are seeing now. And it might have lasted for a decade or more, depending on how many of its temporary spending programs would have later been made permanent.

Considering that the Federal Reserve has traditionally targeted 2 percent inflation, BBB would have eaten up a big chunk of its usual inflation “budget.” Inflation is currently at 6.8 percent, the highest since 1982. The Federal Reserve today announced it would taper money supply growth. It will slow down a bond purchasing program and end it altogether in March, and will likely enact a series of up to three interest rate increases during 2022.

Since money supply growth is inflation’s biggest component, high inflation will be with us well into 2022, no matter what Congress does. But BBB-caused inflation on top of that would have made a bad problem even worse.

Manchin, and likely other Senate Democrats, may realize this is not a good look going into the midterm elections. President Jimmy Carter made important accomplishments in trucking and airline deregulation, and he appointed Paul Volcker as Federal Reserve chair, who ultimately slowed down the monetary printing press. But in the popular mind, Carter’s legacy is stagflation. If President Biden wants to avoid sharing Carter’s legacy, he should be quietly happy that his signature legislation is now on ice. He should see to it that it stays that way.

Biden should also avoid interfering with the Fed as it works to taper down today’s inflation. Since inflation can spark a temporary boom, politicians have always been tempted to put pressure on the Fed to goose the numbers a little leading into an election. (Lyndon Johnson and Richard Nixon were particularly egregious in this regard, as Peter J. Boettke, Alexander William Salter, and Daniel J. Smith argue in their book Money and the Rule of Law.) But the tradeoff of an inflationary boom now is a bust later.

There is no guarantee that Congress and President Biden will learn the right lesson. When inflation’s temporary stimulus effect wears off, policy makers are tempted to reach for the bottle again, rather than risk a hangover recession and hurt their chances for another term in office. This short-term thinking is what led to the 1970s stagflation. Had the process continued longer than it did, the result could have been Argentina-esque. It is crucial that today, Congress and President Biden respect the Fed’s nominal independence.

Fortunately, inflation is unpopular with the public. And economic fundamentals are in reasonably good shape, which means there is no need for inflationary stimulus. People hunkered down when COVID-19 hit, and are opening up when they feel safe—and when regulations allow them to. We aren’t through it yet, and it’s too early to tell how much effect the omicron variant will have. But the COVID recession had no stock market crash, no financial crisis, no housing bubble, no savings and loan scandal, or any other underlying economic illness. Traditional Keynesian stimulus does not apply to today’s economy. Build Back Better might be the biggest example of a #NeverNeeded policy yet.

The best thing that can be said about Build Back Better is that it was fighting the last battle, not the current one. Less charitably, Build Back Better was essentially a Democratic version of the PATRIOT Act, in which policy makers used a crisis as an excuse to put a bunch of longstanding wish-list items into a bill, and then market it as a must-pass crisis response. Not only would BBB have increased inflation, it would have used up more than $1 trillion dollars of resources that almost certainly have better uses than paying political favors—most of them COVID-unrelated.

GDP is already back to where it would have been had COVID never happened. Today’s ultra-low 4.2 percent unemployment rate looks better than it is, because many people are staying out of workforce, either for safety reasons or because they are content living off of savings for a little while longer. But even accounting for that, employment is in decent shape, and labor force participation is trending back to pre-COVID levels. Job openings are there for the taking—though rapid inflation is making it difficult for employers and employees to figure out fair wage rates.

Congress will instead turn its attention to other issues, such as voting rights. But it turns out there are policies Congress can pursue to fight inflation from the supply side. Money is growing faster than goods and services, causing higher prices. Removing regulatory obstacles to making goods and services will help to bring money and goods back into balance.

President Trump doubled tariffs, and President Biden is pursuing nearly identical trade policies. Scrapping those barriers alone would help unclog supply networks while lowering prices on hundreds of billions of dollars’ worth of goods, from big items like cars and houses to children’s toys and clothing.

There is no good reason for truckers to have a minimum age of 21 during a shortage when there are 18-year-olds perfectly able to do the job well.

U.S. ports operate at roughly half the efficiency of more modern ports like Rotterdam, which is open 24/7 and is heavily automated. While there isn’t much Congress can do about this, the biggest obstacle here are labor union contracts. These need to be modernized to avoid another supply network crisis and keep the U.S. shipping industry up to global standards. However, Congress can repeal the 1920 Jones Act, which attempts to protect the U.S. shipping industry but instead has reduced it to an uncompetitive rump of its former self.

Similar Buy American-style regulations requiring U.S.-flagged ships to dredge U.S. ports are why many ports are badly behind on dredging projects, and are unable to host many modern container ships.

Over a quarter of U.S. jobs now require some sort of occupational license from the government. Sixty years ago, it was 5 percent. Federal, state, and local governments need to get rid of unnecessary licenses that prevent willing people from creating more goods and services. Besides being the right thing to do, it would help to fight inflation.

None of these policies has the attention-grabbing cachet of a trillion-dollar piece of legislation. But unlike the BBB, they would stimulate new economic growth and help get inflation back under control.

This Week in Ridiculous Regulations

The number of new regulations this year topped 3,000, ending the week at 3,068, and the 2021 Federal Register topped 70,000 pages. Inflation went up to 6.8 percent, the highest since 1982, back when the 1970s stagflation was still winding down. Congress is working hard to avoid hitting the debt ceiling. While most people would do this by spending less, Congress is instead going to raise the ceiling. Meanwhile, agencies issued new rules ranging from wool trust funds to commuter airplanes.

On to the data:

  • Agencies issued 77 final regulations last week, after 67 the previous week.
  • That’s the equivalent of a new regulation every two hours and 11 minutes.
  • With 3,068 final regulations so far in 2021, agencies are on pace to issue 3,264 final regulations this year. 2020’s total was 3,218 final regulations.
  • Agencies issued 29 proposed regulations in the Federal Register last week, after 29 the previous week.
  • With 1,976 proposed regulations so far in 2021, agencies are on pace to issue 2,095 proposed regulations this year. 2020’s total was 2,102 proposed regulations.
  • Agencies published 384 notices last week, after 357 notices the previous week.
  • With 20,865 notices so far in 2021, agencies are on pace to issue 22,197 notices this year. 2020’s total was 22,480.
  • Last week, 1,811 new pages were added to the Federal Register, after 1,224 pages the previous week.
  • The average Federal Register issue this year contains 301 pages.
  • With 70,687 pages so far, the 2021 Federal Register is on pace for 75,199 pages in 2021. The 2020 total was 87,352 pages. The all-time record adjusted page count (subtracting skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. There are 24 such rules so far in 2021, none from the last week. Agencies published five economically significant rules in 2020, and four in 2019.
  • The running cost tally for 2021’s economically significant rules ranges from $8.83 billion to $13.72 billion. The 2020 figure ranges from net savings of between $2.04 billion and $5.69 billion, mostly from estimated savings on federal spending. The exact numbers depend on discount rates and other assumptions.
  • Agencies have published 344 final rules meeting the broader definition of “significant” in 2021, with four in the last week. This is on pace for 366 significant rules in 2021. 2020’s total was 79 significant final rules.
  • In 2021, 859 new rules affect small businesses; 88 are classified as significant. 2020’s totals were 668 rules affecting small businesses, 26 of them significant.

Highlights from last week’s new regulations:

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

In the News: Christmas Trees

I was quoted in a November 30 Washington Times article about how inflation and regulations are making Christmas trees more expensive.

On the Radio: Inflation

Today at 5:30 ET, I will appear on the Lars Larson Show to talk about inflation.

I’ll post a link to audio afterwards if it’s available.

In the News: Supply Chains

I can’t access the article due to a paywall, but on December 3 I was quoted in the Washington Times about tariffs and supply chains networks.

Inflation Increases to 6.8 percent, Misery Index Reaches 11

October’s inflation reading was the highest since the recession of 1991. November’s is the highest since the 1982 recession, at an annualized 6.8 percent. The reason inflation is usually highest during recessions is because governments attempt to restart growth through a combination of monetary and fiscal policy. It is troubling that today’s inflation is happening while the economy is growing and unemployment is low.

In fact, the misery index is now in double digits, which rarely happens outside of recessions. The misery index is the inflation rate plus the unemployment rate—economist Arthur Okun came up with it as an easy-to-use statistic for President Lyndon Johnson’s benefit, and it remained a key statistic throughout the stagflationary 1970s. It may be time to dust it off again.

While unemployment is a very low 4.2 percent, when combined with 6.8 percent inflation, the misery index currently stands at 11. For context, its all-time high was 21.9 in June 1980. It was below 5 for a good chunk of the 1950s, and was at 5.3 in April 2015. See a historical chart from the St. Louis Federal Reserve’s FRED database here.

Inflation happens when the money supply grows faster than the supply of goods and services, as I explained earlier. In today’s case, the COVID-19 pandemic shut down large swathes of the economy for an extended period. Even if the money supply had remained stable, the supply of goods and services temporarily went down. The effects are still being felt in today’s supply chain problems.

But economic fundamentals remained healthy. There was no financial crisis or popped housing bubble. People hunkered down for a while, and are in the process of coming back. This is why COVID-era growth has bounced back in close tandem with increased vaccination rates and decreased caseloads. When people feel safe to open back up, they do—and nothing is stopping them except for bad public policy.

Both Congress and President Biden responded to a different type of recession with the same tools. The result is high inflation during a period of growth. The solution is to spend less and get money supply growth back in sync with growth in goods and services. Instead, Congress continues to spend at a record rate, with more likely on the way. The Fed has indicated that it will taper back monetary growth, but not until next year.

Policy makers are unlikely to do the right thing on the money side. But they can help the goods and services side by removing trade barriers, getting rid of unneeded occupational licenses, speeding up years-long permit processes, repealing the shipping cost-raising Jones Act, liberalizing trucking regulations, and other deregulatory measures. These would spark growth while helping to tame inflation—and without adding to the deficit.

Can Regional Trade Agreements Replace the WTO?

Trade policy is in a bad place right now, with two consecutive protectionist administrations in the U.S. and the World Trade Organization (WTO) possibly damaged beyond repair. The Hudson Institute’s Thomas J. Duesterberg recently argued in The Wall Street Journal that one solution would be a pivot to regional trade agreements. While that’s not the worst idea on paper, I sent the following letter to the editor pointing out that it wouldn’t work in practice:

Thomas J. Duesterberg rightfully worries that the World Trade Organization may be damaged beyond repair (“The WTO’s Fast Track to Irrelevance,” op-ed, Nov. 29). A trade organization has enough on its plate without having to deal with trade-unrelated issues such as labor, human rights, and climate. But Duesterberg’s solution of expanded regional trade agreements would likely have the same problems.

Trade-unrelated provisions are part and parcel of trade agreements these days, as the United States-Mexico-Canada Agreement’s 2,000-page length shows. The solution is to confine trade agreements to trade and treat separate issues separately. Until that root problem is addressed, trade policy will remain ugly, whether negotiations happen at the WTO or regionally.

Ryan Young

Senior Fellow, Competitive Enterprise Institute

Washington

This Week in Ridiculous Regulations

The number of new final regulations this year will pass 3,000 this week, with more than three weeks still to go. The Omicron variant gave the country an education in the Greek alphabet, though it is too early to tell if it will be particularly harmful. New job numbers provided further evidence that the big spending bills are unnecessary, and that it is well past time for policy makers to begin tamping down inflation. Meanwhile, agencies issued new rules ranging from Egyptian artifacts to imported goats.

On to the data:

  • Agencies issued 67 final regulations last week, after 59 the previous week.
  • That’s the equivalent of a new regulation every two hours and 31 minutes.
  • With 2,991 final regulations so far in 2021, agencies are on pace to issue 3,251 final regulations this year. 2020’s total was 3,218 final regulations.
  • Agencies issued 29 proposed regulations in the Federal Register last week, after 47 the previous week.
  • With 1,927 proposed regulations so far in 2021, agencies are on pace to issue 2,095 proposed regulations this year. 2020’s total was 2,222 proposed regulations.
  • Agencies published 357 notices last week, after 399 notices the previous week.
  • With 20,481 notices so far in 2021, agencies are on pace to issue 22,262 notices this year. 2020’s total was 22,480.
  • Last week, 1,224 new pages were added to the Federal Register, after 1,496 pages the previous week.
  • The average Federal Register issue this year contains 299 pages.
  • With 68,874 pages so far, the 2021 Federal Register is on pace for 74,863 pages in 2021. The 2020 total was 87,352 pages. The all-time record adjusted page count (subtracting skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. There are 24 such rules so far in 2021, none from the last week. Agencies published five economically significant rules in 2020, and four in 2019.
  • The running cost tally for 2021’s economically significant rules ranges from $8.83 billion to $13.72 billion. The 2020 figure ranges from net savings of between $2.04 billion and $5.69 billion, mostly from estimated savings on federal spending. The exact numbers depend on discount rates and other assumptions.
  • Agencies have published 340 final rules meeting the broader definition of “significant” in 2021, with five in the last week. This is on pace for 370 significant rules in 2021. 2020’s total was 79 significant final rules.
  • In 2021, 823 new rules affect small businesses; 87 are classified as significant. 2020’s totals were 668 rules affecting small businesses, 26 of them significant.

Highlights from last week’s new regulations:

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

On the TV: Supply Chains

This morning I appeared on C-SPAN’s Washington Journal to talk about supply chains, opposite the Economic Policy Institute’s Robert Scott.

Video and a transcript are here.