Obama, regulations and the economy

Republicans have been hammering President Obama over “regulations” lately, saying that they have been hurting the economy and are partially responsible for our slow growth. Its a fairly powerful claim. The Obama administration has gotten a reputation as a prolific regulator since their health care reform and financial reform bills  passed, so this claim seems to stick. But this accusation is also extremely vague. What regulations have been hurting the economy? How? Are there more regulations than usual? How does this compare to other countries? Are there other beneficial effects of the regulations passed?

In short, simply making the claim that “regulatory burdens are hindering job growth” leaves a lot of  information out of the picture.

Obama recently has been fighting the Republican-derived moniker of “regulator-in-chief.” Earlier this year, he ordered a government-wide review of all regulations on the books. As a result, the administration “produced reform plans from 26 agencies. A mere fraction of the initiatives described in the plans will save more than $10 billion over the next 5 years; as progress continues, we expect to be able to deliver savings far in excess of that figure.” In addition, the President just nixed a proposed regulation that would have reduced ground-level smog, because of the complaints of his critics. So, the White House has made  a concerted effort to reduce regulations on businesses.

The White House also noted this interesting tidbit: “‘the costs of final, economically significant rules reviewed by the Office of Information and Regulatory Affairs were actually higher in 2007 and 2008 than in the first 2 years of my Administration.’ He also argued that in 2009 and 2010, the benefits of those rules ‘exceeded the costs by tens of billions of dollars.'” There were  more costly regulations coming out of the Bush White House than out of the Obama White House? How can anyone complain about Obama’s regulations when they have been no more taxing than those under his regulation-averse predecessor?

Now for the international picture. Is the business environment in the US making us less competitive in the global economy? The answer would appear to be no. Conservative stalwarts The Wall Street Journal and the Heritage Foundation put together a list every year called the “index on Economic Freedom. This year’s Index (scaled to 100) puts “business freedom” in the US at a 91 (the world average was 64). This ranks the US ahead of comparable countries like France and Germany and light-years ahead of the  Brazilians and Chinese on that measure. The US also had an almost perfect “labor freedom” score of 95.7. These good scores  indicate that, in the big picture, regulations are a very small burden on US companies. Even using conservative measurements, regulations are not making the US significantly less competitive in the world economy.

Its  also important to note that the Obama administration is only currently considering six proposed regulations that would have an impact of $1 billion or more. A billion is a lot of money, don’t get me wrong, but it doesn’t really matter in the grand scheme of a $14 trillion economy.

This debate is especially important  now as Obama is  about to make a huge speech outlining ways to improve the economy and put people back to work. His speech will likely advocate spending money on programs that boost consumption and put people to work repairing our crumbling infrastructure. Doing this would be an opportunity we can’t afford to miss. But Republicans will likely counter that cutting spending and de-regulating are the best ways to employ people. They are wrong  on spending while the Obama administration is already aggressively targeting costly regulations. Not that it matters much anyway, because regulations just don’t have very much effect on the economy. “Getting rid of regulations” makes a great tag-line, but it just won’t lead to that many more people getting jobs (though it may harm public health).

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