Economics

Don’t Talk to Chuck, Listen to Chuck

Charles Schwab has a thoughtful piece in the WSJ today. He makes the critical point that behind every job is a prime mover in the form of an entrepreneur who helped create that job; so to get the jobs machine humming again, policy should encourage entrepreneurial risk-taking. His message to “both parties, Republicans and Democrats alike”:

They need to review every piece of existing legislation and regulation with a clear eye to what impact it will have on business and growth. If something is a job killer, put a moratorium on it. Stop adding to the litany of new laws and regulations until we’ve had time to digest those in place and regain some certainty about the future. Proposed laws and regulations should be put to a simple test: What will this do to encourage businesses and entrepreneurs to invest? What will it do for jobs?

That’s a superb litmus test.  And Congress has several good policy options on its plate, a fact pointed out by Warren Stephens in a recent piece:

Regulatory agencies should be required to study the costs and economic impact, including on job creation, of their rule-making before any rules take effect. Legislation to accomplish this goal has been introduced by Sen. Rob Portman (R., Ohio). His amendments to the Economic Development Revitalization Act of 2011 require regulations by independent agencies such as the Securities and Exchange Commission to be subject to the Unfunded Mandates Reform Act of 1995, which forced executive branch agencies (such as the Environmental Protection Agency) to identify the costs of their regulations.

The Regulations from the Executive in Need of Scrutiny Act (Reins) introduced by Rep. Geoff Davis (R., Ky.) would require that any proposed rule with an annual economic impact of $100 million or more be sent to Congress for approval. The Office of Management and Budget (OMB) has estimated that since 1980 federal regulators have written more than 130,000 rules. More than 1,000 of these rules have cost businesses in excess of $100 million just to comply, according to the American Enterprise Institute’s Nick Schulz. The OMB estimates that federal regulation costs the economy over $1.75 trillion each year.

Sen. Mark Warner (D., Va.) has been seeking support for a bill that would require regulators to drop one current rule for each new one adopted. Dubbed the “Pay-As-You-Go Plan,” Mr. Warner’s proposal would offer a solution to regulatory creep, in which new red tape is routinely wrapped by a federal agency around a new rule, creating confusion among American businesses while rewarding bureaucratic ineptitude.

2 thoughts on “Don’t Talk to Chuck, Listen to Chuck

  1. “Regulatory agencies should be required to study the costs and economic impact, including on job creation, of their rule-making before any rules take effect.”

    This sounds ever-so appealing until you ask the fundamental question: Just who would we trust to divine such impacts with any degree of accuracy or credibility? I would love to meet the person with that kind of crystal ball. And, do you count the jobs created to enforce the regulation (e.g., accountants hired to ensure Sarbanes-Oxley compliance)?

    Regulations usually (though not always) serve some fundamentally sound purpose. I for one happen to like the regulation that prohibits child labor, for example. I would prefer to explore the relative merits of a particular regulation than make the blanket assessment, “Regulation BAD!” Until Chuck tells me which regulations are most egregious and why, I’m not inclined to jump on his bandwagon, despite being a small businessman myself.

  2. The Warner rule still doesn’t get at the fundamental root of the problem: Government’s job is to protect property rights, not to regulate behavior. The government should not be able to come on my property and tell me what I can and cannot do on my property. The use of bureaucracy to regulate behavior suggests I am too stupid to know my production choices and I am too stupid to find least cost combinations to engage in the economic activity.

    Government regulation and compliance is a major barrier to market entry for new business start up. Economists have long regarded government regulation as an effort to prevent market entry. The brightest and most ambitious entrepreneurs should not be bridled with researching government regulations; their focus should be on their business and the market. The red tape of regulation binds the arms and hands of business and prevents them from pursuing excellence. Get government regulators off the backs the business, and you will see a new day in America.

    Most government regulation is a far cry from the role of government. It fails to protect my property rights and actually violates them. From the perspective of liberty, government regulation encroaches on it. From the perspective of economic theory, it creates distortions in choice sets and results in inefficiencies. It prevents market entry and protects oligarchies.

    Why would I then “settle” for trading one regulation for another as Sen Mark Warner suggests? Let’s start rolling back all of the unnecessary, undemocratic, Marxist-oriented ball of wax. Why not give liberty a chance?

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