Regulation Control and economic miracles View 687 20110809

View 687 Tuesday, August 09, 2011

· das Wirtschaftswunder

· A Small Proposal that Might Work

· Going a Bit Further with Reform

· Fallen Angels with Afterword available

Regulation Control

We know the keys to economic growth: cheap energy and a free economy. Actually that boils down to one key, since a free economy would result in a rapid fall in energy costs. Imagine, for a moment, that the government announced the end of all Federal regulations for ten years. State laws still apply. The laws against fraud still apply. But all other regulations – Americans with Disability Act, OSHA, EPA, all of them – simply do not apply for a decade. The result would be an economic explosion that would outshine the German Economic Miracle, das Wirtschaftswunder, that followed the elimination of economic regulations and controls in occupied West Germany after World War II. (Note that East Germany remained under Soviet occupation and followed the Socialist path; the Germanies were united after 1989, and East Germany is only now recovering from its years of socialism).

A ten year moratorium on all Federal economic and environmental regulations – leaving all that to the states – would bring about an American economic miracle. It would take a year or two for the states to begin to compete in offering free economic environments, although some are already in a pretty good position that way, but just the anticipation would produce dramatic effects.

Of course this isn’t going to happen. It wouldn’t happen even if 80% of the American people wanted it. The government isn’t structured to respond to such things. What would all those Federal employees who are now employed enforcing those regulations do? What would the Bunny Inspectors do? Why would we need SWAT teams to enforce regulations that are no longer being applied? The whole think is ridiculous, which means that we will continue to enforce the present system even as it chokes us to death.

Is there a solution, short of turning out every member of Congress and replacing them with people drawn at random from the taxpayer rolls? I guarantee you that if Congress were elected only by people who have paid more than $500 in income taxes in the previous year we would have a lot more economic freedom. The only thing worse than taxation without representation is taxation with representation in which the people represented are entitlement consumers rather than those obliged to pay for those entitlements. If you think things are bad now, wait until we are forced to have a “balanced” solution to Deficit Reduction: recalling that the President has already announced that we have made all the cuts we can make, so the balance will have to be by raising taxes. We haven’t seen the last of the Deficit Dance.

But note that none of the proposals for reducing the Debt seem to involve economic freedom. The US has more than enough energy resources to spark the energy part of a new economic miracle. Of course we haven’t built a new refinery in what, twenty years? Solving those problems are easy. Drill, baby, drill. Approve the pipeline from Canada. Get out there and frack. If all that were done with the urgency with which we responded to Pearl Harbor, we’d be out of the energy crisis in a year or two. Why is no one discussing that remedy? Which, by the way, certainly would produce some revenue; there’s no reason at all why there should not be taxes on oil and natural gas production. But again that’s another story. The point here is that we aren’t even discussing reducing the Deficit by producing more energy domestically and thus avoiding sending hundreds of billions to the Middle East.

Nor, so far as I can tell, were any of the Plans presented in the Deficit Dance concerned at all with permanent or temporary deregulation. OSHA, Americans with Disabilities, Rabbit Protection , all kinds of EPA regulations: none of them suspended nor was there any discussion of suspension. Economic freedom simply is not an item for discussion in these great master plans.

What Can Be Done?

There is one very simple thing Congress can do almost instantly that might have a dramatic effect on economic growth. We have already in place regulation exceptions for small businesses. Some are for businesses with ten or fewer employees. Others apply if your business has fifty or fewer. There may be exceptions for those with 100 or fewer, although I am not sure of that.

My proposal is simple: double the exception numbers. Regulations that apply only to businesses with more than ten employees now apply only to those with more than twenty. Those that apply to more than fifty now apply only to those with more than a hundred. Etc. The effect would be to let successful small businesses expand easily. Those that have been making do by using part time employees can now let them become full time. Regulations would remain in place, but now they apply to fewer businesses. This would take effect immediately and be in place for ten years.

I suspect that the effect would be dramatic. Possibly it would not, but it isn’t going to hurt the economy, and who knows, if that produces economic growth and job creation, it might cause our masters to consider changing the darned regulations.

Going Further

I’d go further. I’d do the exception for small businesses, but then I’d suspend all regulations, that to take effect in one year. During that year a bi-partisan commission would specify which regulations we just couldn’t get along without, outlining why they were important enough to be enforced in a time of economic crisis. Each and every one of that darned things would have to be specified: Federal licensing of stage magician rabbits; protection of endangered species; occupation health and safety; disability acts such as not allowing an employer to fire drunks because alcoholism is a disability; FDA insistence on effectiveness of drugs as opposed to insisting on proper labeling and safety; minimum wage acts; Federal environmental regulations; all of the thousands and thousands of pages of regulations. In each case there would have to be specification that this needs to be Federal, and cannot be left to the states; and specification that it is urgent and there would be great harm from not enforcing this now even during an economic crisis.

Every member of the commission would have to sign the specification. The name would be on record. The specification would not merely say that, say, Federal licensing of stage magician rabbit keeping is a nice thing to do, but that it is something that urgently needs to be done in dire economic times, or that some EPA specification that adjusts the allowable amount of a substance down because we have discovered a more sensitive means of detection although there is no evidence whatever that the level change has any effect on health; that sort of thing. Any of the regulations and crazy laws that the commission did not certify with specification of urgency would be suspended for ten years. Any regulations overlooked that urgently needed to be restored could be restored by a majority vote in each house, but the vote would have to be a single item vote – they could have a hundred in an hour, but it would still be a single item vote – with the yeas and nays recorded.

Of course this won’t happen. We’ll still have Bunny Inspectors for decades. Some people will make a lifetime career of pursuing stage magicians to be certain they have a federal license to use rabbits in their stage shows.

But wouldn’t it be nice?

Meanwhile, I am dead serious about doubling the exemption levels. That wouldn’t produce a miracle, but it would be a long step in the right direction; and it might get people thinking about why have the regulation at all. I’ll repeat the proposal: businesses exempted from Federal regulations by reason of having fewer than some number of employees are now exempted until they have double that number. To take effect immediately. That could be get through Congress in a week after they get back from vacations.

All of you going to town meetings should think about proposing it. If it gets enough suggestions, who knows what might happen. I see no reason why it should not be adopted. If we can live with the effect of a suspension for businesses with fewer than 10 employees, the Earth will not tremble if we raise that exemption to twenty.

I was going to write an essay on real budget cuts, but I got this today, and it saves me the work:

Real cuts

It’s disappointing that real cuts seem impossible even to debate. Perhaps if the public were more fully aware of the magnitude of the issue, more could be done. I’d love to see a series of interviews, press conferences, and ads promoting the idea of simply returning to the worst over-spending of the Bush years.

It would be easy enough to show many people stating that the Bush spending was unreasonably high; that can be agreed on. Anyone, in either party, who agrees that that’s too much can say so. Anyone who supported it then but sees it as a mistake now, can apologize. Yet any proposal to take us there would be portrayed as a "draconian cut."

That level of spending is not ancient history; it should not be inconceivable to go back to it. Write a full budget that takes us back to it in one year. Start working on it as soon as possible, and promoting it early and often. It may be reasonable to make concessions to higher spending (adding the increases to interest on the debt, increases due to population or inflation, etc.), but it would make a wonderful starting point for negotiations in the first year, perhaps fully bringing us back to that spending level in, say, two or three more years.

Beyond that, many people at the time (myself included) saw the spending of the Clinton years as too much; but it’s widely praised as the best times the country’s ever seen. So, set as a goal returning to that (with flexibility on adjustments for inflation, the aftermath of 9/11, etc.), within a decade or so.

Those would be real cuts. And they’re well within living memory for the vast majority of the electorate. But it seems that any real cuts need to be explained clearly and repeatedly, to a wide audience, or else they can be successfully demagogued as cruel and heartless.

And when asked how we can get there, perhaps supporters can start off by citing the Federal Bunny Inspectors.

Thanks for your site. It’s the one I miss most when I’m away from the web for a few days.

—

Steve Carabello

Of course you already have accepted that the Federal government is too large and ought to shrink; as I have (and did back in Reagan’s day). Next Fall’s election will be a national referendum on that proposition, or should be. And can be if we insist. Should the government grow at 5% compound interest rate or shrink at 1% compounded? I’d love to just put that to the people.

Fallen Angels

Amazon has announced that all who bought the older edition of Fallen Angels that lacked the Afterword by Niven, Pournelle, and Flynn can now go to the “Manage Your Kindle” page and arrange to download the updated copy free. They have sent notices to that effect, but your spam filter may have eaten that. If you haven’t bought Fallen Angels, this is a good time to do it. The book is still relevant.