President Obama’s op-ed piece in today’s Wall Street Journal decrying expensive regulations that place “unreasonable burdens on business” not only continues his peace-making overtures to the business community, it also pulls the rug out from under Republicans. It was, in short, masterful politics.
Blaming a regulatory tsunami under the Obama administration for slow job growth, the new GOP leadership in the House of Representatives has promised to cut red tape that might be hindering our recovery. Darrell Issa, the House’s new head of Oversight & Government Reform sent a letter to some 150 businesses and trade groups at the end of last year asking them to identify especially bothersome regulations. Other committees promised similar inquiries.
Such gestures are popular with many Americans, who are constitutionally wary of government interference, and still suffering widespread unemployment. Comments such as those made last week by Tom Donahue, CEO of the Chamber of Commerce, blaming the “web of red tape” in the new healthcare and financial reform bills for sluggish hiring, have resonated. It is not coincidental that Mr. Obama proffered this olive branch ahead of his meeting with the Chamber, scheduled for February 7.
In his Wall Street Journal piece, Mr. Obama promises (through an executive order) that his administration will look at “the system as a whole” to make sure rules and laws are not “excessive, inconsistent and redundant.” He has his work cut out for him. The code of federal regulations is more than 157,000 pages and growing steadily. The new financial reform bill, for instance, takes an outdated and complex system of overlapping bureaus and agencies and – guess what – adds new ones to the mix. A large bank like J.P. Morgan Chase is now watched over by nine separate groups, not including state agencies. The law contains no fewer than 355 potential new rules, 47 mandated studies and 74 reports.
A study by Lafayette College Professors Mark and Nicole Crain for the Small Business Administration put the cost of compliance with federal regulations in 2008 at $1.75 trillion, or 14 percent of national income. Today’s total is over $2 trillion. The sum of this regulation cost plus federal taxes in 2008 amounted to a shocking $37,962 per household. In 2008, the National Federation of Independent Businesses noted that “the federal government alone proposes approximately 150 new rules every year that cost business owners over $100 million in compliance costs.”
Obama’s promise to lighten the regulatory burden is a smart move most likely orchestrated by William Daley, his new chief of staff. The business community, , scarred by the deep recession, has been slow to rehire workers. The crush of new regulation combined with frequent tongue lashings from the White House has not helped matters. Voters demonstrated their displeasure in November, delivering the president a sound thrashing. The message was clear: work with the private sector to boost job growth.
Whether this latest initiative will have legs is unclear. Some of the president’s ambitions may be attained only through new rule making at agencies like the EPA or the NLRB. Let us hope that while the right hand is busily scrubbing out unnecessary regulations, the left hand is not just as quickly scribbling in new ones.
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