Obama’s regulation review is probably a non-event

To much fanfare yesterday, President Obama announced an executive order regarding his new pro-business approach.  No doubt, the President is aware of the generally tepid support he has been receiving from the business community.  This should not be shocking to the President (or anyone else), since his administration has been responsible for massive new laws that generally increase the regulation of, and control over, American business. 

 For example, a September 2010 report published by the U.S. government’s Small Business Administration found that:

  1.  The total cost of federal regulations has now increased to $1.75 trillion;
  2. The cost of federal regulation per employee for firms of all sizes is $8,086 annually; and
  3. Business with 20 employees or less pay a greater cost per employee for federal regulation, at $10,585.

Announcing his stated desire to lessen this burden, the President wrote in an op-ed piece published in the Wall Street Journal on January 18:

 … today, I am signing an executive order that … requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.”

 So, I read the executive order with interest.  Here are some initial observations:

  • With the exception of the items which follow, the Order is the same as what currently exists.  New regulations already (i) go through a public hearing process, and (ii) include the regulator’s estimate of the cost and other impact of compliance.
  • The meat of the Order presumably requires a “Retrospective Analysis of Existing Rules”.  But, the Order merely requires the regulators to submit a plan under which they may consider future reviews.  There is nothing that must change, as follows: 

Within 120 days of the date of this order, each agency shall develop and submit to the Office of Information and Regulatory Affairs a preliminary plan, consistent with law and its resources and regulatory priorities, under which the agency will periodically review its existing significant regulations.”

  • By invoking Executive Order 12866, the Order exempts all “independent agencies”.  So, important regulators such as the Securities and Exchange Commission, the Federal Communications Commission, and the Consumer Financial Protection Bureau can ignore even the requirement to plan to perform a review.
  • In an encouragement for additional regulation based on the regulator’s subjective bias, Federal agencies are allowed to:

… consider (and discuss qualitatively) values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.” 

Despite these shortcomings, who could initially disagree with President’s Obama’s ending paragraph in his Wall Street Journal op-ed piece, which reads:

This is the lesson of our history: Our economy is not a zero-sum game. Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary. But what is clear is that we can strike the right balance. We can make our economy stronger and more competitive, while meeting our fundamental responsibilities to one another.”

 This concluding paragraph is the fourth time that President Obama used the word “balance”.  But, upon reflection, I must say that I remain concerned. 

The perception of “balance” depends upon whether you are the giver or receiver of the regulation.  Does anyone think that the regulators who propounded the original regulations ever described their actions as unbalanced?  This brings to mind a saying from my Midwest roots that whether something is perceived as fair “depends on whose ox is being gored “.  It is the American employer’s ox who is getting the worst of this “balance”.  As the giver of the regulation, there is no doubt that President Obama’s administration will find that “balance” has been reached well before the businesses who need to comply with such regulations will reach the same conclusion.

I suspect that we will not see any dramatic changes.  Unless some real punch is put behind this, the review required by the Order will trigger little real change, and what little change does occur will occur at a glacial speed.  I hope that I am wrong.

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  1. […] mid-January 2011, President Obama announced a business regulatory review. A prior blog entry indicated that this was likely a non-event.  Sadly so far, there has been no major de-regulation of American business under the Obama […]

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