Biden’s Red-Tape Onslaught

Biden has pushed federal spending to record levels and he wants to push taxes to record levels.

He’s also maintained and extended Trump’s protectionist policies.

And we all know about his track record on inflation (he didn’t start the problem, but he did nothing to contain it).

Today, let’s ask what he’s done on regulation.

Unfortunately, the answer is “a lot.” Here’s a chart from American Action Forum, tracking how much new red tape was imposed by the past three president.

Biden is winning on costs and paperwork, which means the American economy is losing.

Here’s some of the accompanying analysis from AAF.

As we have already seen from executive orders and memos, the Biden Administration will surely provide plenty of contrasts with the Trump Administration on the regulatory front. …Since the AAF RegRodeo data extend back to 2005, it is possible to provide weekly updates on how the top-level trends of President Biden’s regulatory record track with those of his two most recent predecessors. …This past week’s regulatory haul has pushed the Biden Administration’s final rule cost tally into truly uncharted territory. …For perspective, if “Biden Administration Regulatory Costs” were a country, its gross domestic product would rank 17th in the world, just behind Indonesia.

Just like with taxes, the cost of red tape is borne by people.

By creating barriers to economic efficiency (what I call an obstacle course), Biden’s regulatory onslaught means that workers receive less income and investors receive lower returns.

The net effect is lower living standards.

For all intents and purposes, Biden wants to copy Europe’s regulatory policy just like he wants to copy Europe’s fiscal policy.

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Net Neutrality and a Lesson about Regulation

If you’re a policy wonk, you’ll enjoy this history of how government regulation has hindered the development of telecommunications technology.

I want to focus on the part of the video, beginning about 30:00, which discusses “net neutrality.” The interview with Professor Hazlett took place in 2017, at a time when there was lots of fighting over this issue.

The pro-regulation crowd claimed that net neutrality was needed to protect consumers from slow and expensive service. And they made all sorts of ridiculous claims about the Trump Administration’s plans to get rid of the Obama-era regulation.

At the time, this tweet from the Democratic members of the U.S. Senate got a lot of attention.

So what actually happened after net neutrality was repealed?

I suppose the first question to answer is:

Did..

…the…

…Internet…

…slow…

…to…

…a…

…crawl?

Not exactly. Robby Soave gives us the details in a column for Reason. He starts with some background information.

Exactly four years ago, the Federal Communications Commission (FCC) repealed the internet regulation known as net neutrality, which had forced internet service providers (ISPs) to treat all content identically in terms of download and streaming speeds, for instance. Since the popular policy had come into existence during the Obama administration, and was gutted during President Donald Trump’s term, its demise was treated as the end of the internet as we know it by panic-stricken #resistance liberals. …The term net neutrality was coined by law professor Tim Wu in 2006; his big idea was that the government needed the power to restrict ISPs’ ability to offer different levels of service to different customers. …Wu cautioned that without rules requiring internet service providers to treat all traffic and content equally, the internet as we had come to know it would cease to exist.”

And here are the results.

Today, the internet is still here, and still functioning properly. Expectations that ISPs would practice widespread and improper discrimination did not pan out. On the contrary, the internet is better and faster for basically everybody than it was when net neutrality ended—in fact, it’s better and faster than at any point in the past. …Foes of net neutrality were clearly correct that the internet didn’t need the government to save it, and absent federal direction and regulation, everything is fine.

The moral of the story is that we experienced a major test of regulation vs. deregulation. And we’ve learned that the advocates of red tape were wildly wrong and the supporters of free enterprise were exactly right.

That’s a lesson we can apply to all sorts of other issues involving government intervention (housing subsidies, financial markets, fisheries, organ transplants, labor markets, etc, etc).

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Assessing Trump’s Record on Regulation

When I did my final assessment of Trump’s economic record, I gave him credit for cutting red tape in some areas, but also noted that he increased government intervention in other areas.

…there were some very positive moves on regulation, but they were partly offset by areas where Trump increased intervention (coal subsidies, property rights, Fannie/Freddie, and international tax rules, for instance).

I did give him credit, on net, for moving regulatory policy in the right direction. In other words, the good things he did regarding red tape outweighed the bad things.

But that’s a judgement call, in part because it’s rather difficult to measure the myriad forms of regulation from dozens of different bureaucracies, but also because there’s no agreement on how to measure success (is it a victory, for instance, to reduce the rate of increase in red tape?).

To see how this is challenging, let’s see what various experts wrote about Trump’s regulatory track record.

A new study, authored by Professors Cary Coglianese, Natasha Sarin, and Stuart Shapiro, pours cold water on Trump’s claim that he successfully reduced economic intervention.

Both the extent and impact of the Administration’s efforts to eliminate regulation are considerably less substantial than President Trump and his supporters have claimed. …We recognize that the Trump Administration has repealed or modified a series of agency regulations adopted under the Obama Administration, and even that the Administration has adopted a smaller number of new regulations deemed significant than other recent administrations. Yet overall the reality of regulatory elimination is rather unremarkable… The Administration has accomplished markedly little compared to what it has claimed. … in measuring levels of regulatory activity,researchers rely on a variety of sources of data, including overall pages in the Federal Register and the CFR,the incidence of new rules published in the Federal Register,and the number of actions listed in the semi-annual regulatory agenda. …The Code of Federal Regulations (CFR) is the authoritative source of all existing regulatory requirements on the books. …Growth continued in the Obama Administration to 185,053 pages in 2016. If President Trump’s claim to have eliminated 25,000 pages were correct, we would expect to see no more than160,000 pages in the CFR by now. But, quite to the contrary, the count as of the end of 2019 was185,984 pages—actually a somewhat greater number of pages, not fewer.

Here’s Figure 1 from the paper, which does confirm that there was not a 25,000-page reduction in red tape.

Though if you focus on the last couple of years, it is obvious that the rate of increase slowed significantly. Depending on one’s perspective, that is either a victory or a smaller defeat.

The authors do acknowledge that the number of pages isn’t even the right way to measure regulatory burden.

So they then examine the claim that the Trump Administration had more initiatives to reduce rather than increase red tape.

A count of pages in the CFR is only an indirect proxy for regulatory obligations. …Another way to look at what the Trump Administration has done by way of deregulation would be to look not at pages but at the number of actual rules. …Although the President and his supporters have claimed various levels of deregulatory activity—from 7 to 22 rules removed for every new rule added—these claims are false or misleading. …The lists overcount deregulatory actions by including withdrawals of proposals that were never finalized, delays in effective dates which do not eliminate regulations, non-regulatory actions such as the repeal of guidance documents, and even proposed deregulatory actions rather than completed ones. In addition, when comparing deregulatory actions to regulatory ones, the White House only counts new regulations designated as “significant,” while they count deregulatory actions of any magnitude or level of significance… rather than there being more deregulatory actions than other actions, as the Trump Administration’s claims have implied, there was, in fact, just the opposite. Overall about three completed actions in the regulatory agenda appear for every action designated as deregulatory.

The bottom line, based on their assessment, is that Trump didn’t accomplish much, particularly when compared to what happened under Carter and Clinton.

…in terms of“dramatic regulatory relief,” nothing the Trump Administration has done compares to the deregulation of the airlines, rail, and truck transportation that was executed by the Carter Administration in the late 1970s. Prior to that time, these major sectors of the economy—along with others, such as natural gas and telecommunications—were subject to regulations of prices and outputs—an inefficient form of regulation that advantaged incumbent firms but at the expense of consumers. President Carter championed major deregulatory initiatives that loosened the government restrictions on the air, rail, and transport sectors.Retrospective analysis indicates that the deregulation of these industries resulted in $70 billion in annual consumer benefits. …the evidence does not support the Trump Administration’s claims to have engaged in a dramatic scaling back of government regulation. More pages were removed from the CFR in the Clinton Administration than the Trump Administration. A more substantial unleashing of market forces occurred from the deregulatory changes made in the Carter Administration. And the Trump Administration has done at least as much regulating as it has deregulating.

For what it’s worth, Clinton was much more market oriented than most people realize. And Carter, while misguided in some areas, did a very good job on regulation.

So it’s not necessarily a knock on Trump to say he fell short of those two presidents.

Now let’s look at a pro-Trump perspective.

Professor Casey Mulligan of the University of Chicago early last year offered an upbeat assessment of the former president’s performance in tackling regulations.

In just three years the administration has reversed hundreds of regulations, many of which drone on for hundreds of pages. …Many of the regulations reversed had been written and implemented at the behest of special interests, including large banks, trial lawyers, major health insurance companies, big tech companies, labor unions, and foreign drug manufacturers. …the Council of Economic Advisers (CEA)…dedicated a great deal of manpower preparing a comprehensive and rigorous assessment of deregulation since 2017. That report, released in June, concluded that the past three years of deregulation is comparable to, and probably exceeds, any deregulatory episode in modern U.S. history. …the CEA report estimates that over the next five to 10 years, the deregulatory efforts of the Trump administration will increase annual real incomes in the United States by $3,100 per household.

I wrote about the above-mentioned report from the CEA in the summer of 2019. The CEA’s goal was to present Trump’s policies favorably, so I certainly don’t object to some skepticism from outsiders, but I also noted that, “the underlying assumptions aren’t overly aggressive” and “even modest improvements in growth lead to meaningful income gains over time.”

In a column for the Hill, James Broughel of the Mercatus Center analyzed Trump’s track record and concluded that some good things happened.

…the president issued Executive Order 13,771 soon after taking office. Its “2 for 1” requirement received the most attention: Two regulations must be identified for elimination each time a new one is put forward. However, perhaps more important is the “regulatory budget” it set up, which essentially set a cap on new regulatory costs executive branch agencies can impose. …A look at the data suggests the cap is largely working. On Jan. 20, 2017 — Trump’s inauguration day — there were 1,079,601 regulatory restrictions on the books. By Dec. 6, 2019, that number stood at 1,077,822. While the code has not declined substantially by this measure — and the administration should acknowledge that aggregate cuts to-date have been modest — it’s rare to see a code fail to grow across an entire presidential term.

Incidentally, the Mercatus measure of “regulatory restrictions” almost certainly is better than other measures of red tape, so it’s disappointing that Coglianese, Sarin, and Shapiro failed to include it in their analysis.

But if we’re simply looking at the volume of “significant rules,” here’s a tweet from James Pethokoukis showing that the increase in red tape dramatically slowed once Trump took over.

Philip Wallach of the R Street Institute examined Trump’s track record on red tape in an article for National Review in late 2019 and he thought the glass was half empty rather than half full.

Regulation became one area where conservatives wary of Trump allowed themselves high hopes. Trump’s experiences as a developer left him with a bone-deep skepticism of regulations. …There have been some real bright spots for deregulators. Many of the Obama administration’s aggressive and legally dubious environmental rules have been stalled or rolled back, including the Waters of the United States rule, Corporate Average Fuel Economy standards for tailpipe emissions, and the Clean Power Plan, which regulated greenhouse-gas emissions from existing power plants. The Endangered Species Act will be interpreted so as to make it less burdensome. Promises to scrap Obamacare may have gone unfulfilled, but the administration has quietly and constructively made the program more flexible for states and individuals. …the Trump administration…to an unprecedented degree…has…issu[ed] far fewer new regulations than any of its predecessors.

As you can see, it’s important to define success. Is it a victory to have “far fewer new regulations”?

Or, as you can see in the following excerpt from Wallach’s article, is it a victory to cut red tape by less than Obama increased it?

These triumphs notwithstanding, three years in, hopes of a thoroughgoing overhaul have been dashed. …hitting the pause button, however unusual, does not a revolution make. The hoped-for transformation of the administrative state is nowhere to be found. …In 2018, the administration sought to show its relative merit by noting that, through its first two years, the Obama administration had imposed $245 billion in regulatory costs. The Trump administration’s negative $33 billion in costs imposed at that point certainly was a lot less than $245 billion. But the comparison cuts harder in the other direction: The administration is admitting that it is coming nowhere close to reversing the costs imposed even by the Obama administration — let alone the decades of regulatory burdens built up previously. …the administration’s math allows it to take credit for deregulatory policies as soon as they are promulgated, without paying any attention to whether they are carried through. …the administrative state has been more discomfited than deconstructed by the Trump administration.

Last but not least, former Obama official Cass Sunstein opined for Bloomberg back in 2018 that Trump’s main achievement was to slow the tide of new regulations.

Is President Donald Trump dismantling the regulatory state? Not close. …let’s take a broader perspective. Under George W. Bush, the Office of Information and Regulatory Affairs approved about 2,500 final regulations. Under Barack Obama, it approved about 2,100 final regulations. …By comparison, the Trump administration has repealed … dozens of finalized regulations. …about 2 percent of the number of regulations finalized over the past 16 years. …Much more fundamentally, he’s substantially slowed the flow of new ones. …From Bush’s inauguration to Sept. 1, 2002, the Office of Information and Regulatory Affairs approved about 400 proposed regulations and about 500 final regulations. From Obama’s inauguration to Sept. 1, 2010, the Office of Information and Regulatory Affairs approved about 270 proposed regulations and about 470 final regulations. …the Bush and Obama administrations look pretty similar… The Trump administration is a big outlier. From Trump’s inauguration to the present, the Office of Information and Regulatory Affairs approved about 170 proposed regulations and about 160 final regulations. That’s a major reduction.

So what’s my two cents?

The obvious conclusion is that the Trump Administration did some good things to ease the nation’s regulatory burden, but there was no major paradigm shift.

The United States had a lot of red tape when Trump took office and it had a lot of red tape when Trump left office, though he definitely slowed the rate of increase.

But a slower rate of increase is still not good news, as illustrated by the fact that the Fraser Institute calculates that America’s score on red tape has declined slightly since 2016.

Indeed, the overall score for economic liberty in the United States has declined slightly since Obama left office, which is evidence for my argument that Trump delivered an incoherent mix of good policies (taxes, for instance) and bad policies (trade, for instance).

P.S. Trump’s Jekyll-Hyde record on economic policy is one of the reasons why I prefer Reaganism over Trumpism. The establishment doesn’t like either of those options, but I very much prefer the one that unambiguously reduces the size and scope of government.

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Do Small Countries and Small States Have Lower Levels of Red Tape?

When I write about regulation, I mostly focus on cost-benefit analysis.

Simply stated, red tape makes it more expensive for people and businesses to do things, much as adding obstacles makes it more difficult for someone to get from Point A to Point B.

So a relevant question is whether proposed regulations generate enough benefits to justify the added expense (I’m generally skeptical, but those are empirical matters).

But there’s another question we should ask, which is why governments create new rules and red tape in the first place?

• Are they genuinely trying to solve problems?
• Are they responding to “public choice” pressures?
• Are they trying to control and limit behavior?

Those are all plausible explanations.

But one thing that never occurred to me is that we may get more regulation if we live in a state or nation with lots of people.

That’s a topic that James Bailey, James Broughel, and Patrick A. McLaughlin investigated in a new study from the Mercatus Center. Here’s a description of their methodology.

…very few academic studies have advanced scholars’ understanding of the relationship between regulation and population. This article is intended to help fill this gap in the literature. We aim to test whether this population-regulation connection holds using more recent, more refined, and more comprehensive measures of regulation. …This study is the first to use RegData to measure why some polities are more regulated than others, the first to use the full State RegData (released in October 2019) for any econometric analysis, and the first to combine federal and state RegData for the United States with RegData datasets for other countries (Australia and Canada).

Here is some of the key data from the United States, Canada, and Australia.

The United States has about an order of magnitude more people than Canada, along with about an order of magnitude more regulatory restrictions than Canada. Conversely, Australia is less populous than Canada but has nearly twice as many regulatory restrictions. On a per capita basis, Canada, with only 0.0023 restrictions per capita for the entire time period examined, appears somewhat less regulated than the United States (at about 0.0032 restrictions per capita) and significantly less regulated than Australia (whose restrictions per capita rise from about 0.0053 in 2005 to a peak of 0.0095 in 2012, and taper slightly to 0.0092 in 2018). We note, however, that both the Canadian and the Australian regulatory systems are fairly decentralized compared to that of the United States, delegating a considerable amount of autonomy and authority to provincial governments.

The study includes some interesting charts.

First, we see that there are a lot more regulatory restrictions in the United States than in Canada and Australia.

Though if you adjust for population size, Australia has the most red tape.

Kudos to Canada for having the lowest level of red tape, both in absolute terms and in per-capita terms. As I wrote a few years ago, there are many Canadian policies we should emulate.

One common feature of the U.S., Canada, and Australia is that all three nations have some degree of federalism, which means that some government policies are handled at the state/provincial level.

And this means the Mercatus study has another way of measuring the relationship between population and red tape. In the United States, we learn that more people means more regulations.

Figure 3 compares the 2000 population and 2018 regulatory restriction counts of 46 US states and the District of Columbia. We see a strong positive correlation between population and regulatory restrictions. Running a basic linear regression with no controls, we find that, on average, an increase in population of 1,000 people is associated with a statistically significant increase of 9 regulatory restrictions. …we next take the log of both population and regulatory restrictions and run a simple linear regression on these variables…which show that, on average, a 10 percent increase in population is associated with a 3.27 percent increase in regulatory restrictions.

Here’s the relevant chart from the study.

Congratulations to South Dakota for having the lowest level of red tape (the state also scores well on fiscal policy).

Canada and Australia have fewer subnational governments, but the study finds a similar relationship between population size and regulatory restrictions.

While Canada and Australia do not have enough provinces to support proper regression analysis, Figures 4 and 5 plot their subnational populations against their subnational regulatory restrictions. The results are also suggestive of a positive population-regulation correlation.

Here’s the chart for Canada.

And here’s the chart for Australia.

The relationship between red tape and population isn’t a perfect fit, either in the U.S. or in the other two countries. But there certainly seems to be some level of correlation.

But why?

The authors offer some potential answers.

…we show that larger polities consistently have more regulation. This provides support for previous theoretical work that posited a fixed cost associated with regulating. Specifically, the fixed costs of establishing new bureaus, staffing them, and funding them to implement and enforce regulations may fall on a per capita basis with a larger population. In addition to the fixed cost explanation, Mulligan and Shliefer offer other alternative explanations for why regulation may increase with population levels…the scope of activities to regulate becomes larger as population increases.

Sounds like we should turn the 50 states into 500 states (to help ensure good political outcomes, let’s leave California, New York, and Illinois alone and subdivide the libertarian-leaning states).

Not only would we get less red tape, we’d also benefit from additional regulatory diversity and additional regulatory competition.

P.S. Our friends on the left want to go in the opposite direction, favoring global regulation.

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More Red Tape = More Corruption

Back in 2014, I shared a World Bank study that measured how tax complexity facilitates more corruption by government officials.

Not that anyone should have been surprised. Complex tax codes enable politicians to extort bribes when writing the law (a problem that definitely exists in Washington) and they makes it possible for bureaucrats to extort bribes when administering the system.

Now the World Bank has a new study showing how a larger regulatory burden enables and facilitates corruption.

The two authors, Mohammad Amin and Yew Chong Soh, wanted to use better types of data to get an accurate assessment of the problem.

Business regulations often create opportunities for public officials to collect bribes… If true, this simple insight provides a practical and powerful way for deregulation to combat corruption and its many harmful effects on the economy. …Regulation is often measured by laws on the books rather than the actual regulatory burden on the firms even though it is the latter that is the primary determinant of corruption… The present paper attempts to fill this gap in the literature by using firm-level survey data on the actual corruption and regulatory burden experienced by the firms. …the public choice theory, stresses that regulation is intended to create rents to be distributed between the industry incumbents and the corrupt public officials. In some cases, the main beneficiary of regulation is the industry (regulatory capture view) while in others, it is the politicians and public officials (tollbooth view). …The present paper contributes to the…literature in several ways. …most previous studies have used perceived corruption indices…we depart from the literature by using firms’ experience with corruption instead. … for regulation, we use the actual regulatory burden experienced by the firms rather than rules on the books. This is an important departure from the literature.

For those not familiar with the term, “public choice” refers to research on the self-interested behavior of people in government.

Anyhow, prior research already showed that red tape gave politicians and bureaucrats the ability to extort money from the private economy.

…several studies analyze the possible effects of regulation on corruption. Using macro-level data for a cross-section of 85 countries in 1999, Djankov et al. (2002) look at the relationship between entry regulations and the level of corruption. …Consistent with the tollbooth view, the study finds strong evidence of higher corruption associated with heavier regulation of businesses. Using data from three worldwide firm surveys, Kaufmann and Wei (2000) confirm that when bribe-extracting bureaucrats can endogenously choose regulatory burden and delay, the effective (not just nominal) red tape and bribery can be positively correlated across firms.

The results in the new World Bank study build on the earlier research and confirm (as I noted in a video more than 10 years ago) more power for government means more corruption by government.

Our results show a large positive impact of the regulatory burden on the level of overall corruption as well as petty corruption. For the baseline specification, the overall bribery rate (bribes as percentage of firms’ annual sales) rises by about 0.03 percentage point for each percentage point increase in the regulatory burden. …The results show that irrespective of the set of controls, there is a large positive relationship between Overall Corruption and Time Tax… That is, for each percentage point increase in the regulatory burden, the overall bribe rate increases by 0.028 percentage point. Alternatively, an increase in regulatory burden from its minimum to maximum level leads to 2.8 percentage points increase in the level of overall corruption. This is a large increase given that the mean level of overall corruption equals about 1.1 percent.

By the way, “time tax” is defined as “the average of the percentage of senior management’s time spent in dealing with business regulations”

Here’s a graphic from the study for those of you who like digging into the empirical details.

P.S. The World Bank also released a study last year showing how more regulation reduces business productivity. Needless to say, that ultimately translates into lower wages for workers.

P.P.S. I’ve been asked why the World Bank seems friendlier to good policy than either the International Monetary Fund or Organization for Economic Cooperation and Development. I point out that it’s not uncommon to see quality work from the professional economists at all international bureaucracies, even the IMF and OECD. But the World Bank seems to have a higher percentage of quality research. My guess it that this is a result of its focus on poverty alleviation.

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Red Tape and Corruption

When I wrote last month about the Green New Deal, I warned that it was cronyism on steroids.

Simply stated, the proposal gives politicians massive new powers to intervene and this would be a recipe for staggering levels of Solyndra-style corruption.

Well, the World Bank has some new scholarly research that echoes my concerns. Two economists investigated the relationship with the regulatory burden and corruption.

Empirical studies such as Meon and Sekkat (2005) and De Rosa et al. (2010) show that corruption is more damaging for economic performance at higher levels of regulation or lower levels of governance quality. …Building on the above literature, in this paper, we use firm-level survey data on 39,732 firms in 111 countries collected by the World Bank’s Enterprise Surveys between 2009 and 2017 to test the hypothesis that corruption impedes firm productivity more at higher levels of regulation. …estimate the model using sample weighted OLS (Ordinary Least Squares) regression analysis.

And what did they discover?

We find that the negative relationship between corruption and productivity is amplified at high levels of regulation. In fact, at low levels of regulation, the relationship between corruption and productivity is insignificant. …we find that a 1 percent increase in bribes that firms pay to get things done, expressed as the share of annual sales, is significantly associated with about a 0.9 percent decrease in productivity of firms at the 75th percentile value of regulation (high regulation). In contrast, at the 25th percentile value of regulation (low regulation), the corresponding change is very small and statistically insignificant, though it is still negative. …after we control for investment, skills and raw materials, the coefficients of the interaction term between corruption and regulation became much larger… This provides support for the hypothesis that corruption is more damaging for productivity at higher levels of regulation.

Lord Acton famously wrote that “power corrupts, and absolute power corrupts absolutely.”

Based on the results from the World Bank study, we can say “regulation corrupts, and added regulation corrupts additionally.”

Not very poetic, but definitely accurate.

Figure 4 from the study shows this relationship.

Seems like we need separation of business and state, not just separation of church and state.

This gives me a good excuse to recycle this video I narrated more than 10 years ago.

P.S. Five years ago, I cited a World Bank study showing that tax complexity facilitates corruption. Which means a simple and fair flat tax isn’t merely a way of achieving more prosperity, it’s also a way of draining the swamp.

The moral of the story – whether we’re looking at red tape, taxes, spending, trade, or any other issue – is that smaller government is the most effective way of reducing sleaze and corruption.

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The Economic Benefits of Reducing the Regulatory Burden

When I assess President Trump’s economic policy, I generally give the highest grade to his tax policy.

But as I pointed out in this interview from last year, there’s also been some progress on regulatory policy, even if only in that the avalanche of red tape we were getting under Bush and Obama has abated.

But perhaps I need to be even more positive about the Trump Administration.

For instance, I shared a graph last year that showed a dramatic improvement (i.e., a reduction) in the pace of regulations under Trump.

For all intents and purposes, this means the private sector has had more “breathing room” to prosper. Which means more opportunity for jobs, growth, investment, and entrepreneurship.

To what extent can we quantify the benefits?

Writing for the Washington Post, Trump’s former regulatory czar said the administration has lowered the cost of red tape, which is a big change from what happened during the Obama years.

Over the past two years, federal agencies have reduced regulatory costs by $23 billion and eliminated hundreds of burdensome regulations, creating opportunities for economic growth and development. This represents a fundamental change in the direction of the administrative state, which, with few exceptions, has remained unchecked for decades. The Obama administration imposed more than $245 billion in regulatory costs on American businesses and families during its first two years. The benefits of deregulation are felt far and wide, from lower consumer prices to more jobs and, in the long run, improvements to quality of life from access to innovative products and services. …When reviewing regulations, we start with a simple question: What is the problem this regulation is trying to fix? Unless otherwise required by law, we move forward only when we can identify a serious problem or market failure that would be best addressed by federal regulation. These bipartisan principles were articulated by President Ronald Reagan and reaffirmed by President Bill Clinton, who recognized that “the private sector and private markets are the best engine for economic growth.”

But how does this translate into benefits for the American people?

Let’s look at some new research from the Council of Economic Advisers, which estimates the added growth and the impact of that growth on household income.

Before 2017, the regulatory norm was the perennial addition of new regulations.Between 2001 and 2016, the Federal government added an average of 53 economically significant regulations each year. During the Trump Administration, the average has been only 4… Even if no old regulations were removed, freezing costly regulation would allow real incomes to grow more than they did in the past, when regulations were perennially added… The amount of extra income from a regulatory freeze depends on (1) the length of time that the freeze lasts and (2) the average annual cost of the new regulations that would have been added along the previous growth path. …In other words, by the fifth year of a regulatory freeze, real incomes would be 0.8 percent (about $1,200 per household in the fifth year) above the previous growth path. …As shown by the red line in figure 3, removing costly regulations allows for even more growth than freezing them. As explained above, the effect, relative to a regulatory freeze, of removing 20 costly Federal regulations has been to increase real incomes by 1.3 percent. In total, this is 2.1 percent more income—about $3,100 per household per year—relative to the previous growth path.

Here’s the chart showing the benefits of both less regulation and deregulation.

The chart makes the change in growth seem dramatic, but the underlying assumptions aren’t overly aggressive.

What you’re seeing echoes my oft-made point that even modest improvements in growth lead to meaningful income gains over time.

P.S. My role isn’t to be pro-Trump or anti-Trump. Instead, I praise what’s good and criticize what’s bad. While Trump gets a good grade on taxes and an upgraded positive grade on regulation, don’t forget that he gets a bad grade on trade, a poor grade on spending, and a falling grade on monetary policy.

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Falling Red Tape = Rising Economic Growth

I was not optimistic about a Trump presidency. Before the 2016 election, I characterized him as a “statist” and a “typical big-government Republican.”

I’ve also criticized his policies on entitlements, trade, child care, capital gains taxation, government spending, and infrastructure.

But one good thing about being libertarian is that I feel no pressure to spin. I will criticize politicians who I normally like and praise politicians I normally dislike.

So I’ve also applauded some of Trump’s policies, whether they are big reforms like a cut in the corporate income tax or small changes like killing Obama’s Operation Chokepoint.

Today, I’m going to give Trump some credit for what’s happening with regulation and red tape.

Wayne Crews of the Competitive Enterprise Institute measures the change.

The calendar year concluded with 61,950 pages in the Federal Register… This is the lowest count since 1993’s 61,166 pages. …A year ago, Obama set the all-time Federal Register page record with 95,894 pages. Trump’s Federal Register is a 35 percent drop from Obama’s record… After the National Archives processes all the blank pages and skips in the 2017 Federal Register, Trump’s final count will ultimately be even lower.

Here’s a visual that captures what has happened.

Wayne explains that the numbers of rules have dropped in addition to the number of pages.

…the Federal Register may be a poor guide for regulation… The “problem” of assessing magnitude is even worse this year, because many of Trump’s “rules” are rules written to get rid of rules. …There has also been a major reduction in the number of rules and regulations under Trump. Today the Federal Register closed out with 3,281 final rules within its pages. This is the lowest count since records began being kept in the mid-1970s.

Susan Dudley of George Washington University looked at what’s happening to regulation for Forbes.

…what has the administration achieved on the regulatory front in 2017? …President Trump issued Executive Order 13771 directing federal agencies to remove two regulations for every new one they issued, and to cap the total cost of new regulations at zero. …An Office of Management and Budget report…finds that during the first eight months of the administration (through September 30th), executive agencies issued 67 deregulatory actions and only 3 significant regulatory actions. …More meaningful is the report’s estimate that these actions will save Americans more than $570 million per year on net. …This was the year of the Congressional Review Act. Working with the Republican Congress, President Trump has disapproved 15 regulations, most issued at the end of the Obama administration.

She looks specifically at regulations that involve a lot of money.

The pace of new regulation has visibly slowed in the Trump administration. A search of OMB’s database reveals that, between January 21 and December 20, 2017, the Office of Information and Regulatory Affairs concluded review of 21 “economically significant” regulations—those with impacts (costs or benefits) expected to be $100 million or more in a year. As the chart below shows, that is dramatically fewer rules than previous presidents have issued in their first years.

Here’s an impressive chart from her column.

And here’s most impressive part. Some of these “significant” rules are actually designed to reduce red tape.

…a further breakdown of those 21 economically significant actions this year: …Three are classified as “regulatory,” including two from HHS and one from the IRS. …Four are “deregulatory,” including three HHS rules as well as the congressionally-disapproved FAR rule mentioned earlier.

So what does this shift in regulation mean?

Well, as the New York Times has just reported, less red tape is good for the economy.

A wave of optimism has swept over American business leaders, and it is beginning to translate into the sort of investment in new plants, equipment and factory upgrades that bolsters economic growth, spurs job creation — and may finally raise wages significantly. …the newfound confidence was initially inspired by the Trump administration’s regulatory pullback, not so much because deregulation is saving companies money but because the administration has instilled a faith in business executives that new regulations are not coming.

I fully agree with this point.

What seems to be helping growth is that companies are getting some “breathing room” simply because the regulatory onslaught of the Bush and Obama years has finally abated.

…in the administration and across the business community, there is a perception that years of increased environmental, financial and other regulatory oversight by the Obama administration dampened investment and job creation — and that Mr. Trump’s more hands-off approach has unleashed the “animal spirits” of companies that had hoarded cash after the recession of 2008. …with tax cuts coming and a generally improving economic outlook, both domestically and internationally, economists are revising growth forecasts upward for last year and this year. Even before it became clear that Republicans would pass a major tax cut, capital spending had risen significantly, climbing at an annualized rate of 6.2 percent during the first three quarters of last year. Surveys of planned spending also show increases. …business executives are largely convinced that the cost of complying with rules diverts money that could be invested elsewhere. And economists see a plausible connection between Mr. Trump’s determination to prune the federal rule book and the willingness of businesses to crank open their vaults. Measures of business confidence have climbed to record heights during Mr. Trump’s first year. …The Business Roundtable, a corporate lobbying group in Washington, reported last month that “regulatory costs” were no longer the top concern of American executives, for the first time in six years. …The National Association of Manufacturers’ fourth-quarter member survey found that fewer than half of manufacturers cited an “unfavorable business climate” — including regulations and taxes — as a challenge to their business, down from nearly three-quarters a year ago.

The bottom line is that Trump has out-performed my expectations on this issue.

But I don’t care about that. I’m more interested in a freer and more prosperous America.

So when you’re contemplating the shift in regulatory policy, here are a few factoids.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”
• The European Central Bank estimated that product market and employment regulation has led to costly “misallocation of labour and capital in eight macro-sectors.”

Red tape accounts for 20 percent of a nation’s grade according to Economic Freedom of the World. If the current deregulatory momentum is sustained, the United States will rise in the rankings and Americans will be richer.

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Will Republicans Drain the Regulatory Swamp?

On major economic issues, it does not appear that Republican control of Washington makes much of a difference.

• Efforts to repeal Obamacare have bogged down because GOPers are willing to deal with the fiscal wreckage of that law, but don’t seem very comfortable about undoing the interventions and regulations that have caused premiums to skyrocket.
• Efforts to cut taxes and reform the tax code don’t look very promising because House Republicans have proposed a misguided border-adjustment tax and the White House seems hopelessly divided on how to proceed.
• Efforts to restrain government spending haven’t gotten off the ground. A full budget is due next month, but it’s not overly encouraging that Trump’s proposed domestic cuts would be used to expand the Pentagon’s budget.

Let’s see whether we get a different story when we examine regulatory issues.

We’ll start with some good news? Well, sort of. It seems the United States has the largest and 4th-largest GDPs in the world.

You may think that makes no sense, but this is where we have to share some bad news on the regulatory burden from the Mercatus Center.

Economic growth has been reduced by an average of 0.8 percent per year from 1980 to 2012 due to regulatory accumulation. Regulations force companies to invest less in activities that enhance productivity and growth, such as research and development, as companies must divert resources into regulatory compliance and similar activities. …Compared to a scenario where regulations are held constant at levels observed in 1980, the study finds that the difference between the economy we are in and a hypothetical economy where regulatory accumulation halted in 1980 is approximately $4 trillion. …The $4 trillion dollars in lost GDP associated with regulatory accumulation would be the fourth largest economy in the world—larger than major countries like Germany, France, and India.

By the way, this data from Mercatus gives me an opportunity to re-emphasize the importance of even small variations in economic growth. It may not make that much difference if the economy grows 0.8 percent faster or slower in one year.

But, as just noted, a loss of 0.8 percent annual growth over 32 years has been enormously expensive to the U.S. economy.

The Competitive Enterprise Institute has a depressing array of data on America’s regulatory burden. Here’s the chart that grabbed my attention.

And here’s a video on the burden of red tape from the folks at CEI.

Who deserves the blame for this nightmare of red tape?

The previous president definitely added to the regulatory morass. The Hill reported last year on a study by the American Action Forum.

The Obama administration issues an average of 81 major rules, those with an economic impact of at least $100 million, on a yearly basis, the study found. That’s about one major rule every four to five days, or, as the American Action Forum puts it, one rule for every three days that the federal government is open. “It is a $2,294 regulatory imposition on every person in the United States,” wrote Sam Batkins, director of regulatory policy at the American Action Forum, who conducted the study.

And there was a big effort to add more red tape in Obama’s final days, as noted by Kimberly Strassel of the Wall Street Journal.

Since the election Mr. Obama has broken with all precedent by issuing rules that would be astonishing at any moment and are downright obnoxious at this point. This past week we learned of several sweeping new rules from the Interior Department and the Environmental Protection Agency, including regs on methane on public lands (cost: $2.4 billion); a new anti-coal rule related to streams ($1.2 billion) and renewable fuel standards ($1.5 billion).

As you might expect, the net cost of Obama’s regulatory excess is significant. Here’s some of what the Washington Examiner wrote during the waning days of Obama’s tenure.

According to new information from the White House, finally released after a two year wait, the total burden of federal government paperwork is more than 11.5 billion man-hours a year. That’s almost 500 million man-days, or 1.3 million man-years. More importantly, it’s 35 hours every person in the country (on average) has to spend doing federal paperwork every year, on average. …Time is money, and paperwork time alone costs the country almost $2 trillion a year, or about 11 percent of GDP.

But it’s not solely Obama’s fault. Not even close.

Both parties can be blamed for this mess, as reported by the Economist.

The call to cut red tape is now an emotive rallying cry for Republicans—more so, in the hearts of many congressmen, than slashing deficits. Deregulation will, they argue, unleash a “confident America” in which businesses thrive and wages soar, leaving economists, with their excuses for the “new normal” of low growth, red-faced. Are they right?

They may be right, but they never seem to take action when they’re in charge.

Between 1970 and 2008 the number of prescriptive words like “shall” or “must” in the code of federal regulations grew from 403,000 to nearly 963,000, or about 15,000 edicts a year… The unyielding growth of rules, then, has persisted through Republican and Democratic administrations… The endless pile-up of regulation enrages businessmen. One in five small firms say it is their biggest problem, according to the National Federation of Independent Business.

Though I would point out that President Reagan was the exception to this dismal rule.

That being said, who cares about finger pointing? What matters is that the economy is being stymied by excessive red tape.

So what can be done about this? President Trump has promised a 2-for-1 deal, saying that his Administration will wipe out two existing regulations for every new rule that gets imposed.

Susan Dudley opines on this proposal, noting that Trump hasn’t put any meat on the bones.

Like pebbles tossed in a stream, each individual regulation may do little economic harm, but eventually the pebbles accumulate and like a dam, may block economic growth and innovation. A policy of removing two regulations for every new one would provide agencies incentives to evaluate the costs and effectiveness of those accumulated regulations and determine which have outlived their usefulness. Mr. Trump’s statement doesn’t provide details on how this new policy would work.

Ms. Dudley points out, however, that other nations have achieved some success with similar-sounding approaches.

…his team could look to experiences in other countries for insights. The Netherlands, Canada, Australia and the United Kingdom have all adopted similar requirements to offset the costs of new regulations by removing or modifying existing rules of comparable or greater effect. …The Netherlands program established a net quantitative burden reduction target that reduced regulatory burdens by 20% between 2003 and 2007. It is currently on track to save €2.5 billion in regulatory burden between 2012 and 2017 by tying the introduction of new regulations “to the revision or scrapping of existing rules.” Under Canada’s “One-for-One Rule,” launched in 2012, new regulatory changes that increase administrative burdens must be offset with equal burden reductions elsewhere. Further, for each new regulation that imposes administrative burden costs, cabinet ministers must remove at least one regulation. Similarly, Australia’s policy is that “the cost burden of new regulation must be fully offset by reductions in existing regulatory burden.” The British began with a “One-in, One-out” policy, requiring any increases in the cost of regulation to be offset by deregulatory measures of at least an equivalent value. In 2013, it moved to “One-in, Two-out” (OITO) and more recently to a “One-in, Three-out” policy in an effort to cut red tape by £10 billion.

The bottom line is that progress will depend on Trump appointing good people. And on that issue, the jury is still out.

The legislative branch also could get involved.

In a column for Reason, Senator Rand Paul explained that the REINS Act could make a big difference.

…13 of the 15 longest registers in American history have been authored by the past two presidential administrations (Barack Obama owns seven of the top eight, with George W. Bush filling in most of the rest)…federal lawmakers should pass something called the REINS Act—the “Regulations from the Executive in Need of Scrutiny Act. The REINS Act would require every new regulation that costs more than $100 million to be approved by Congress. As it is now, agencies can pass those rules unilaterally. Such major rules only account for about 3 percent of annual regulations, but they are the ones that cause the most headaches for individuals and businesses. …the REINS Act did pass the House on four occasions during the Obama administration. Lack of support in the Senate and the threat of a presidential veto kept it from ever reaching Obama’s desk.

But would it make a difference if Congress had to affirm major new rules?

Given how agencies will lie about regulatory burdens, it wouldn’t be a silver bullet.

But,based on the hysterical opposition from the left, I’m betting the REINS Act would be very helpful.

REINS would fundamentally alter the federal government in ways that could hobble federal agencies during periods when the same party controls Congress and the White House — and absolutely cripple those agencies during periods of divided government. Many federal laws delegate authority to agencies to work out the details of how to achieve relatively broad objectives set by the law itself. …REINS, however, effectively strips agencies of much of this authority.

That sounds like good news to me. If the crazies at Think Progress are this upset about the REINS Act, it must be a step in the right direction.

Let’s close with a bit of evidence that maybe, just maybe, Republicans will move the ball in the right direction. Here are some excerpts from a Bloomberg story.

The White House estimates it will save $10 billion over 20 years by having rescinded 11 Obama-era regulations under a relatively obscure 1996 law that lets Congress fast-track repeal legislation with a simple majority. …In all, the law has been used to repeal 11 rules, with two more awaiting the president’s signature… About two dozen measures with CRA’s targeting them remain, but because the law can only be used on rules issued in the final six months of the previous administration, Congress only has only a few more weeks to use the procedure.

Before getting too excited, remember that the annual cost of regulation is about $2 trillion and the White House is bragging about actions that will reduce red tape by $10 billion over two decades. Which means annual savings of only $500 million.

Which, if my math is right, addresses 0.025 percent of the problem.

I’ll take it, but it should be viewed as just a tiny first step on a very long journey.

P.S. The Congressional Review Act was signed into law by Bill Clinton. Yet another bit of evidence that he was a surprisingly pro-market President.

P.P.S. If you want some wonky analysis of regulation, I have some detailed columns here, here, here, here, here, here, and here.

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Regulation Nation

If you look at the methodology behind the major measures of economic liberty, such as Economic Freedom of the World and Index of Economic Freedom, you’ll notice that each nation’s regulatory burden is just as important as the overall fiscal burden.

Yet there doesn’t seem to be adequate appreciation for the importance of restraining red tape. I’ve tried to highlight the problem with some very depressing bits of information.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”

Unfortunately, these bad numbers are getting worse.

We start with the fact that there’s a natural tendency for more intervention in Washington because of the Obama Administration’s statist orientation.

That’s the bad news. The worse news is that this tendency to over-regulate is becoming more pronounced as Obama’s time in office is winding down.

I’ve already opined on the record levels of red tape emanating from Washington, but it’s getting even worse in the President’s final year.

Here’s what the Wall Street Journal recently wrote about the regulatory wave.

…government-by-decree that is making Mr. Obama the most prolific American regulator of all time. Unofficially, Mr. Obama’s Administration has once again broken its own record by issuing a staggering 82,036 pages of new and proposed rules and instructions in the Federal Register in 2015. …That would not only eclipse Mr. Obama’s record of 81,405 set in 2010; it would also give him six of the seven most prolific years of regulating in the history of the American republic. He’s a champion when it comes to limiting economic freedom, and American workers have the slow growth in jobs and wages to prove it. …His Administration is also in a class by itself in issuing de facto rules as “notices” or “guidance” that are ignored by businesses at their peril. …And there’s much more to come.

Amen. The WSJ is correct to link the regulatory burden with anemic economic performance.

As I point out in this interview, red tape is akin to sand in the economy’s gears.

By the way, I can’t resist emphasizing that the Nordic nations, much beloved by Bernie Sanders and other leftists, generally are more free market than the United States on non-fiscal issues.

In other words, they have a more laissez-faire approach on matters such as regulation.

Now let’s try to quantify the cost of all this red tape.

The Washington Examiner reports on some new research.

The price of the Obama administration’s regulatory burden hit just shy of $200 billion last year, or $784 million for every day his government was open for business, according to a new analysis by American Action Forum.

To make matters worse, as I noted in the interview, I very much suspect the bulk of that new regulation was not accompanied by cost-benefit analysis. So the supposed benefits will be small and the actual costs will be high.

Let’s move from the general to the specific. The Heritage Foundation has a list of the worst regulations from last year. Here are some of the highlights, though lowlights would be a better term.

• …a ban by New Jersey on sales of tombstones by churches — adopted in March at the behest of commercial monument makers.
• Certain New York restaurants now have to include warnings on their menus about the sodium content in many popular dishes.
• The Occupational Safety and Health Administration…expanded its mandate in June by declaring that businesses should allow employees to use whichever restroom corresponds to their “gender identity.”
• …the Environmental Protection Agency and Army Corps of Engineers expanded their own jurisdiction to regulate virtually every wet spot in the nation.

And there are plenty more if you really want to get depressed.

But let’s not dwell on bad news. Instead, we’ll close by highlighting a potentially helpful bit of regulatory reform north of the border. Here are some blurbs from a story in the Washington Examiner.

…look to Canada for lessons from its experiment with regulatory budgeting. What is regulatory budgeting? It’s a process that seeks to use traditional budget concepts to better manage regulatory costs. The goal is to require government departments and agencies to prioritize and manage “regulatory expenditures,”… Regulatory budgeting imposes hard caps on departments and agencies and requires that new regulatory policies fit within their respective budgets. It may not be a silver bullet to the U.S. government’s regulatory profligacy, but with strong political leadership and a proper design, it can arrest the growth of new regulations and bring greater accountability, discipline and transparency to the process. …Departments and agencies are given a “baseline” calculation of regulatory requirements and the costs they impose on individuals and businesses, and then are expected to live within their respective budgets. This means — at least, in the case of the federal experiment — that any new regulatory requirements be offset by eliminating existing ones with equivalent “costs.” An independent, third-party panel verifies the government’s year-over-year compliance.

And it appears this new system is yielding dividends.

Over the past two years, the federal government estimates the system has saved Canadian businesses more than C$32 million in administrative burden, as well as 750,000 hours spent dealing with “red tape.” Most importantly, regulatory budgeting has gradually contributed to a more disciplined regulatory process by rewarding departments and agencies for finding lower-cost options and for making existing requirements smarter and less burdensome.

Hmmm…, maybe I should consider escaping to Canada rather than Australia if (when?) America falls apart.

In addition to this sensible approach on regulatory reform, Canada is now one of the world’s most economically free nations thanks to relatively sensible policies involving spending restraint, corporate tax reform, bank bailouts, the tax treatment of saving, and privatization of air traffic control. Heck, Canada even has one of the lowest levels of welfare spending among developed nations.

Though things are now heading in the wrong direction, which is unfortunate for our northern neighbors.

P.S. While the regulatory burden in the United States is stifling and there are some really inane examples of silly rules (such as the ones listed above), I think Greece and Japan win the record if you want to identify the most absurd specific examples of red tape.

P.P.S. Though I suspect America wins the prize for worst regulatory agency and most despicable regulatory practice.

P.P.P.S. Here’s what would happen if Noah tried to comply with today’s level of red tape when building an ark.

P.P.P.P.S. Just in case you think regulation is “merely” a cost imposed on businesses, don’t forget that bureaucratic red tape is the reason we’re now forced to use inferior light bulbs, substandard toilets, second-rate dishwashers, and inadequate washing machines.

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The Regulatory State Grew to Record Levels in 2015, and the Red-Tape Burden Will Get even Worse in 2016

For those of us worried (with good reason!) about excessive regulation and red tape, 2015 was not a good year.

As you can see from the headline of this story in the Washington Examiner, federal bureaucrats were very busy imposing new mandates and restrictions on the economy. Indeed, President Obama now has the cumulative record for red tape.

That’s obviously good news for compliance bureaucrats, lawyers, and others who get fat and happy because of the regulatory state. But it can’t be good for growth and competitiveness to have all that sand thrown into the gears of the economy.

And to put the numbers in context, here’s a chart from the folks at the Competitive Enterprise Institute. On the left side, it shows the biggest red-tape year for every President before Obama. And then on the right side, it shows how Obama is consistently meeting or exceeding prior records.

All this bad news might be somewhat bearable if there was some reason to think we were turning a corner and that the worst was behind us.

Unfortunately, that’s not the case. Let’s now share another headline, this time from a report in The Hill.

The bottom line is that the Obama Administration is openly excited about the prospect of building upon the President’s dubious red-tape record.

Though I guess we shouldn’t be surprised. If you read the story, you’ll see that next year will be a perfect storm of pro-regulation bureaucrats being egged on by Obama’s regulatory appointees who see 2016 as their last chance to impose additional red tape on the economy’s productive sector.

But the private sector will become less dynamic as we become more like Greece. Here are some very depressing bits of information I’ve shared in the past.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”

P.S. While the regulatory burden in the United States is stifling, I think Greece and Japan win the record if you want to identify the most absurd specific examples of red tape.

P.P.S. Though I suspect America wins the prize for worst regulatory agency and most despicable regulatory practice.

P.P.P.S. Here’s what would happen if Noah tried to comply with today’s level of red tape when building an ark.

P.P.P.P.S. Just in case you think regulation is “merely” a cost imposed on businesses, don’t forget that bureaucratic red tape is the reason we’re now forced to use inferior light bulbs, substandard toilets, second-rate dishwashers, and inadequate washing machines.

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More Regulation: Bad for Jobs and Entrepreneurship, Good for Corporate Cronies

When people think about government regulation, it’s understandable that they focus on things that impact their everyday lives.

Most of us, for instance, are irked by government’s war against modern life. Bureaucratic pinheads in Washington think they have the right to plague us with crummy dishwashers, inferior light bulbs, substandard toilets, and inadequate washing machines.

But what matters more is the way that onerous regulation throws sand in the gears of the economy, slowing growth and undermining job creation. And no matter how you slice the data, there’s no escaping the conclusion that American competitiveness is suffocating because of red tape and regulation from Washington.

Here are some very depressing bits of information I’ve shared in the past.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• The Obama Administration added $236 billion of red tape in 2012 alone.
• A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”

So what’s President Obama’s plan to deal with this regulatory morass?

Well, he wants to make matters worse. I’m not joking. Here are some excerpts from a report in The Hill.

President Obama is moving to complete scores of regulations as he looks to cement key parts of his legacy… The White House quietly released its formal rulemaking schedule late last week, revealing the administration’s latest plans for regulations currently in the works at agencies across the federal government. …Obama has no intentions of slowing down the process during his final year in office. …Critics, however, say the President has already issued far too many burdensome regulations. …the administration has finalized about one rule a day since Obama took office and estimates the compliance costs associated with those rules to total about $700 billion.

What makes this so depressing is that the Mercatus Center has new research showing that the regulatory burden is especially harmful to entrepreneurs and small businesses.

Here are some of the findings from this new study.

…a 10 percent increase in the intensity of regulation as measured by the RegData index leads to a statistically significant 0.5 percent decrease in overall firm births. …regulation deters hiring overall. A 10 percent increase in regulation is associated with a statistically significant 0.9 percent decrease in hiring. …Regulation leads to a statistically significant reduction in hiring and firm births for firms overall and for small firms. …our results suggest that from 1998 to 2011, increased federal regulation reduced the entry of new firms by 1.2 percent and reduced hiring by 2.2 percent. That result implies that returning to the level of regulation in effect in 1998 would lead to the creation of 30 new firms and the hiring of 530 new employees every year for an average industry.

So who benefits from red tape?

Other than bureaucrats and lobbyists, the big winner is big business.

…we find that large incumbents are actually less likely to die when their industry becomes more regulated. That finding suggests that incumbents, in particular, benefit from increasing levels of regulation and provides support for the idea that incumbents might actively seek increasing regulation to deter entry and limit competition (consistent with capture theory).

The good news is that a growing number of people are recognizing the need to deal with excessive regulation.

I don’t think many people would accuse Professor Noah Smith of Stony Brook University of being a libertarian, yet he makes a strong case for regulatory relief in a recent Bloomberg column.

Republicans should stop focusing so much on taxes and devote more attention to deregulation. …Although it’s very difficult to measure the amount of regulation across the economy, there are more and more areas that are cause for concern. For example, the scope of occupational licensing, which economists mostly believe is a drag on growth, is startling, and seems to have no good reason behind it. …Another concern is environmental regulation…local development opponents are often able to use costly environmental reviews to block needed infrastructure. A third area is zoning. As the incentives for density have risen, zoning regulation has become an increasing burden on growth.

He lists additional items, such as the approval process at the FDA for new drugs and all the Byzantine red tape required by the Sarbanes-Oxley law, and he also makes the very important point that cost-benefit analysis is necessary since not all regulations are created equal.

So what’s the solution to this mess?

Research from the folks at Mercatus points to some possible solution.

First and foremost, cut the budgets for regulatory agencies. If there’s less money, there will be fewer bureaucrats with fewer resources.

Here’s a very persuasive chart from a Mercatus report showing the correlation between regulatory budgets and the burden of red tape.

By the way, notice how regulatory spending exploded during the Bush years. Yet another bit of data showing that statist Republicans can be even worse for the economy than statist Democrats.

But I’m digressing. Let’s now look at another potential way of reining in the regulatory state.

Another study from Mercatus looks at a policy in Canada that put an aggregate cap on red tape.

Canada recently became the first country in the world to legislate a cap on regulation. The Red Tape Reduction Act, which became law on April 23, 2015, requires the federal government to eliminate at least one regulation for every new one introduced. Remarkably, the legislation received near-unanimous support across the political spectrum: 245 votes in favor of the bill and 1 opposed.

The nationwide legislation was based on an experiment in British Columbia.

When the BC government first introduced the Reform Policy in 2001, two regulatory requirements had to be eliminated for every one introduced. …today the policy calls for eliminating one requirement for every new one introduced. …requiring regulators to…eliminate…regulatory requirements for every new one introduced represented a dramatic change in thinking about regulation in BC: It put the onus on the government to…reduce the total amount of regulation.

And this policy apparently was very successful.

There is no question that BC’s economic performance improved markedly after 2001 in contrast to the “dismal decade” of the 1990s. The province went from being one of the worst performing in the country to being among the best. …economic growth in BC was 1.9 percentage points below the Canadian average between 1994 and 2001 but 1.1 percentage points above the Canadian average between 2002 and 2006. BC’s real GDP growth was lower than Canada’s as a whole in six of the nine years between 1992 and 2000, but BC’s GDP grew faster than Canada’s every year between 2002 and 2008.

What’s the key takeaway lesson?

Well, just as a spending cap is the right approach to fiscal policy, a regulatory cap also is the right way to deal with red tape.

…a hard cap on the total amount of regulatory requirements…has forced a discipline that did not previously exist, a discipline that has helped change the culture within government to one where regulators see their job as focusing on the most important rules.

Gee, what a radical idea. Requiring the folks in Washington to set priorities and make tradeoffs!

P.S. I guess we can add regulatory reform to our good-things-we-can-learn-from-Canada collection, along with spending restraint, corporate tax reform, bank bailouts, reducing double taxation, and privatization of air traffic control. Heck, Canada even has one of the lowest levels of welfare spending among developed nations.

P.P.S. Since we just reviewed research on how big corporations can benefit by supporting regulations that will disproportionately hurt their small competitors, you probably won’t be surprised to learn that some of those same big companies support tax hikes that will be especially damaging to small businesses.

P.P.P.S. While I suspect America wins the prize for worst regulatory agency and most despicable regulatory practice, Japan almost surely wins the prize for the oddest regulation.

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The Regulatory State’s War against Modern Life

When writing about the burden of regulation, I often share big numbers about aggregate cost, job losses, time wasted, and foregone growth.

But I sometimes wonder if such data is effective in the battle for good policy.

Maybe it’s better, at least in some cases, to focus on regulations that affect quality of life for regular people. Lots of ordinary citizens, for instance, are irked that they’re now forced to use inferior light bulbs, substandard toilets, and inadequate washing machines because of regulatory silliness from Washington.

And it looks like we’ll now be forced to use dishwashers that don’t clean dishes thanks to proposed regulations that will reduce water use (which is in addition to a 2012 regulation that already restricted water use).

The Hill reports on the Nanny State’s latest salvo in the war against modern civilization.

The Association of Home Appliance Manufacturers is accusing the Department of Energy (DOE) of a politically motivated drive to increase dishwasher efficiency standards, which are so bad that they would cause consumers to re-wash dishes, erasing any efficiency gains. Rob McAver, the group’s head lobbyist, said regulators are going too far and the new rules will allow only 3.1 gallons to be used to wash each load of dishes. …They then ran standard tests with food stuck to dishes. “They found some stuff that was pretty disgusting,” McAver said. …“The poor performance that would result would totally undercut and go backwards in terms of energy and water use, because of the need for running the dishwasher again, or pre-rinsing or hand-washing, which uses a lot of water,” he said.

Great, another bone-headed step by the government that will make life less enjoyable.

I’m already one of those people who rinse my dishes before putting them in the dishwasher because I hate the idea that they won’t be fully clean afterwards.

So I can only imagine how bad it will be if this absurd example of red tape is imposed and I have to buy a new dishwasher.

I guess I’ll just keep my fingers crossed that my current dishwasher doesn’t break down.

Especially since the rules make new dishwashers more expensive.

Ernest Istook, former Republican congressman from Oklahoma, wrote in a Washington Times piece that complying with the 2012 rule, based on DOE estimates, added roughly $44 to the cost of each machine. “Now their 2015 proposal will add another $99 to the price tag, even by DOE’s own admission,” he wrote.

Julie Borowski has the right assessment. Her column for Freedom Works is from 2012, but it’s very appropriate still today.

Are you disappointed in every shower head that you purchase? Does your toilet have trouble flushing? Have you noticed that your dishes are still dirty after the dishwasher cycle is completed? …Some of us may be quick to blame the manufacturer of these home appliances. But the manufacturers are just abiding by the costly regulations by the Environmental Protection Agency (EPA) and the Department of Energy.

What’s really frustrating is that these regulations reduce the quality of life without even reducing water usage.

…it has only led to people hacking their shower heads to remove the intrusion that is blocking water flow in order to have a more relaxing shower that actually gets them clean. There is no proof that the water restrictions have actually saved water because many people just end up taking longer showers than they otherwise would.

Amen. Every so often I wind up at a hotel with restricted-flow showerheads and it’s a hassle because I probably spend twice as long in the shower.

Not to mention problems government has created elsewhere in bathrooms.

…water restrictions are also the reason that our toilets have trouble flushing. Many of us have become accustomed to flushing the toilet multiple times before the toilet bowl is clear. The 1992 Energy Policy Act states that all toilets sold in the United States use no more than 1.6 gallons of water per flush. These water restrictions are the reason why we have to use plungers far more often than we used to.

I won’t torment readers with a TMI moment, but I will say that I now routinely flush at the halfway point when seated on a toilet. And even that doesn’t necessarily preclude a third flush at the end of the process.

The only good news is that this gives me a daily reminder that government has far too much power to micro-manage our lives.

Speaking of excessive government, here’s another example of the regulatory state run amok.

Perhaps you’ve heard of the federal milk police? Well, now we’ll have the federal pizza police, as explained by The Manhattan Institute.

Pizza makers could face fines and prison time under a new Food and Drug Administration rule for failing to provide calorie counts for their billions of combinations of pizza orders. …FDA’s menu labeling rule will go into effect on December 1st, 2016… If a company does not perfectly comply with the mandate, food may be rendered “misbranded” under the Federal Food, Drug, and Cosmetic Act, a violation that carries criminal penalties. Failure to comply with the regulation could lead to government seizure of food, a maximum $1,000 fine, and a one-year prison sentence. …Revising systems under strict compliance with the regulation’s guidelines is expected to cost Domino’s $1,600 to $4,700 per restaurant annually. In general, the rule is expected to cost businesses $537 million, losses that necessarily must be passed on to consumers in the form of higher prices.

And I doubt anyone will be surprised to learn that all this coercion and red tape will have no positive effect.

Several studies on the effectiveness of calorie displays suggest the mandate will have little to no effect on the public’s choices. In one study on menu-labeling in New York City, Brian Elbel, a professor at New York University, found that only 28 percent of people who saw calorie labels said that the information influenced their choices. There was no statistically significant change in calories purchased. In another study, Lisa Harnack of the University of Minnesota examined whether knowledge about calorie counts of menu items would influence how much a person ate, even if the information did not change ordering habits. A lab study revealed that, overall, consumers did not change how much they ate after receiving information about their food’s caloric content.

Which is why, when writing about this topic last year, I predicted “If this regulation is implemented, it will have zero measurable impact on American waistlines.”

P.S. Keep in mind we already have the federal bagpipe police, the federal pond police, and the federal don’t-whistle-at-whales police.

P.P.S. As I repeatedly warn, if the answer is more government, someone’s asked a very silly question.

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Should Unelected D.C. Bureaucrats Turn the Internet into a Government-Regulated Public Utility?

I suspect that most Americans, if asked to list the biggest economic success story in the United States over the past few decades, would list high tech and the Internet.

And that would be a good answer. For those of us with a good bit of gray hair, it’s sometimes remarkable to think how much different the world is today with laptops, tablets, smart phones, and all sorts of other gadgets.

Gadgets with huge value, by the way. Ask yourself the question in this video. How much money would you need to give up the Internet for the rest of your life?

But if every dark cloud has a silver lining, then I guess silver clouds must have dark linings. And you won’t be surprised to learn that the dark lining for the Internet and high tech is big government.

More specifically, the Federal Communications Commission (FCC) wants to use a law from the 1930s as an excuse to seize authority to micro-manage this (at least so far) vibrant sector of our economy.

In a column for the Wall Street Journal, Gordon Crovitz writes about this regulatory power grab in Washington that could stifle the “permissionless innovation” of the Internet.

Last week Washington abandoned open innovation when the chairman of the Federal Communications Commission yielded to President Obama ’s demands and moved to regulate the freewheeling Internet under the same laws that applied to the Ma Bell monopoly.

So what does that mean?

Until now, anyone could launch new websites, apps and mobile devices without having to lobby a regulator for permission. That was thanks to a Clinton-era bipartisan consensus that the Internet shouldn’t be treated as a public utility. Congress and the White House under both parties kept the FCC from applying the hoary regulations that micromanaged the phone system, which would have frozen innovation online. Last week’s announcement from FCC Chairman Tom Wheeler rejects 20 years of open innovation by submitting the Internet to Title II of the Communications Act of 1934. Once Mr. Wheeler and the commission’s Democratic majority vote this month to apply Title II, the regulations will give them staggering control. Any Internet “charges” and “practices” that the bureaucrats find “unjust or unreasonable is declared to be unlawful.”

And it will open the door to cronyism as already-established companies and well-connected insiders work the system for their own advantage.

This is an open invitation to entrenched companies challenged by new technologies. The Internet has been a source of creative destruction, upending industries from music, movies and newspapers to retail, travel and banking. History teaches that companies threatened by competition will hire as many lawyers as necessary to get regulators to protect them.

And when I wrote the door will be open, it will be wide open.

In 2005, the U.S. Supreme Court warned that if the FCC treated the Internet as a telecommunications service, it “would subject to mandatory common carrier regulation all information service providers that use telecommunications as an input to provide information service to the public”—in other words, almost all websites and apps would be subject to regulation. …once regulators get power, they use it. And if there is any forbearance, there will be litigation from companies seeking to burden their competitors with regulation.

Here are some videos that help put the debate in context.

Let’s start with this Reason TV interview.

Next we have a humorous portrayal of Internet usage in a bureaucrat-governed world.

Sort of reminds me of this Obamacare OB/GYN video.

Last but not least, here’s a dry but very informative explanation of the “net neutrality” issue.

But perhaps all you need is this cartoon, which is from a bigger collection that can be enjoyed here.

Think about the big picture. Is there a sector of the economy that has become more efficient and inexpensive because of government?

Health care? Nope.

Higher education? Nope.

Banking? Nope.

Charity? Nope.

Manufacturing? Nope.

I could continue, but you get the idea.

P.S. If you want more bad news, the Obama White House wants to cede some authority over the Internet to the Keystone Cops at the United Nations.

P.P.S. And since we’re sharing bad news about the Internet, don’t forget that some politicians want a government-empowering, privacy-destroying scheme to let state politicians impose taxes on online sales that take place outside their borders.

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Strangling Santa (and Everyone Else) with Regulation and Red Tape

How thoughtful. The President gave the economy a special gift before jetting off to Hawaii.

The Obama administration is cramming like a college student trying to study for a final exam, publishing more than 1,200 new regulations in the last 15 days alone, according to data from Regulations.gov. Energy and environment rules are the biggest category, with 139 published by the federal government in the last 15 days… So far this year, the Obama administration has proposed or finalized  more than $200 billion in regulations when the coal ash rule’s costs are factored in, according to the American Action Forum.

Unfortunately, it appears there is no return policy for these gifts, even if many of them are actually lumps of coal.

So is there a way to quantify the cost of all this regulation, particularly when added to all the red tape that’s already been imposed?

The honest answer is that it’s very difficult. Do you measure only direct budgetary costs? What about compliance costs for the private sector. And how about the indirect costs of diminished productivity, not only in terms of economic performance but also the impact on longevity?

On the other side of the ledger, should there also be some calculation of benefits? A national 5-MPH speed limit would wreck the economy, to be sure, but it would save lives. How does this get measured, using cost-benefit analysis?

The bottom line is that the methodological issues when looking at regulatory burdens are significant, so take any numbers with a few grains of salt. With that caveat out of the way, here are some very large numbers to digest.

Americans spend 8.8 billion hours every year filling out government forms.

The economy-wide cost of regulation is now $1.75 trillion.

For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.

The Obama Administration added $236 billion of red tape in 2012 alone.

A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”

And now we’re going to augment this disturbing list.

The Mercatus Center at George Mason University has a “RegData” page that allows a user to generate all sorts of information on regulatory burdens.

But I wasn’t focused on “micro” data on the regulations that affect different industries or the regulations promulgated by various bureaucracies.

I clicked on the data designed to capture the overall “macro” magnitude of red tape. And we have two types of information.

This first chart measures the numbers of words in the annual Code of Federal Regulations (which makes great reading if you’re suffering from insomnia).

The bottom line is that there’s been a 40 percent-plus increase in the number of words over the past 15 years.

To be sure, the number of words cranked out by regulatory bureaucracies is not a perfect measure of regulatory burdens.

The Pentagon, for instance, has 26 pages of regulation detailing how to bake brownies. That’s insanely stupid and probably makes brownie procurement four times more expensive than necessary.

But there are regulations with fewer pages (and fewer words) that are far more expensive to the overall economy. The IRS, for instance, imposed a regulation to force American banks to put foreign tax law above U.S. tax law regarding the reporting of bank deposit interest paid to nonresident foreigners with U.S. accounts. That regulation was less than five pages long, but could drive millions of dollars from the American financial system.

Now let’s look at the number of restrictions imposed by regulations. To be more specific, the Mercatus experts calculate the number of times that regulations use coercive words and phrases such as “shall” and “must not.”

The good news, if you’re grading on a curve, is that the use of coercive terminology has jumped by “only” 28 percent since 1997.

I guess you could say that bureaucrats are becoming loquacious faster than they’re becoming proscriptive.

Or if you’re a glass-half-empty person, you could say that they’re making us read more to learn how our freedoms are being curtailed.

Now let’s look at the regulatory burden imposed by one piece of legislation.

I’ve referred to the so-called Wall Street Reform and Consumer Protection Act as the Dodd-Frank Bailout Bill, but that really doesn’t capture the scope of the legislation. Robert Genetski has a column in Investor’s Business Daily that attempts to measure the law’s economic burden.

Our politicians have placed any number of barriers in the way of prosperity, and one of the most costly has been the Dodd-Frank financial reforms (DF). …The Government Accountability Office provided an original estimate of Dodd-Frank’s direct cost: $2.9 billion over the first five years. If that is accurate, it means the law will cost the taxpayers roughly $600 million annually, or $5 for each private-sector worker. The direct cost to taxpayers is only the beginning. Historical estimates show private-sector costs to comply with government regulations tend to be 36 times the direct cost to government. If Dodd-Frank is typical, the annual cost of compliance will be more like $22 billion, or $188 for each private-sector worker. Unfortunately, there are numerous indications the Dodd-Frank regulations are far from typical. …Dodd-Frank has a compliance cost of close to $120 billion annually, or just over $1,000 for each private-sector worker. As burdensome as that estimate sounds, it too likely understates Dodd-Frank’s compliance costs. …the Davis Polk law firm identified 398 explicit new regulations created by Dodd-Frank, making it at least 25 times more extensive and complex than Sarbanes-Oxley. If the costs of complying with Sarbanes-Oxley are the more reasonable gauge for those associated with Dodd-Frank, it could easily cost 25 times more than its predecessor, or $225 billion a year. This amounts to almost $2,000 for each private-sector worker.

Wow. I’m glad he ran out of space. The burden of the law got more expensive with each new paragraph.

Now let’s shift to a more uplifting story.

Back in the late 1970s, politicians actually deregulated the air cargo sector.

The folks at Mercatus highlight some of the benefits.

In the twenty years prior to deregulation, the CAB refused to certify the entry of any new cargo carriers or the expansion of existing ones into new routes and limited the size of plane allowed for air cargo hauls. Thus under this regime carriers such as FedEx, which was classified as an express (rather than cargo) service, could only use small planes even when larger ones were the more efficient choice. …Deregulation of the airline industry occurred in two stages: the first happened with the passage of Public Law 95-163 deregulating interstate air cargo transport in 1977; this was followed a year later by the Airline Deregulation Act of 1978 deregulating the air passenger industry. The effects of deregulation were dramatic. …Absent route restrictions, the air cargo industry began using hub-and-spoke models that made widespread overnight shipping possible. …Free from operational restrictions imposed by the CAB and the Interstate Commerce Commission (ICC), shippers increased reliability and provided a multitude of delivery speed, time, and method combinations. …Deregulation of air cargo was a key element in the emergence of modern supply chain management and allowed wider access to goods supplied by domestic and international sources. It also facilitated American trade to foreign markets. Efficiencies in widespread use of hub-and-spoke models for air cargo, by reducing total costs, enable more American products to reach foreign markets.

There’s also an accompanying video that is perfect for the season.

If air cargo regulation was the good and Dodd-Frank was the bad, I guess it’s now time for the ugly.

Here’s a video from Reason that satirizes the TSA for senseless rules on what can – and cannot – be carried onto a plane.

Just in case you think the video is unfair to the TSA, check out these horror stories.

P.S. Here’s what would happen if Noah tried to comply with current regulation when building an ark.

P.P.S. Meanwhile, there are reports that Santa Claus was arrested after a multi-bureaucracy investigation found that he violated a slew of federal rules.

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America’s Ever-Expanding Regulatory Swamp

Maybe I’m biased because I mostly work on fiscal policy, but it certainly seems feasible to come up with rough estimates for the damage caused by onerous taxes and excessive spending.

On a personal level, for instance, we have a decent idea of how much the government takes from us and we know the aggravation of annual tax returns. And we tend to have some exposure to government bureaucracies, so we’re familiar with the concept of wasteful spending.

But how do you quantify the cost of regulation and red tape? Well, here are some very large numbers to digest.

Americans spend 8.8 billion hours every year filling out government forms.

The economy-wide cost of regulation is now $1.75 trillion.

For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.

The Obama Administration added $236 billion of red tape in 2012 alone.

In other words, the regulatory burden is enormous, but I worry that these numbers lack context and that most of us don’t really grasp how we’re hurt by government intervention.

So let’s look at some additional data.

If nothing else, this video from the Mercatus Center will help you appreciate just how vast the regulatory state has become.

The video mentions a report with additional data. Well, here’s some of what’s in that report.

A recent study published in the Journal of Economic Growth found that between 1949 and 2005 the accumulation of federal regulations slowed US economic growth by an average of 2 percent per year. Had the amount of regulation remained at its 1949 level, 2011 gross domestic product (GDP) would have been about $39 trillion—or three and a half times—higher, which translates into a loss of about $129,300 for every person in the United States.

A 2005 World Bank study found that a 10-percentage-point increase in a country’s regulatory burdens slows the annual growth rate of GDP per capita by half a percentage point. Based on this finding, an increase in regulatory burdens can translate to thousands of dollars in lost GDP per capita growth in less than a decade.

Other economists have estimated that a heavily regulated economy grows two to three percent slower than a moderately regulated one.

According to a World Bank study, moving from the 25 percent most burdensome to the 25 percent least burdensome regulatory environment (as measured by the World Bank’s Doing Business index) can increase a country’s average annual GDP per capita growth by 2.3 percentage points.

Hopefully all those numbers drive home the point that our economy is weaker and our incomes are lower because of needless red tape.

And never forget that even small differences in growth add up to big differences in living standards after a few decades.

Want more evidence? This chart, also from Mercatus, gives us a good idea. Industries that are heavily regulated had far lower levels of productivity compared to industries with less red tape.

And remember that labor productivity helps determine wages, so both workers and investors suffer.

By the way, if you’re interested in the methodology, here’s some of the explanatory text that accompanied the graph.

Regulatory burden is measured using RegData, a text analysis tool that counts the number of binding words—“shall,” “must,” “may not,” “prohibited,” and “required”—that appear in the Code of Federal Regulations and cross-references those word counts with the industries to which they apply. Comparing this data to production-efficiency measures from the Bureau of Labor Statistics shows that industries that are subject to less regulation have significantly higher production-efficiency measures than industries that are subject to more regulation.

And here are some sobering numbers from the Competitive Enterprise Institute. They show that regulatory compliance costs are now larger than the costs – for both households and businesses – of obeying the income tax.

Maybe now you can fully appreciate this Nate Beeler cartoon.

Let’s close with some specific examples of regulation run amok.

First, Kevin Williamson of National Review writes about the deadly (no hyperbole) decision by the Food and Drug Administration to block additional patients from receiving a promising treatment for the Ebola virus.

When you are infected with Ebola, you are not very much worried about the possibility that you might get sick — you are sick, horrifyingly so, and mortally so in more than half of all cases. Worrying that your health might take an additional turn for the worse after you’ve been infected with Ebola is like noticing that your car’s check-engine light has come on a half-second after you’ve driven it over the rim of the Grand Canyon. And so the controversy over giving experimental Ebola drugs to two American aid workers, Kent Brantly and Nancy Writebol, and whether to extend the same option to dying people in Africa, is a strange one. …the drugs should be released, but the World Health Organization is hearing none of it. The experimental Ebola serum, which has shown promise in tests on monkeys but has not been through human trials, may very well have saved the two aid workers’ lives. The serum, called ZMapp, is a project of Mapp Pharmaceutical of San Diego — one of those wicked pharmaceutical companies that are a favorite whipping-boy of health-care reformers while they are quietly working to save the world — in collaboration with Dreyfus Inc. and U.S. and Canadian health agencies. Mapp seems ready and willing to get moving: “Mapp and its partners are cooperating with appropriate government agencies to increase production as quickly as possible,” the firm said in a statement. But use of ZMapp remains “under the regulatory guidelines of the FDA.” An American firm with a potentially life-saving drug is allowed to administer it to two Americans, while 1,600 or more Africans are denied… Ebola experts including Peter Piot, the discoverer of the virus, argue that African doctors and patients should be given the same choice that was given to Kent Brantly and Nancy Writebol. He’s right.

The Ebola episode, isn’t an isolated example.

It isn’t just Africa, of course. Every year, Americans in the late stages of terminal illnesses are denied access to experimental treatments by the FDA, on the theory that untested drugs might make these dying people sick. The agency’s “compassionate use” program, which gives some leeway in the use of unapproved drugs, is cumbrous and narrow, and, like most regulatory programs, is much more oriented toward the FDA’s institutional interests than those of the sick and dying people the program allegedly is there to serve. The FDA is not there to look after Americans’ health; the FDA is there to look after the FDA.

And that can have deadly consequences for sick people.

Here’s a story, from Washington’s Freedom Foundation, about the Forest Service using its regulatory power to abuse a disabled veterans.

The story began about four years ago, when a small rock slide covered the entrance portal to Nicholas’ mine and, based on Forest Service rules and bureaucratic obstruction, he was forbidden to clear the slide debris with heavy equipment.  In addition to inventing new excuses and red tape to delay Nicholas’ rightful access to his claim, the agency also decided to seize his trailer and related equipment located at his mine, valued at $68,000.  …The USFS managers were very capable of inventing new justifications, excuses and delays to pick on Nicholas, and they apparently had plenty of time and energy to do this.

Fortunately, we have a happy ending.

While the Forest Service was denying Nicholas the ability to access his equipment with a backhoe because it might disturb spotted owls or cause some other imaginary terrible event, they admitted they could not prevent Nicholas from removing the small debris slide by hand. The bureaucrats appeared to think this was amusing because they knew Tony was disabled, and he wasn’t physically able to move these rocks.  They never considered that his neighbors would come to Nicholas’ aid and move tons of rocks for him.  This is exactly what happened in late June when – led by Manweller, 50 volunteers showed up at the Liberty Café in Cle Elum, drove up to Nicholas’ mine claim and moved many of the rocks.

I’m glad things worked out, but who would have thought the Forest Service would behave so poorly?

Then again, we recently learned that the Park Service was filled with spiteful bureaucrats.

Here’s one final example of ludicrous regulation, this time from Nebraska.

Massage a horse, go to jail. That’s the absurd fate Karen Hough could face if she wants to continue her business in Nebraska. A certified instructor, Karen has been massaging horses for years. …Earlier this year, she applied for a license in equine massage but was told only veterinarians can become licensed. A 2007 memo from Nebraska’s Board of Veterinary Medicine and Surgery asserted that “no health professional other than licensed veterinarians and licensed veterinary technicians may perform services/therapies on animals.” This means Karen would need to spend thousands of dollars and seven years of her life just to acquire a government permission slip to do what she’s been doing for years. A few weeks later, she received a letter from Nebraska’s Department of Health and Human Services ordering her to “cease and desist” from the “unlicensed practice of veterinary medicine.” In Nebraska, continuing to operate a business without a license after getting a cease and desist letter is a Class III felony. So Karen could face up to 20 years in prison and pay a $25,000 fine. By comparison, that’s the same penalty for manslaughter in the Cornhusker State. What’s worse, under Nebraska state law, she can’t even give out advice on how to massage horses: “They told me I couldn’t give massages for money; I couldn’t do it for free and I couldn’t even tell friends how to do it. That last one really got to me. To me, that is restricting my free speech.”

I confess that horse massaging sounds as odd as getting a psychologist for your cat, but maybe I’m behind the times.

Regardless, it’s absurd that you could get thrown in jail for rubbing a horse!

Or for selling milk. Or transporting a bagpipe.

As Joe Biden said, it’s time to take back America.

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America’s Most Clueless and Malicious Bureaucrats?

I’ve already suggested that subsidies for the Paris-based Organization for Economic Cooperation and Development are the most wasteful and counterproductive item in the federal budget. At least on a per-dollar-spent basis.

But what about a similar exercise for government red tape?

How would we come up with the worst regulation or the most counterproductive regulatory agency?

Thanks to the IRS, I have a strong candidate for the worst regulation, but if I had to pick the worst agency, I’d probably choose the horribly mis-named Equal Employment Opportunity Commission.

These bureaucrats are infamous for bone-headed initiatives, such as:

The EEOC making it hard for trucking companies to weed out drunk drivers.

The EEOC telling a coffee shop it had too many attractive waitresses.

The EEOC forcing companies to make special accommodations for “pee-shy” employees.

The EEOC trying to give special employment rights to crooks.

We now have another item for the list.

The bureaucrats apparently like forcing companies to hire people who are more likely to rip off customers, though sometimes they find judges that aren’t nearly so tolerant.

Let’s see what the Wall Street Journal had to say about the “hilariously caustic rebuke of the Equal Employment Opportunity Commission by the Sixth Circuit Court of Appeals.”

The EEOC had sued Kaplan, the for-profit education company, for using “the same type of background check that the EEOC itself uses,” as Judge Raymond Kethledge cheekily put it in the first sentence of his ruling in EEOC v. Kaplan. Despite its own practices, the Obama EEOC has made a cause of suing private companies because it claims that credit and criminal background checks discriminate against minorities.

But so-called disparate impact doesn’t mean discrimination.

Judge Kethledge eviscerated the EEOC like a first-day law student, writing that Kaplan had good reason to conduct credit checks… As for proving disparate racial impact, Judge Kethledge noted that “the credit-check process is racially blind; the [credit-check] vendor does not report the applicant’s race with her other information.” …The unanimous opinion was joined by Damon Keith, one of the most liberal judges on the entire federal bench. If government officials were accountable, EEOC General Counsel P. David Lopez would be fired for losing in such humiliating fashion.

But that’s just one crazy case.

The Wall Street Journal also opined about another strange example of EEOC quackery. The bureaucrats actually believe that stealing should be a protected disability.

Or, to be more technical, that stealing should be an acceptable behavior because of a supposed disability.

In September 2008, Walgreens employee Josefina Hernandez claims she had a hypoglycemia attack, grabbed a bag of potato chips off a shelf and ate them to boost her blood sugar. The drug-store company has a strict policy against “grazing” (i.e., stealing) and so a supervisor fired Ms. Hernandez, an 18-year veteran of the company. Three years later, the EEOC sued Walgreens for discrimination under Title VII of the 1964 Civil Rights Act and the 1990 Americans With Disabilities Act and asked for punitive damages. …The ADA requires employees to request an accommodation for a medical condition, which Mrs. Hernandez never did. Nor does federal law sanction illegal activity—i.e., theft—under cover of a disability, as the Supreme Court made clear in 2003’s Raytheon v. Hernandez.

A green light for thievery from the EEOC

Seems like this should be an open-and-shut case. Which raises the interesting question of why the EEOC decided that the federal government should intervene on behalf of potato chip thievery.

So why pursue such a case in the first place? The EEOC’s lawyers probably figured they had nothing to lose. If they landed a sympathetic judge, they could set a new legal precedent. If they lost, taxpayers would pay for the case anyway. And sure enough, U.S. District Judge William Orrick, an Obama appointee, ruled against the store’s motion for summary judgment last week. The question now is whether Walgreens will continue to fight for the right to fire employees who steal from company shelves, or simply settle to get the EEOC’s lawyers to go away.

I hope all companies fight meddling and stupidity by the federal government.

I do understand that sometimes it makes sense to acquiesce to extortion, at least in the short run. The long-run costs of surrender, though, are very high.

Which is why companies should fight, but they should get support from Capitol Hill. The EEOC budget should be slashed to show that there are consequences to bureaucratic insanity.

P.S. I shared some political humor last year about a make-believe Obama Administration initiative called the “Americans with no Abilities Act.”

Anybody want to guess when that becomes official EEOC policy?

I’m only partially joking. It’s sort of happened already in the United Kingdom.

P.P.S. Don’t forget that EEOC regulation is just one straw of red tape on the camel’s back.

Americans spend 8.8 billion hours every year filling out government forms.

The economy-wide cost of regulation is now $1.75 trillion.

For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.

The Obama Administration added $236 billion of red tapein 2012.

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Great Moments in Wasteful Spending…or Great Moments in Bizarre Regulation?

Every so often, I share stories about the ridiculous and outrageous way in which the federal government squanders our money.

• Forcing taxpayers to pay millions of dollars for pro-Obamacare and pro-IRS propaganda.
• Doing interviews – at a per-person cost of $6,000 – about erectile dysfunction and sticking the tab on us.
• Giving disability benefits to a grown man who wants to wear diapers and live as an “adult baby.”
• Squandering $400K on experimental underwear that detect cigarette smoke.
• Paying 35 times the market price for some Kindles.
• A $100,000 library grant to a city without a library.
• Throwing $100 million in the garbage by subsidizing a leftist bureaucracy in Paris that advocates for higher taxes in the United States.

So when I saw this New York Post story about the feds pissing away a six-figure sum on condom research, I figured this would be a perfect addition to my collection of government waste stories.

The federal government is stretching your tax dollars — in search of the perfect condom. The National Institutes of Health will spend $224,863 to test 95 “custom-fitted” condoms so every American man can choose the one that fits just right.

And it’s a good match with this story about Washington flushing away more than $400K on research about men not liking to wear condoms.

Do we really need to spend other people’s money to figure out that guys, if they have to wear condoms, would like them to fit?!?

But then I found something in the story that genuinely surprised me. Apparently there are federal regulations that restrict the types of condoms that can be sold in the United States!

The NIH blames US “regulatory guidelines” for American men having to choose from a “narrow range of condom sizes.” The six-figure grant was awarded to TheyFit of Covington, Ga., which offers a wide variety of condoms that vary in length — from a bit more than 3 inches to nearly 9 ¹/₂ — and in width. They’re available in European Union countries, but not in the United States, where they would have to be approved by the Food and Drug Administration.

I’m flabbergasted. I can vaguely understand why the government might regulate some aspects of condom production, such as durability rules to limit breakage. I don’t think such red tape is necessary because companies already plenty of incentive – because of both reputational risk and preemptive legal protection – to maintain good standards.

But at least you can see a rationale for bureaucrats to intervene.

I can’t imagine, though, what excuse regulators came up with when they decided to limit the variety of condom sizes. Maybe this is a literal example of the one-size-fits-all mentality of Washington?

And isn’t it embarrassing that Europeans have a more market-friendly approach on this issue?

Though none of us should be surprised that the Keystone Cops at the United Nations want to create a human right to obtain taxpayer-financed condoms.

At least Sandra Fluke will be happy about that.

P.S. Here’s a Glenn McCoy cartoon about Obama and subsidized condoms.

P.P.S. Since I started this post with examples of wasteful spending, but then decided that this story might belong in the category of absurd regulation, let’s close by sharing some examples of foolish red tape.

• Regulations making it difficult for trucking firms to weed out drunk drivers.
• Year-long sting operations by federal milk police.
• Rules harassing coffee shops with bikini-clad sales staff.
• OSHA requirements for expensive safety harnesses for people working 11 feet off the ground.

Addendum: A friend with a warped sense of humor emailed to suggest a unflattering link between the condom research and the note left on my windshield right before Christmas. So I can only imagine what my enemies are saying.

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Pick the Stupidest Regulation Contest: I Report, You Decide

I’ve conducted a handful of polls in the past four-plus years of writing this blog.

* Michael Ramirez won the contest for best political cartoonist.

* In the government-thuggery contest, readers overwhelmingly selected the organic farmer being harassed by local bureaucrats.

* I was surprised that Romney easily won the 2012 election poll, but even more surprised that Obama wasn’t that far behind Gary Johnson.

* For my poll on why (or if) people support the Second Amendment, my choice came in fourth place.

 * We got a wide range of responses in the poll about the guy who took revenge in a very unique way against local law enforcement.

Now let’s do another poll. Our contest today will be to select the worst example of the regulatory state running amok.

1. Our first option deals with the Orwellian Foreign Account Tax Compliance Act (FATCA), which seeks to impose bad American tax law on things that happen outside America’s borders.

The good news is that Obama has unified the world, just like he promised in his campaign. The bad news – from the U.S. perspective – is that the world is now united against this horrible piece of legislation.

Here’s some of what a law professor just wrote about FATCA for the Wall Street Journal Europe.

Beware the sledgehammer used to crack the nut. In this case, the nut is the U.S. government’s laudable goal of catching tax evaders. The sledgehammer is the overreaching effect of legislation that is alienating other countries and resulting in millions of U.S. citizens abroad being forced to either painfully reconsider their nationality, or face a lifetime of onerous bureaucracy, expense and privacy invasion. The legislation is Fatca, the Foreign Account Tax Compliance Act.

Ms. Graffy provides a very powerful example of why FATCA is an absurd extraterritorial application of bad U.S. law.

To appreciate its breathtaking scope along with America’s unique “citizen-based” tax practices, imagine this: You were born in California, moved to New York for education or work, fell in love, married and had children. Even though you have faithfully paid taxes in New York and haven’t lived in California for 25 years, suppose California law required that you also file your taxes there because you were born there. Though you may never have held a bank account in California, you must report all of your financial holdings to the State of California. Are you a signatory on your spouse’s account? Then you must declare his bank accounts too. Your children, now adults, have never been west of the Mississippi but they too must file their taxes in both California and New York and report any bank accounts they or their spouses may have because they are considered Californians by virtue of one parent’s birthplace.

Sounds utterly ridiculous, but FATCA applies these rules to American citizens in other nations – with predictably awful results.

Extrapolate that example to the six million U.S. citizens living around the globe. Many, if not most, don’t know about these requirements. Yet they face fines, penalties and interest for not complying—even if they owe no U.S. taxes, own no U.S. property, have no U.S. bank account and haven’t lived there in years—if ever. …Foreign financial institutions trying to avoid these new requirements have two alternatives: to drop American clients, or don’t invest in the U.S. Neither scenario benefits America.  …This infringement on the sovereignty of other nations has not gone down well abroad and has only served to reinforce the most negative stereotypes of America. …It forces honest people with affection for their ties to America to either keep quiet about their heritage, or spend potentially thousands of dollars a year to prove that they owe no U.S. taxes. Or, as is increasingly occurring, it forces them to give up their U.S. citizenship. The result is that the U.S. is turning millions of “good will” ambassadors into “bad will” ambassadors. Can any of this be good for America?

Of course it’s not good for America, but greedy politicians are perfectly happy to impose enormous costs on the private sector in exchange for trivially small amounts of additional revenue. And those projections of additional revenue almost surely won’t materialize because of Laffer-Curve effects on investment in the American economy, so even the politicians won’t come out ahead when the dust settles.

Maybe the crowd in Washington will even learn the right lesson and support Senator Rand Paul’s legislation to undo some of the worst parts of FATCA, but don’t hold your breath.

2. Here’s the second choice. I thought I had learned never to be surprised by examples of foolish government intervention, but even I did a double take when I learned that the federal bureaucracy was regulating rabbits in magic shows.

Not just regulating them, but even requiring disaster plans in case of calamities such as “Fire. Flood. Tornado. Air conditioning going out. Ice storm. Power failures”. I’m not joking. Here are some excerpts from a Washington Post report.

This summer, Marty the Magician got a letter from the U.S. government. It began with six ominous words: “Dear Members of Our Regulated Community . . .” Washington had questions about his rabbit. Again. …Hahne has an official U.S. government license. Not for the magic. For the rabbit. The Agriculture Department requires it, citing a decades-old law that was intended to regulate zoos and circuses. Today, the USDA also uses it to regulate much smaller “animal exhibitors,” even the humble one-bunny magician. That was what the letter was about. The government had a new rule. To keep his rabbit license, Hahne needed to write a rabbit disaster plan. …For Hahne, the saga has provided a lesson in one of Washington’s bad old habits — the tendency to pile new rules on top of old ones, with officials using good intentions and vague laws to expand the reach of the federal bureaucracy. …“Our country’s broke,” Hahne said. “And yet they have money and time to harass somebody about a rabbit.”

What if regulators are committing crimes against common sense?

Just in case you think this is merely a case of bureaucrats concocting silly rules from their comfortable perches in Washington, I’m sure you’ll be delighted to learn that our fearless public servants are venturing outside the beltway.

Hahne…has been doing magic shows full time for 27 years, on cruise ships and on land. That means he has experienced most of the troubles a magician can expect… But he did not expect the U.S. Department of Agriculture. “She said, ‘Show me your license.’ And I said, ‘License for . . .?’ ” Hahne recounted. This was after a 2005 show at a library in Monett, Mo. Among the crowd of parents and kids, there was a woman with a badge. A USDA inspector. “She said, ‘For your rabbit.’ ” Hahne was busted. He had to get a license or lose the rabbit. …Hahne has an official USDA license, No. 43-C-0269, for Casey — a three-pound Netherland dwarf rabbit with a look of near-fatal boredom. The rules require Hahne to pay $40 a year, take Casey to the vet and submit to surprise inspections of his home. Also, if Hahne plans to take the rabbit out of town for an extended period, he must submit an itinerary to the USDA. The 1966 law that started all of this was four pages long. Now, the USDA has 14 pages of regulations just for rabbits. …the law applies only to warmblooded animals. If Hahne were pulling an iguana out of his hat — no license required. Now, he needs both a license and a disaster plan.

I’ve complained about a bloated and overpaid government workforce, but I’ll redouble my efforts now that I know we have bureaucrats going to one-man magic shows to check people for licenses.

On the other hand, I’m surprised that rabbit rules only 14 pages of regulations? That’s pretty spartan compared to the 74,000 pages of rules for the tax code.

The good news – relatively speaking – is that rabbit regulations don’t threaten to drive investment and jobs from the U.S. economy. But for sheer stupidity on the part of government, can you think of a more pointless set of regulations?

3. Now let’s consider our final example, which manages to combine the nanny state with domestic protectionism with an attack on the First Amendment.

This trifecta of red tape insanity comes from Kentucky, where the local state-protected cartel of psychologists wants to stop a newspaper columnist from giving free advice.

Here are some of the details from the Associated Press.

John Rosemond has been dispensing parenting advice in his newspaper column since 1976, making him one of the longest-running syndicated columnists in the country. But some Kentucky authorities want to put him in a time out. In May, Kentucky’s attorney general and its Board of Examiners of Psychology told Rosemond his parenting column — which regularly offers old-school advice and shows little tolerance for any kind of parental coddling — amounts to the illegal practice of psychology. They want him to agree to a cease-and-desist order. In particular, they want Rosemond to stop identifying himself as a psychologist, because he is not a licensed psychologist in Kentucky.

To his credit, Mr. Rosemond is fighting back.

Rosemond, an author of 11 parenting books who has a master’s degree in psychology from Western Illinois and is a licensed psychologist in his home state of North Carolina, sees the board’s letter as an effort at censorship and is filing a lawsuit Tuesday in federal court seeking to bar the state from taking any action against him. …He is represented by the Arlington, Va.-based Institute for Justice, which has filed multiple lawsuits challenging what they see as overreach by government licensing boards. Institute for Justice lawyer Paul Sherman says that under Kentucky’s logic, columnists like Dear Abby and television personalities like Dr. Phil and Dr. Oz are breaking the law any time they offer advice, because the content is aired in Kentucky and meets the state’s broad definition of psychological advice.

And the newspaper that publishes his column also is standing up for the First Amendment.

Peter Baniak, editor of the Lexington Herald-Leader, which ran the column that prompted the psychology board’s cease-and-desist letter, said Monday that his paper has not been contacted by the board or the Kentucky attorney general, and that the paper intends to continue publishing the column. “I would find it troubling for a state board to suggest or think it has the ability to say what should or shouldn’t run in an advice column,” Baniak said.

By the way, if you watch this video, you’ll see that Rosemond’s home state of North Carolina also is guilty of trying to undermine the First Amendment as part of efforts to protect certain professions from competition.

Now it’s your turn to pick the most foolish example of regulation from this list.

By the way, just in case there are skeptics who think I’ve shared isolated examples and that regulation is generally beneficial, check out these staggering numbers.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• Increased regulatory burdens since 1949 have reduced living standards by more than 70 percent.

So whether we’re looking at anecdotes or big-picture data, the message is the same. Red tape is strangling the productive sector of the economy.

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Strangled By Red Tape

I’ve shared some nightmare stories of excessive and mindless government regulation.

1. The Food and Drug Administration raiding a dairy for the terrible crime of selling unpasteurized milk to people who prefer unpasteurized milk.
2. New York City imposing a $30,000 fine on a small shop because it sold a toy gun.
3. The pinheads at the Equal Employment Opportunity Commission going after Hooters for not having any male waiters in hot pants and tight t-shirts.
4. Indiana’s Department of Natural Resources is legally attacking a family for rescuing a baby deer.
5. An unlucky guy who is in legal hot water for releasing some heart-shaped balloons to impress his sweetheart.

But the regulatory burden goes way beyond these odd anecdotes. We’re talking about a huge cost to the economy, and it’s been getting worse for the past 12 years.

Here are some comments on the President’s inauspicious record from the Wall Street Journal.

Team Obama is now the red tape record holder. …pages in the Code of Federal Regulations hit an all-time high of 174,545 in 2012, an increase of more than 21% during the last decade. …the cost of federal rules exceeded $1.8 trillion, roughly equal to the GDP of Canada. These costs are embedded in nearly everything Americans buy…at $14,768 per household, meaning that red tape is now the second largest item in the typical family budget after housing. Last year 4,062 regulations were at various stages of implementation inside the Beltway. The government completed work on 1,172, an increase of 16% over the 1,010 that the feds imposed in 2011, which was a 40% increase over 722 in 2010. …the Obama Administration did not break the all-time record of 81,405 pages it set in 2010. But the 78,961 pages it churned out in 2012 mean that the President has posted three of the four greatest paperwork years on record. And to be fair, if Mr. Obama were ever to acknowledge that this is a problem, he could reasonably blame George W. Bush for setting a lousy example. Despite the Obama myth that the Bush years were an era of deregulation, the Bush Administration routinely generated more than 70,000 pages a year in the Federal Register.

If those numbers don’t make you sit up and take notice, how about these ones?

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• The Obama Administration added $236 billion of red tape just in 2012.

My personal “favorite,” as you can imagine, is the regulatory burden of the income tax.

1. The number of pages in the tax code.
2. The number of special tax breaks.
3. The number of pages in the 1040 instruction booklet.

Today’s Byzantine system is good for tax lawyers, accountants, and bureaucrats, but it’s bad news for America. We need to wipe the slate clean and get rid of this corrupt mess. And you know how to make that happen.

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Special Employment Rights for Crooks: Our Tax Dollars at Work

As an economist with a boring personality (sorry to be redundant), I sometimes focus on numbers. And when contemplating the cost of regulation and red tape, there are some numbers that should frighten all of us.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• The Obama Administration added $236 billion of red tape just in 2012.

But normal people are probably more likely to understand the cost of red tape when you share specific examples of absurd regulation.

And apparently that’s why we have an Equal Employment Opportunity Commission. The EEOC bureaucracy has become famous for ridiculous examples of red tape. It first became famous many years ago when it went after Hooters for hiring attractive young women instead of fat old men to serve as waitresses (and now the bureaucrats are going after a business in Rhode Island for the same reason).

In more recent years, the pinheads at the EEOC have harassed a trucking company for the supposed crime of discriminating against alcoholics and pushed multi-billion dollar regulations to accommodate “pee-shy” employees.

Now the clowns from the EEOC have jumped to the aid of a new “protected class.” Who are these unfortunate and mistreated people that the bureaucrats want to defend?

Get ready to pick your jaw off the floor. Jim Bovard has a column in the Wall Street Journal that seems like satire from The Onion.

Should it be a federal crime for businesses to refuse to hire ex-convicts? Yes, according to the Equal Employment Opportunity Commission, which recently released 20,000 convoluted words of regulatory “guidance” to direct businesses to hire more felons and other ex-offenders.

I’m sure employment lawyers are delighted at the thought of all the billable hours that will be required to peruse 20,000 words of bureaucratese, but what on earth is the EEOC thinking?

Well, it seems the bureaucrats have a long track record of seeking to “protect” the criminals amongst us.

…the EEOC began stretching Title VII of the 1964 Civil Rights Act to sue businesses for practically any hiring practice that adversely affected minorities. In 1989, the agency sued Carolina Freight Carrier Corp. of Hollywood, Fla., for refusing to hire as a truck driver a Hispanic man who had multiple arrests and had served 18 months in prison for larceny. The EEOC argued that the only legitimate qualification for the job was the ability to operate a tractor trailer. U.S. District Judge Jose Alejandro Gonzalez Jr., in ruling against the agency, said: “EEOC’s position that minorities should be held to lower standards is an insult to millions of honest Hispanics. Obviously a rule refusing honest employment to convicted applicants is going to have a disparate impact upon thieves.”

But even though the bureaucrats were slapped down by the courts, the EEOC continues to harass companies that seek to hire honest workers who aren’t a threat to the general public.

…the EEOC guidance frowns on such checks and creates new legal tripwires that could spark federal lawsuits. …If a background check discloses a criminal offense, the EEOC expects a company to do an intricate “individualized assessment” that will somehow prove that it has a “business necessity” not to hire the ex-offender (or that his offense disqualifies him for a specific job). …It is difficult to overstate the EEOC’s zealotry on this issue. The agency is demanding that one of Mr. Livingston’s clients—the Freeman Companies, a convention and corporate events planner—pay compensation to rejected job applicants who lied about their criminal records.

To understand the stupidity and venality of government, re-read the last sentence of that excerpt. The EEOC actually wants a business to give money to applicants who were rejected because they lied about their criminal records.

I’m at a loss for words.

Actually, just joking. I have a lot more words to write, particularly when I see that the bureaucrats at the EEOC also launched a legal attack against a firm that understandably didn’t want to hire crooks for sensitive jobs such as guarding nuclear power plants.

…businesses complying with state or local laws that require employee background checks can still be targeted for EEOC lawsuits. This is a key issue in a case the EEOC commenced in 2010 against G4S Secure Solutions after the company refused to hire a twice-convicted Pennsylvania thief as a security guard. G4S provides guards for nuclear power plants, chemical plants, government buildings and other sensitive sites, and it is prohibited by state law from hiring people with felony convictions as security officers. …The EEOC’s new regime leaves businesses in a Catch-22. As Todd McCracken of the National Small Business Association recently warned: “State and federal courts will allow potentially devastating tort lawsuits against businesses that hire felons who commit crimes at the workplace or in customers’ homes. Yet the EEOC is threatening to launch lawsuits if they do not hire those same felons.”

Oh, by the way, you probably won’t be surprised to learn that the EEOC refuses to say whether it conducts background checks on its own employees. Remember, the ruling class shouldn’t have to worry about all the laws imposed on you and me and the rest of the peasants.

…the EEOC is practically rewriting the law to add “criminal offender” to the list of protected groups under civil-rights statutes, [but] the agency refuses to disclose whether it uses criminal background checks for its own hiring. When EEOC Assistant Legal Counsel Carol Miaskoff was challenged on this point in a recent federal case in Maryland, the agency insisted that revealing its hiring policies would violate the “governmental deliberative process privilege.”

What’s particularly tragic about this farce is that it will almost certainly hurt the minorities that the EEOC supposedly is trying to help.

…studies published in the University of Chicago Legal Forum and the Journal of Law and Economics have found that businesses are much less likely to hire minority applicants when background checks are banned. As the majority of black and Hispanic job applicants have clean legal records, the new EEOC mandate may harm the very groups it purports to help.

Remarkable…and typical.

And if you want a few more examples of government stupidity:

• Putting a store out of business for selling toy guns.
• Year-long sting operations by federal milk police.
• Rules harassing coffee shops with bikini-clad sales staff.
• OSHA requirements for expensive safety harnesses for people working 11 feet off the ground.
• The IRS making banks put foreign tax law above US tax law.

Simply stated, government is a disaster waiting to happen – just as shown in this satirical poster.

P.S. If you didn’t get suicidally depressed after reading this post, Jim Bovard has a column about the Department of Housing and Urban Development that is equally mind-boggling.

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Free Markets Protect Consumers with “Mutually Reinforcing” Private Regulation

I’ve written before about the heavy costs of regulation, including these rather sobering statistics. Or, to be more accurate, here are some staggering numbers.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.

But a lot of people don’t focus on the cost of regulation. They are motivated instead by a desire to protect themselves against unknown risks, which they assume are exacerbated by companies that are greedy for short-run profits.

I acknowledged this concern in the November issue of Townhall magazine.

…it is difficult—or even impossible—for the average consumer to gauge safety. Are we flying on a well-maintained plane? Are we eating food that is free of salmonella and botulism? Is our workplace protected against dangerous machinery? Are our children vulnerable to chemical exposure? Since the vast majority of people have no way of answering these questions, we shouldn’t be surprised that many of them want some sort of independent oversight—especially since they suspect that businesses will be tempted to cut corners. After all, less money spent on health and safety means more profit for shareholders.

But I also explained how the free market produces very effective forms of private regulation.

…the desire for profits creates a big incentive for businesses to use good practices while producing safe and effective products. Imagine you’re the CEO of a major airline, and one day all the regulatory agencies disappear. Are you going to stop maintaining your planes? At the risk of stating the obvious, the answer is no. One disaster could be the death knell for an airline, particularly if there were the slightest hint that the company was skimping on upkeep. Moreover, it’s highly unlikely that investors would plow money into an airline when share value could disappear overnight because of an accident. And banks presumably would be leery about lending to an airline that faced the risk of quick bankruptcy. Moreover, insurance companies would have a very strong incentive to monitor the safety practices of the airline— and keep in mind no bank would lend money to an airline that lacked insurance. In other words, the competitive marketplace can be viewed as a very effective form of regulation. Instead of rules and red tape from Washington, the profit motive creates mutually reinforcing oversight.

This “mutually reinforcing oversight” does not guarantee that business won’t cut corners and/or make mistakes. But, then again, regulation from politicians and bureaucrats don’t stop that from happening either.

The key question to ask is which approach achieves the best results at the lowest cost.

The answer is the free market, though augmented by government regulations that pass a cost-benefit test, the tort system to discourage bad business behavior such as negligence, and the criminal justice system to fight behaviors such as fraud.

There will be a debate, of course, on where to draw the line. But one thing I can say for sure is that an intelligent system will never produce these examples of bureaucratic idiocy.

• Putting a store out of business for selling toy guns.
• Regulations making it difficult for trucking firms to weed out drunk drivers.
• Year-long sting operations by federal milk police.
• Rules harassing coffee shops with bikini-clad sales staff.
• OSHA requirements for expensive safety harnesses for people working 11 feet off the ground.
• Rules from the EEOC for “pee-shy” employees.
• The IRS making banks put foreign tax law above US tax law.

Remember, if government is the answer, you’ve asked a very strange question.

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Obama’s Right – in a Perverse Way – about Government Playing an Important Role for Small Businesses

President Obama recently got himself in a bit of hot water with his “you didn’t build that” remark, which trivialized the hard work of entrepreneurs.

But he is right – in a perverse way – about government playing a big role in the life of small businesses. Thanks to a maze of regulations, the government is an unwelcome silent partner for every entrepreneur. And we’re not talking small numbers.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, one study estimated that 100 jobs are destroyed in the economy’s productive sector.

But sometimes an image helps to make things easy to understand. Here’s a chart from the Joint Economic Committee, which maps out the web of regulation imposed by Washington.

This chart does more than just show sources of red tape coming from Washington. It shows that “Washington” is really several entities, such as Congress, the executive branch, the courts, and so-called regulatory agencies.

These varies entities then impose regulatory burdens in various fields, such as labor, finance, tax, and environment.

Keep in mind, by the way, that each small pink circle actually represents an entire field of regulation. So when you see, for instance, the “Obamacare” circle, what you’re really seeing is this nightmarish image of regulatory complexity.

And don’t forget the role of state and local government.

Last but not least, remember that each regulatory bureaucracy is then capable of making individual decisions that…well, you judge for yourself.

• Putting a store out of business for selling toy guns.
• Regulations making it difficult for trucking firms to weed out drunk drivers.
• Year-long sting operations by federal milk police.
• Rules harassing coffee shops with bikini-clad sales staff.
• OSHA requirements for expensive safety harnesses for people working 11 feet off the ground.
• Rules from the EEOC for “pee-shy” employees.
• The IRS making banks put foreign tax law above US tax law.

Gee, it’s almost enough to make you think regulation might be the problem and not the solution.

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From Hooters to Marylou’s, Great Moments in EEOC Bureaucracy

I’ve written about the high cost of red tape, and have cited crazy examples of regulation run amok.

• Special bathroom rules for “pee-shy” employees.
• Making banks put foreign law above U.S. law.
• The federal milk police.
• Banning light bulbs.

The list could go on forever, so let’s look at a new example of regulatory stupidity.

Back during the Clinton years, the pinheads at the Equal Employment Opportunity Commission tried to coerce Hooters into ending its discriminatory hiring practices. These clueless bureaucrats thought it was unfair that fat, middle-aged men weren’t properly represented on the serving staff.

In a rare victory for common sense, the EEOC eventually backed down, in large part because Hooters launched a public “get a grip” campaign to embarrass the government which included newspaper ads and billboards showing how absurd it would be to change the company’s hiring practices.

Now, as Yogi Berra would say, it’s deja vu all over again. The EEOC is agitated because a Massachusetts coffee chain apparently has hired too many attractive young women. Here’s some of what the Boston Herald reported.

South Shore coffee chain Marylou’s is singing the blues over a federal employment-discrimination investigation, crying foul that the feds are going after its long-standing practice of hiring bubbly young bombshells to peddle the shop’s trademark joe. The Equal Employment Opportunity Commission has been quietly probing Marylou’s’ hiring practices for nearly a year, the Herald has learned, with investigators pulling reams of job applications, interviewing company brass and grilling the 29-store chain’s pink-clad clerks about their co-workers’ gender, age, race and body type, according to the company. …Katherine J. Michon, a Boston lawyer who specializes in discrimination cases, said the length and scope of the investigation indicates the feds are serious about cracking down on the company. …he company also complained about the probe to state Sen. Robert L. Hedlund, who blasted the EEOC as “a meddlesome, overblown, intrusive federal agency.” He said he plans to contact the local congressional delegation, and is dumbfounded the agency is probing the stalwart South Shore coffee shop. “Why, because they haven’t hired old overweight men who want to wear a pink T-shirt and serve coffee?” Hedlund said. “The federal government has better things to do with my tax dollars than to harass a legitimate business.”

What’s especially nauseating about this case is that nobody complained about discrimination. Instead, some moron bureaucrats got upset that the TV ads featured attractive young women. Here’s more from a follow-up story in the Herald.

She [the head of the EEOC] refused to answer general questions about the agency, which critics say has run amok by initiating investigations into businesses even if no one has complained about their hiring procedures. Marylou’s execs, for example, say the feds’ yearlong inquiry started when investigators saw the chain’s flirty TV commercials. Sandry said the groundswell of support for Marylou’s has remained strong since the Herald broke the news Wednesday of the yearlong EEOC inquiry, which company founder Marylou Sandry has called “a witch hunt.” “It’s been crazy, but everywhere I go people are cheering the girls,” Ronnie Sandry said. “Boy, people hate the government.”

I’m greatly encouraged by the last sentence in the excerpt. We should all be very upset that overpaid bureaucrats are harassing and pestering people in the productive sector of the economy. These leeches should be immediately terminated.

Even though I don’t like coffee, I wish Marylou’s had some branches in the DC area. I would find something to buy just to show my support.

P.S. In the interests of fairness, I should point out that the federal government is not the only entity to pursue idiotic regulations. California lawmakers, for instance, have considered rules to regulate babysitting. And since we’re on the topic of coffee, let’s not forget the Seattle campaign to ban scantily clad baristas. But the all-time record for strangest government regulation belongs to Japan, which actually has government rules on the application of coffee enemas.

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Great Moments in Government Regulations: Special Accommodations for Pee-Shy Employees

Regulation is a hidden tax that in many cases raises the cost of creating jobs and generating wealth. Here are some staggering numbers.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.

But those numbers probably don’t mean anything because they are so large. So let’s look at an example of regulation run amok. Here are some of the details from a report at the Daily Caller.

Not pee-shy

It could cost U.S. employers between $2 billion and $4 billion to comply with an obscure Americans with Disabilities Act regulation meant to protect workers who are gun-shy in public restrooms. According to an informal discussion letter the U.S. Equal Employment Opportunity Commission issued in August 2011, “paruresis” — more commonly known as “shy bladder syndrome” — qualifies as a disability under the amended Americans with Disabilities Act. …If every employer large enough to be subject to the ADA were to hedge against future lawsuits by adding segregated restrooms for timid tinklers, the cost would exceed the gross domestic product of many small nations. …Failure to comply with EEOC regulations could open businesses up to potential lawsuits from shy leakers because, according to the commission, employers must provide reasonable accommodation for employees with disabilities. The EEOC reports that the median cost of complying with an ADAAA-covered disability is just $240  – substantially less than the thousands of dollars it could cost to accommodate a social phobia by building a new bathroom.

I’m not a big fan of going to the bathroom in front of other people, so I’m not unsympathetic to those who don’t like crowded public restrooms. And I certainly can sympathize with those who don’t like having to pee in a cup for a silly drug test.

But I also believe in common sense, and that’s one thing that’s often missing at regulatory agencies. If you think this story is out of character, then consider these examples.

• Putting a store out of business for selling toy guns.
• Regulations making it difficult for trucking firms to weed out drunk drivers.
• Year-long sting operations by federal milk police.
• Rules harassing coffee shops with bikini-clad sales staff.
• OSHA requirements for expensive safety harnesses for people working 11 feet off the ground.

Gee, it’s almost enough to make you think regulation is part of the problem, not the solution.

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Good and Bad News in International Survey on Regulation

Even when the results coincide with my views, I have a jaundiced view of polling data. In large part, this is because the answers often depend on how a question is framed.

That being said, I periodically link to polling data about economic policy if I think we can glean some insight from the data.

I assume, for instance, that trends can be accurately detected if the same question is asked year after year, regardless of whether the question is fair or slanted.

This is why I posted this poll showing that Americans are increasingly hostile to the federal government.

Similarly, I showed this data on how a growing number of Americans see the federal government as a threat to freedom and liberty.

I also like multi-country polls. Whether the questions are straightforward or tilted, you can at least learn something about differences in national attitudes.

One of my favorite polls, for instance, compared the degree to which Americans and Europeans think it’s okay to mooch off government.

I’m not sure, though, how to react to this latest survey data. Published in the New York Times, it shows widespread global support for more regulation. Here are the results (click the image to enlarge).

These results obviously are not good news for supporters of deregulation – especially since the burden of red tape already is so onerous.

The only bit of good news, at least for American chauvinists, is that people in the United States are more likely than others to think there is “too much” regulation.

But if you look at the data from a different perspective, people in Singapore and Sweden are least likely to say there’s “not enough” regulation.

The most puzzling bit of data is that people in Hong Kong appear to be the most sympathetic to regulation. Considering that Hong Kong is the most economically free jurisdiction in the world, this doesn’t make much sense.

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Measuring One Part of the Bush-Obama Regulatory Onslaught

Have you ever tried to run in waist-high water? It’s not easy, but it’s a useful exercise if you want to experience what it’s like to comply with government rules, regulation, paperwork, and red tape. Especially if you want to understand why it’s getting harder for American companies to compete against firms from other nations.

The Wall Street Journal reports on some new numbers released by the White House Office of Management and Budget.

The effort needed to comply with federal bureaucracy now has a number. According to new government estimates released this week, Americans spent 8.8 billion hours filling out government forms in fiscal 2010. …In all, the paperwork burden has increased by around 19% over the past decade, up from 7.4 billion hours in fiscal 2000, the White House Office of Management and Budget said.

The article explains that there is plenty of blame to go around, showing that politicians of both parties seem perfectly happy to bury Americans under a mountain of red tape.

Between 2002 and 2005, federal agencies reported significant increases in paperwork demands. Republicans controlled Congress and the White House for almost all that period. In 2005, laws including the Bush administration’s Medicare prescription-drug overhaul, created what is now estimated to be an extra 250 million paperwork hours. At the same time, the biggest single-year jump in the past decade came in 2010, when individuals and businesses spent an extra 352 million hours responding to paperwork requests from agencies prompted by new statutory requirements.

Some of the example will help you understand why the economy is having trouble creating jobs.

Last year, employers needed almost 70 million additional hours to claim a new credit for hiring more workers, and restaurants spent 14.5 million hours to display calorie counts for their menus, according to figures submitted to OMB by the departments of the Treasury and Health and Human Services. In fact, the Treasury was the source of most of the paperwork burden in 2010, hitting 6.4 billion hours, or 73%. …The winner of the largest year-on-year increase was the Securities and Exchange Commission, which decided it actually took twice as long to complete its forms than it previously thought, upping its estimates to 361 million hours from 168 million. A spokesman declined to comment.

The real cost of all this regulation is measured in lost economic output, jobs not created, and mandated inefficiency. According to the Small Business Administration, that amounts to a whopping $1.75 trillion per year.

But if you just want to measure the cost of the man-hours required, the Administration has an estimate.

The OMB said it hadn’t attempted to put a financial cost on the paperwork requests, but noted in its report that “it is clear that the monetary equivalent would be very high. For example, if each hour is valued at $20, the monetary equivalent would be $176 billion.”

Considering much of the compliance burden falls on the business community, the $20 per-hour figure is obviously way too low.

But whatever the actual total, remember that the man-hours are just one small slice of the burden.

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Obama’s Column against Over-Regulation: Insincere, Inaccurate, and Hypocritical

The President garnered some attention for his January 18 column in the Wall Street Journal, in which he said we need to control the regulatory burden.

Let’s start with the insincere part. He praised capitalism.

America’s free market has not only been the source of dazzling ideas and path-breaking products, it has also been the greatest force for prosperity the world has ever known. That vibrant entrepreneurialism is the key to our continued global leadership and the success of our people.

I’m not really sure how to analyze this passage. Let’s just say it is akin to George W. Bush talking about the need for small government and fiscal responsibility.

Obama then talks about the need for balance, saying that regulations sometimes are too onerous, but then he gets to the inaccurate part.

…we have failed to meet our basic responsibility to protect the public interest, leading to disastrous consequences. Such was the case in the run-up to the financial crisis from which we are still recovering. There, a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.

I don’t know whether to laugh or cry at this statement. A part of the government, the Federal Reserve, creates far too much liquidity with an easy-money policy. Other government-created entities, Fannie Mae and Freddie Mac, then create enormous subsidies for bad housing loans. These combined policies lead to a bubble that bursts, and Obama wants us to believe it was a problem of inadequate regulation?!? For those who are interested, here’s a good article from the American Enterprise Institute explaining how government caused the financial crisis.

Now let’s get to the hypocritical part, where the President issues a new executive order, asserting we need to balance costs and benefits.

As the executive order I am signing makes clear, we are seeking more affordable, less intrusive means to achieve the same ends—giving careful consideration to benefits and costs. This means writing rules with more input from experts, businesses and ordinary citizens. It means using disclosure as a tool to inform consumers of their choices, rather than restricting those choices.

I suppose we should give the President credit for chutzpah. Less than one month ago, his Administration proposes an IRS interest-reporting regulation that, in a best-case scenario, will drive tens of billions of dollars out of the U.S. economy. That regulation does not even pretend there are any offsetting benefits, yet Obama says his Administration will be diligent in applying cost-benefit analysis. This is sort of like a kid murdering his parents and then asking a court for mercy because he’s an orphan.

But that example is just the tip of the iceberg. Diana Furchtgott-Roth has a column for Realclearmarkets, where she dings the President for absurd regulations dealing with everything from gender quotes in the Dodd-Fran bailout bill to offshore drilling regulations that have thrown tens of thousands into unemployment lines.

And David Harsanyi, writing in the Denver Post, nails the White House for several examples of regulatory excess, including the EPA’s power grab, the FCC’s unilateral attempt to regulate the Internet, and the nightmarish rules that will be required for government-run healthcare.

Right now the EPA is drafting carbon rules to force on states, even though a similarly torturous 2,000 pages on a cap-and-trade scheme intending to make power more expensive was rejected. Maybe there’s something in that pile of paper to mine? Right now, the FCC is shoving net neutrality in the pipeline — again, bypassing Congress — so government can regulate the Internet for the first time in history, though the commissioners themselves admit that, as of now, any need for rules are based on the what-ifs of their imaginations. There exists no legislation more burdensome and expensive than the “job-crushing” (not “job-killing,” because, naturally, we can’t stand for that kind of imagery) “Patient Protection and Affordable Health Care Act,” formerly known as Obamacare and presently being symbolically repealed by House Republicans.

Obama’s insincerity, inaccuracy, and hypocrisy are unfortunate. The burden of regulation is now estimated to be about $1.75 trillion. Counterproductive red tape is hidden form of taxation that impedes the economy’s performance, and that means less prosperity for America.

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Strangling Entrepreneurship and Job Creation with $1.75 Trillion of Regulation and Red Tape

A new study from the Small Business Administration’s Office of Advocacy concludes that annual regulatory costs jumped by nearly $600 billion between 2005 and 2008. Thanks to the Obama Administration’s big-government agenda, the burden of red tape today doubtlessly is much higher, but the 2008 estimate is enough to generate some very sobering numbers. A $1.75 trillion regulatory cost works out to be more than $15,500 for every household and more than $8,000 for every employee in the country. Red tape is especially challenging for smaller firms, as noted in these key findings from the summary:

The research finds that the total costs of federal regulations have further increased from the level established in the 2005 study, as have the costs per employee. More specifically, the total cost of federal regulations has increased to $1.75 trillion, while the updated cost per employee for firms with fewer than 20 employees is now $10,585 (a 36 percent difference between the costs incurred by small firms when compared with their larger counterparts).

To be sure, some forms of regulation, such as environmental protection, generate benefits. There generally are not good estimates needed to produce cost-benefit analyses, but it is quite likely that the costs are much higher than necessary – particularly for economic regulation, the burden of which is more than three times larger than the costs of environmental regulation.

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Two More Reasons to Hate Taxes

When all you have is a hammer, everything begins to look like a nail. That old saying makes a lot of sense. As a tax economist, I’m sometimes guilty of looking at all sorts of issues based on their relationship with the tax code. In my defense, however, the tentacles of the IRS now reach into almost every nook and cranny of our society. And greedy tax collectors on the state and local level make a bad situation even worse. Two things from today’s inbox illustrate my point.

First, you may remember that the IRS is going to be a chief enforcer of Obamacare. Well, our friends at the tax collection agency have just released a draft form for the “credit for small employer health insurance premiums.” We already have a tax system that takes up 72,000 pages and requires more than 1,000 different forms and publications, but now we can add 25 more lines of mind-numbing, eye-glazing bureaucratese, all of which doubtlessly will lead to innocent mistakes that cause many more taxpayers to have nightmarish interactions with the IRS. (click here to see a full-size version of the form)

Second, here’s an article on telecommuting which largely focuses on the environmental and quality-of-live advantages of people working from home. What does this have to do with taxes, you ask? It turns out that greedy state politicians have an annoying tendency of trying to tax people who live elsewhere. This form of taxation without representation imposes both bureaucratic and economic barriers that hinder an otherwise desirable development.

Possibly the biggest barrier to telework are state tax laws. Many states implement some form of double taxation on out-of-state teleworkers. For example, New York applies a “convenience of the employer” doctrine on out-of-state teleworkers who work for a New York–based organization, which requires them to pay income tax to New York for telework days outside of the state. All work done outside of New York is subject to New York income tax, unless the work is done outside of New York out of necessity to the employer . In 2005, the New York State Court of Appeals upheld the “convenience of the employer” doctrine in Huckaby vs. New York State Division of Tax Appeals. Thomas Huckaby, a Tennessee resident, worked for a New York–based company, but teleworked 75 percent of the time. On his New York State nonresident tax returns, Huckaby allocated 25 percent of his income to New York, and 75 percent to Tennessee; however, the New York State tax department determined that Huckaby should have paid New York income tax on 100 percent of his income. The court sided with the New York State tax department, stating that the doctrine was constitutionally applied. As many as 35 states have some form of double taxation for teleworkers.

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