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Wanted: A Real Deregulatory Revolution


Jennifer Crafts exemplifies the best of American entrepreneurship. She wanted both to work and to spend more time with A.J., her infant son. So she opened a restaurant-A.J.’s Place- and put A.J. in a playpen next to the kitchen. The customers were almost as happy as Jennifer to have him around. Explained regular Richard Reynolds, “Everybody likes to see him. He’s an adorable child.”

Everyone except the government, that is. Health inspectors visited and told Jennifer that A.J. had to go. She shouldn’t be changing diapers and handling food, they explained. (Presumably, they were unfamiliar with such modern conveniences as the wash basin.) Also, A.J. might get hurt. Jennifer had to go to court before she could reopen her restaurant.

Unfortunately, this sort of ludicrous story is commonplace. There are few aspects of the workplace (and increasingly, the rest of life) exempt from governmental meddling. Federal controls, supplemented by state and local rules, raise business costs, which destroy jobs and hike consumer prices. All told, figures Thomas Hopkins, an economics professor at the Rochester Institute of Technology, regulation is costing $400 billion a year, or about $4,000 per household. That comes to a 13 percent reduction in the average household’s standard of living of $32,000 annually.

The largest single source of regulatory costs is what Professor Hopkins terms “process regulation,” particularly due to various paperwork and reporting requirements. Environmental controls account for the second largest regulatory burden. Almost as costly is economic regulation, such as trade barriers and entry restrictions in particular industries. Lost efficiency from regulation comes next, followed by social regulation–such as the Consumer Product Safety Commission.

As of late last year, 59 different agencies were working on 4,863 regulations, of which 919 were new additions to their agencies’ agendas. In fact, 1991 saw the sharpest increase in more than a decade in the number of pages in the Federal Register-up 26 percent to nearly 68,000, the most since 1980.

Not surprisingly, the number of regulators and regulatory spending have increased sharply. Today more than 122,000 federal bureaucrats-even more than in President Jimmy Carter’s record-setting year of 1980-are drafting regulations. Outlays by regulatory agencies, too, have grown steadily, to more than $13 billion annually.

Consider just a few areas where federal regulations have been extended. Based on dubious statutory authority, the EPA imposed wetlands rules requiring federal approval for even the most basic uses of an estimated 100 million acres of land, much of which was ordinarily dry. Landowners have been prosecuted or threatened with prosecution for removing trash, adding fill dirt, repairing a levee, installing a tennis court, plowing land, and planting crops without an Army Corps of Engineers permit. All told, as much as five percent of U.S. land, including about 75 percent of Alaska and half of all farmland, arguably fell within federal jurisdiction under the EPA’s original regulations, now being revised by the administration.

In early 1992, after three and one-half years of work, the Internal Revenue Service issued complicated new pension rules barring “discrimination” against lower-paid employees. The IRS gave most companies less than four months to comply with detailed requirements on adjusting pensions for retirement age, and so on.

In 1989 Congress upped the minimum wage from $3.35 to $4.25 over a two-year period. Existing food-labeling law was dramatically overhauled by the Nutrition Labeling and Education Act, which ran some 700 pages. The law requires companies to use FDA-approved terms, list nutritional information in an FDA-specified manner, and only make FDA-backed claims. The law is expected to force changes in 257,000 different labels and could cost firms an estimated $3 billion or more.

The Pollution Prevention Act requires manufacturers that use one or more of 300 specified chemicals to prepare a detailed annual report on their use. Writes former CEA Chairman Murray Weidenbaum, “Ecologists should mourn for the trees that will be cut down to provide the paper for all the reports that will be prepared” under the law.

As onerous as these various provisions are, there are even more burdensome laws coming into effect. Of particular significance are the Civil Rights Act, the Americans with Disabilities Act, and the Clean Air Act.

The Civil Rights Act of 1991. The Civil Rights Act was agreed to after two years of nasty debate. The regulation at issue—the legal standard for convicting firms of discrimination-goes back to a 1971 Supreme Court case in which the Court ignored the clear purpose of the law and ruled that Title VU did not require plaintiffs to demonstrate discriminatory intent. That is, a firm could be successfully sued if its practices had the effect of discriminating against minorities. In 1989, however, the Court changed course, setting a different standard: to collect damages a plaintiff had to prove that discrimination had actually occurred. The 1991 legislation shifted the burden of justifying employment practices back onto the employer. The result will be litigation expenses and lost economic productivity, as well as the socially costly divisiveness of turning private employment even more into a racial spoils system.

The Americans with Disabilities Act. Promoted as a natural extension of the Civil Rights statutes, the ADA will cost about $2 billion annually, but the number could go far higher because the ADA combines two different regulatory approaches: redesign for physical plant and quasi-affirmative action for disabled applicants and employees. Notably, what the ADA does not do is simply bar discrimination on the basis of disability, as would an analogue to traditional civil-rights laws. Rather, the law requires firms to undertake potentially expensive “accommodations” for disabled applicants and employees. Moreover, the statute, even more ambiguous than the civil-rights laws, will prove to be a lawyers’ full-employment art.

The Clean Air Act. The first Clean Air Act was passed in 1963 and has been amended several times. The latest version, approved in November 1990, runs nearly 800 pages (twenty times the length of the original law!) and is incomprehensibly complicated. The law explicitly calls for the development of 400 sets of new regulations-which are expected to fin up at least 7,000 pages–and will require states to revise their “implementation plans.” It is perhaps no surprise, then, that the Bush administration boasted that its 1993 budget “provides an all-time high level of funding and staffing for EPA’s operating program.

To discuss the bill in much detail risks putting readers to sleep. Suffice it to say that the statute, which consists of seven separate titles, tightens up existing law virtually across the board. The law is hideously inefficient-relying on command- and-control dictates, attempting to eliminate minimal risks at very high costs, and requiring ever more businesses to get ever more permits for ever more modest changes in their operations. Estimates of the annual expense of complying with the law range up to $40 billion, which will come on top of what the EPA today estimates to be $155 billion in annual compliance costs. Unfortunately, however, these direct costs do not take into account the price increases of various goods and services throughout the economy; as a result, the real cost of environmental regulation may run twice as high as is commonly thought.

What is needed in America today is nothing more than radical rethinking of the role of government in our society. While there are a few issues where there is no obvious free-market solution–how to clean up the air in Los Angeles, for instance–they are few in number. In most cases, the solution is not to streamline the rules, but to get rid of them–and constitutionally to eliminate the power of government to enact them.

Only when we reconsider the very appropriateness of government regulation itself will we have a chance of reining in the federal behemoth gone mad. And only then will we have a chance of reclaiming the promise of freedom and prosperity that originally accompanied the founding of this nation.

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    Doug Bandow is vice president of policy at Citizen Outreach, the Cobden Fellow in International Economics at the Institute for Policy Innovation, a senior fellow at the Cato Institute, and serves as adjunct scholar for The Future of Freedom Foundation. He is a former special assistant to President Reagan; he is also a graduate of Stanford Law School and a member of the California and D.C. bars. BOOKS BY DOUG BANDOW: Leviathan Unchained: Washington’s Bipartisan Big Government Consensus (forthcoming) Tripwire : Korea and U.S. Foreign Policy in a Changed World (1996) Perpetuating Poverty : The World Bank, the Imf, and the Developing World (1994) The Politics of Envy : Statism As Theology (1994) The U.S.-South Korean Alliance : Time for a Change (1992) The Politics of Plunder : Misgovernment in Washington (1990) Beyond Good Intentions : A Biblical View of Politics (1988)