Winston Churchill observed that “Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.” We may finally be seeing a small step in that direction. The Bush and Obama administrations have tried fiscal stimulus to speed up economic recovery. It didn’t work. The Federal Reserve tried increasing the money supply, which they called “quantitative easing” because it sounds much more pleasant than “printing money.” That didn’t work. Then they tried it again. That didn’t work, either. What to do?
We at CEI have been pushing a deregulatory stimulus for years. Now that all other possibilities are exhausted, the administration appears to be taking small steps in that direction. Regular readers are aware that federal regulation costs about $1.75 trillion, and that the Code of Federal Regulations is over 157,000 pages long. Both of those numbers grow every year, as over 3,500 new rules hit the books annually. This morning, OIRA chief Cass Sunstein is announcing a 30-point plan that would “save American companies billions of dollars in unnecessary costs,” according to The Washington Post.
This new initiative stems from Obama’s Executive Order from earlier this year that ordered agencies to comb their books and recommend obsolete or harmful rules for elimination. Agencies hardly have an incentive to reduce their size or scope, which is why an independent commission would be a better vehicle for getting rid of old rules. The rules Sunstein is proposing to eliminate are very modest. But it’s better than nothing.
The real savings would actually go to consumers. Because companies pass on their costs, consumers are the ones who ultimately pay regulatory costs. They will also ultimately reap the savings in the form of lower prices and more choices.
The bad news is that the regulatory savings will comprise only a tiny fraction of the $1.75 trillion cost of federal regulation. Many will hail these reforms as landmark, revolutionary, or some other hyperbole. They are nothing of the sort. It is only a first step on the road to a saner regulatory approach. But if people believe that we’ve already reached the destination, they will lose the desire to press for further reform.
The worse news is that almost all of the new rules in the pipeline – 4,225 at last count – will still hit the books. Costly new regulations from the health care bill and the Dodd-Frank financial regulation bill may well outweigh the savings that Sunstein is proposing today.
Not all the details are out yet, but there is reason for deregulators to be cautiously optimistic. For more regulatory reform ideas, see this article that Wayne Crews and I wrote for AOL News.
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.
Rep. Ann Kirkpatrick is proposing a 5 percent pay cut for members of Congress.
“In the face of our ever-deepening federal debt, the federal government must follow their example by finding common-sense solutions to do more with less,” she told The Hill.
A noble sentiment. And one that would save $8700 per member. With 535 members of the House and Senate, the total savings are $4.65 million.
The federal government is on track to spend about $3.8 trillion this year. Trimming $4.65 million means that for every $816,502 the federal government spends, it would save one dollar.
Rep. Kirkpatrick is proposing a 0.00122 percent spending cut. That’s not even a rounding error.
I do not intend to mock Rep. Kirkpatrick. Her spending cut is better than nothing, and I am glad she is proposing it. But placed in proper context, it is very, very small. It is a largely symbolic proposal, and should be treated as such. A 5 percent pay cut for Congress is no austerity measure.
More fundamental solutions would involve fundamental entitlement reform paired with a deregulatory stimulus. Cato’s Chris Edwards has some other spending cut ideas that deserve a serious look. They total $380 billion, or ten percent of federal spending.
Posted in Political Animals, regulation, Spending
Tagged ann kirkpatrick, chris edwards, debt, deficit, deregulatory stimulus, entitlement reform, overspending, rep. ann kirkpatrick, spending, spending cut, symbolism, washington waste
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.
Posted in Business Cycles, Economics, Publications, regulation, Spending, Stimulus
Tagged american spectator, deregulate to stimulate, deregulation, deregulatory stimulus, jobs, jobs bill, regulation, regulations, unemployment