Business Ethos Blog

Regulatory Overkill

Dr. David Mielke is the Retired Dean of the College of Business at Eastern Michigan University

 Dr. David MielkeIn one issue of the Wall Street Journal last week there were 4 articles about regulators use (or is it abuse), of their power.  The articles showcased Labor Secretary Perez, Health and Human Services, the State Department’s US trade negotiators and the Department of Housing and Urban Development.  If we include the Energy Department’s announcement of potential new coal fired power plant regulations also last week and the Transportation Department’s new ethanol standards, we get a flavor of the activity pushing new rules outside the legislative process.  Should we be concerned that more regulatory power is being exercised?  Is this the “Right Thing to do?”

Let’s look at some issues.

1. These six examples show that we are not just experiencing one or two activist departments within the federal government, but what I would call an activist environment within the administration.  These six examples come from six different departments—all in one week.

2.  Labor Secretary Perez is trying to force Governor Jerry Brown to exempt transit workers from last year’s state pension reforms in California or lose billions in federal funds.  Mr. Perez threatened to withhold federal grants for 83 local transit agencies because he claimed California’s pension reforms violate the Federal Transit Act, which requires the Labor Department to certify that protective arrangements are made for workers (here the Teamsters) before the federal funds are transferred.  Nearly $2 billion is at stake just this year.  Perez did cut off $54 million, the first time in 15 years that the Labor Department has de-certified a grant.  Brown agreed then to exempt transit workers, but intends to challenge the de-certification in federal court as a misapplication of the law.  Two test cases already have supported Brown’s position.  Now that the state has awarded the Teamsters a carve-out, other public unions will want one too.  Paying Mr. Perez’s blackmail may embolden unions and make it harder for states to reform their pension laws.

3. The Affordable Care Act is paying for navigators or non-government groups that received federal dollars in August to help people figure out and enroll for Obamacare subsidies.  The navigators were supposed to cost $54 million, but the Health and Human Services Department dipped into a “wellness” slush fund to bump that up by 24% to $67 million.  HHS won’t require background checks for the navigators but do say they must obey security and privacy requirements, without defining what those requirements will be.  Since the navigators will tap into sensitive medical and financial information about individuals, more than a dozen state attorneys general are alarmed about the potential for fraud and identity theft.  There have been requests by Congress to see the applications for the navigator grants, but HHS is refusing.  Organizations like Planned Parenthood and the National Urban League have received the grants.

4. The US is involved in free trade talks with Pacific Rim countries.  US negotiators are pushing for a carve-out for tobacco regulation that could damage the talks.  They are trying to use trade leverage to impose health policy on the rest of the world.  The US Trade Representative web site boasts that the proposal will for the first time in a trade agreement, address specifically the public health issues surrounding tobacco.  What if the EU did the same thing with genetically modified agricultural products?  The US farm exports are expected to reach $140 billion this year.  At least 88% of US corn, cotton and soybeans are genetically modified, so a big chunk of the economy would be at risk.

5. In July, the Department of Housing and Urban Development published its proposal on “Affirmatively Furthering Fair Housing.”  It is a sweeping set of land use regulations that the agency wants to use to dismantle local zoning so communities have what is called the right mix of economic, ethnic and racial diversity.  A finding of discriminatory behavior, or allegations of discrimination, would no longer be necessary.  HUD will supply nationally uniform data of what it thinks 1,200 communities should look like.  HUD has no idea how much the new rules will cost.

6. The EPA plans to block the construction of new coal fired power plants unless they are built with novel and expensive technology to capture green house gas emissions.  The revised emissions standards propose a limit of 1,100 pounds of carbon dioxide per megawatt hour.  Most coal fired plants, even with the most advanced technology available today, emit twice that amount.  The result will be to effectively ban new coal fired plants.

7. A couple of weeks ago we talked about the Department of Energy’s ethanol standards and the mandate to produce and use more ethanol than can be blended into gasoline at the current and projected consumption of gasoline.

Six examples from six federal departments, all which could have profound effects on the US economy and implications for all of us personally.  Is this activist regulatory environment what we need to move us forward?  Are these the “Right Things to do?”  Our economy has been experiencing one of the slowest expansions in history, unemployment and underemployment are at unacceptable levels.  These six new sets of regulations will not help, but I can guarantee will hinder our recovery.