Regulations: Sacrificing sanity for Political Correctness

by Judy Cresanta

hen a law is passed in Congress or at the state level
and signed by the President or a governor a process begins which many are not aware of… a process which sometimes perverts the intent of the original bill and in some extreme cases changes the bill altogether. This bill, which has undergone public scrutiny by lobbyists and undergone hours of hearings in most cases, leaves the hands of law makers and goes to the appropriate department for the addition of rules and regulations necessary to uphold and monitor the law. At the federal level this is called the regulatory process. At the state level it’s often called the "addition of the Administrative Code."

What most people are unaware of is that this regulatory addition carries with it the weight of law. Seldom is this process monitored by those most concerned about the outcome of the new law and seldom is the outcome of regulation measured in terms of economic impact. This activity, which amounts to a tax, is executed by bureaucrats who are never elected by taxpayers and to make matters worse there is no real mechanism in place to cause law makers to oversee these bureaucrats or the regulations they invent.

The cost of federal regulations are the highest they have ever been in U.S. history. Regulations impose costs on businesses and consumers alike by requiring them to fill out volumes of paperwork and consume countless man hours. This causes productivity to go down and sacrifices business profit margins. When profit margins are gouged, employers have a more difficult time providing competitive wages and benefits for their employees, often deferring growth and expansion which ultimately costs local economies. In 1995 dollars, it cost small firms more money to comply with regulations than large firms. A business with 20 or fewer employees in manufacturing costs the employeer approximately $9,000 per employee for regulations. A business that is involved in international trade costs $4,500 per employee. For a business in the service sector the cost is $4,500. For a business that has between 20 employees and 499 employees, regulations cost close to $11,000 per employee. Trade: $3,900. And the service industry: $3,900.

In all, Americans spend about $500 billion per year on regulations, or $5,400 per household. Perhaps it would be worth it if these regulations always made our world a better place to live in but more often than not regulations are intrusive, sacrificing common sense for one size-fits-all application, and economic sanity for political correctness and junk science.

Regulations: The Hidden Tax

Individually, poorly conceived regulations harm taxpayers in many ways. They make us poorer, costing families almost 10 percent of what they earn. This "regulatory tax" lessens our ability to buy better homes, food, clothes, cars and even toys for our kids. In extreme cases they can even threaten our health and our lives. A Harvard study estimates that by diverting funds from high risk, low cost problems to low risk, high cost problems, an additional 60,200 people needlessly die every year. Consider one example of costly regulation.

Corporate Average Fuel Economy

Environmentalists have long employed questionable means to achieve their ends. One of the most damaging methods employed is "junk science." It’s exactly what it implies. The junk scientist claims, "The world’s natural resources are being depleted at alarming rates, thus posing a threat to national security by increasing our dependence on foreign oil." True or not true? Not true. But that bit of junk science has been the prime mover in constructing the regulatory timetable of the CAFÉ bill in this country—the Corporate Average Fuel Economy bill. Under CAFÉ, automobiles must attain certain fuel efficiency goals by certain years. The ante goes up just about every year, thanks to Richard Bryan, chief sponsor of CAFÉ. There is nothing wrong with the goal of more efficient fuel economy but the cost both in expense and human lives has been outrageous. In order to comply, the auto industry responded by replacing heavy steel parts in cars with plastic parts. They weigh less which can be translated into more miles per gallon. But the unpublished result is 20,000 lives a year.

Lighter cars cannot protect their occupants as well as steel cars in the event of a collision. Now take that a couple steps further. The new technology made cars more expensive, the real costs in auto insurance went up, health insurance increased, disability and life insurance went up. For those in business requiring the use of automobiles expenses rose commensurately. A few law makers have noticed these "unforeseen consequences." So what is their solution? A tax on SUVs — Sport Utility Vehicles. Since SUVs inflict even more damage on plastic cars than other plastic cars, let’s penalize their owners for the irresponsible choice they made in purchasing such a vehicle in the first place.

Here’s another example of how regulations cost lives. There is such a thing as off-label drug use regulation. Drugs approved for one use often end up getting prescribed for others. It’s legal to do so, but the FDA forbids drug companies from advertising these uses. So Aspirin companies, for example, can’t tell people that taking the pain killer regularly in very small doses can cut the risk of heart attacks in half.

Or how about the new Medicare regulations? Now it’s illegal for anyone over the age of 65 to privately contract with a physician for health care. In addition, physicians are required to release patient information to the federal government under pain of four years imprisonment. Not only does quality of care get sacrificed, patient privacy is non-existent.

Pass the Buck

Those who have followed bills through the legislative process are aware that there are often political reasons for "drop-kicking" expensive consequences to the regulators. First, it’s politically convenient. How many times do you see written on a bill when the Legislative Counsel Bureau is supposed to evaluate the cost that the economic impact as zero? This avoids a bill having to go to Ways and Means Committees in both houses plus it technically does not involve "direct taxation," thus avoiding having to go to a taxation committee. The political capital of the legislator is spared in an environment of fiscal budgetary constraint. Second, regulation acts as a hidden tax because it is passed on to consumers, employees and employers – making those costs harder to measure and track while keeping the legislator insulated from responsibility. One way to change the role of government and regulation is to demand that such costs be itemized. After all, how can we vote intelligently on issues when essential information is kept from us? NPRI recently devised the Right To Know Payroll Form which itemizes on an employee’s pay stub where all the money goes. Why should the employer bear the responsibility of the politician’s actions? Why shouldn’t the employee have full disclosure regarding his earning potential without government regulations?

And the Beat Goes On

Aside from Social Security, Medicare, Federal Unemployment Insurance, and state unemployment insurance, liability insurance, health insurance retirement benefits, you could also itemize the cost of every regulation generated by any of the following bills:

The Davis Bacon Act Fair Labor Standards Act Workers’ Compensation Equal Pay Act of 1963 Service Contract Act of 1965 Americans with Disabilities Act of 1990 The Family Medical Leave Act Minimum Wage Title VII of the Civil Rights Act of 1964 Age discrimination in Employment Act of 1967 Executive Order 11246 (non-discrimination employment for Federal Contractors) The Clean Air Act Occupational Health and Safety Act Drug-Free Workplace Act

What about the cost of fire and health inspections? How many of you have had a firefighter land on your doorstep unannounced to perform a fire inspection only to present you with a bill for that inspection a few weeks later? Have your employees seen the cost of that enumerated on their pay stubs?

Perverse Incentives

Third, regulation is the result of perverse incentives. You, the business owner, have incentives driven by competition. You must be efficient and produce a quality product at the least cost in order to survive. Bureaucracies, on the other hand, measure success by the increases in their budget. Bureaucrats are not rewarded by cost effectiveness, quality or simplicity. They would be spelling their own demise if they were. And lets face it; We have made public employment rather cushy.

No One To Blame

Lest you are tempted to place blame on someone else for this sad state of affairs, you cannot. There is no place for a sense of victimization in a competitive free enterprise system. Relinquished territory must be recaptured by you the business interests. By our lack of diligence the Federal Register is now 67,000 pages annually and growing—there are 4,500 new rules in the pipeline. These new rules will cost $11.6 billion if they’re implemented. By our lack of diligence, regulatory costs for small firms are nearly double the costs for large firms. By our lack of diligence, new rules affecting small business have increased seven percent under President Clinton. Budget and staffing for federal and state agencies enforcing regulations are at record levels. Because of our lack of diligence EPA has provided economic impact for only 30 percent of its proposed rules and the OMB has identified only 135 economically significant rules out of literally thousands.

Ain’t freedom grand?

•If you’re a landlord and someone believes you’ve denied him an apartment because of "racism," an army of fair housing bureaucrats can descend on your business, launch an intrusive investigation and fine you tens of thousands of dollars for committing what Soviet authorities would have termed a thought crime.

•If the IRS decides you haven’t ponied up enough tax dollars it can freeze your assets until you prove the agency wrong. And even if you win, it could be years fighting enormous government resources to fight your claim.

•If you’re a black man caught paying for an airline ticket from your wallet-full of cash, the police can arrest you and seize your billfold because you fit the profile of a drug dealer. •If you own a construction company and you fire a drug abuser because he endangered the lives of other workers, federal officials can sue you because drug abuse is a condition protected by the Americans with Disabilities Act.

Right now the government controls the curriculum of your children. It redistributes half of all of our earnings as it sees fit. It tells you whether or not you can develop your own land. It can throw you in jail if you fill in a wetland; or if your business fails to conform to every dot and tittle in the volumes of nearly indecipherable affirmative action, safety, labor and environmental regulation.

Of course these powers are not enough for the feds. The current administration wants to monitor websites, expand wiretapping and redefine domestic terrorism, expand programs and create new regulations so it can take them abroad. Ain’t freedom grand? u

Judy Cresanta is publisher of Nevada Journal.


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