Regulation Overload - Wave That Flag, Wave It Wide And High

In previous iterations of Wind in the Willows we’ve spoken in great detail about the way that regulatory activities force workers and businesses to move around the country.  In general, the United States has always been a relatively business friendly place.  Our capitalistic society encourages innovation and hard work because even despite a progressive tax system, the system rewards new ideas and hard work.  This is as true in the US as it is anyplace in the world.  At least for now.  A little more than 2 years into the Biden Administration, it has delivered 590 final rules costing more than $375B and 227M paperwork hours for entrepreneurs. 

Many business owners complained during the Obama Administration about getting shaken down for payoffs around new regulatory activities, and while the number of new rules was higher, the costs were “only” $213M and 135.8M paperwork hours in the same timeframe.  Trump added a similar 665 rules during his first 2 years, but those costs were an incremental $7.8B and 47.2M paperwork hours.  While it’s clear most entrepreneurs would prefer the Trump Administration’s activities in this regard, the truth is, this was incrementally higher as well. 

Not surprisingly, while the Trump era regulations were incremental, real wages were able to grow much faster than during the surrounding high regulation administrations.  This is by no means an endorsement or even commentary on the various politicians, but according to Forbes Magazine, there is a substantial body of research that suggests increasing regulation diminishes economic and productivity growth. 

So for all the rhetoric we may hear from politicians about job growth and increasing potential for economic growth, we need to be mindful of how many new regulations are coming down the pike to accomplish that.  Because the higher those numbers are, the more damage will likely occur.  Notice the word was damage and not “job growth”.

The irony here of course is that the Federal Reserve has thrown the kitchen sink at the economy in the form of the fastest rate hike cycle in history, and they’ve struggled to have an impact.  Meanwhile, the Biden Administration may have a more significant effect with its tools in the FTC, EPA, SEC, and Department of Justice.  Look out economy!!!!  The politicians are coming, and they’ve got paperwork.  

While it may sound noble or even responsible to force companies to track all their environmental impact, many of these regulations are clearly impossible and only designed to further the cause of re-election.  It’s not just the executive branch either.  Congress could and should be pursuing regulatory reform to assure a balance of appropriate guardrails and the freedom to grow businesses.  But current policies target things like climate policy, which is expensive to deliver, hard to measure, and is sure to be passed on to consumers.  The Supreme Court has been doing some work to cut back on regulations as cases are brought to them, but they do not have the power to go after cases that aren’t.  As we begin the next election cycle, we hope voters realize the power of regulation and its direct effect on their own wallet.

Sources: Forbes, Yahoo Finance