Business Ethos Blog

Strangled By Red Tape

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


Dr. David Mielke


For two decades, Wayne Crews of the Competitive Enterprise Institute has tracked the growth of new federal regulations.  In his 20th anniversary edition he reported that the pages in the Code of Federal Regulations hit an all-time high of 174,545 in 2012, an increase of more than 21% during the last decade.  At a time that our economy is still struggling and we have concerns about the federal debt and budget deficits, IRS scandals and National Security Administration scrutiny of phone and email records, can we afford to impose any more restrictions?  Is this the “Right Thing to do?”  Let’s look at some issues:

1. Mr. Crews estimates that in 2012 the cost of federal regulations exceeded $1.8 trillion, roughly equal to the GDP of Canada.

2. These costs are embedded in almost everything we buy.  He estimates these costs at $14,768 per household, meaning that red tape is now the second largest item in the typical family budget after housing.

3. Last year, 4,062 regulations were at various stages of implementation inside the beltway.  The government completed work on 1,172, an increase of 16% over the 1,010 that the feds imposed in 2011, which was a 40% increase over 722 in 2010.

4. Another way to measure the regulatory burden is by pages in the Federal Register, which includes new rules as well as proposed rules and supporting documents.  By that measure the Obama administration last year did not break the all time record of 81,405 pages set in 2010, but the 78,961 pages churned out in 2012 mean that the President has posted 3 of the 4 greatest paperwork years on record.

5. The Bush Administration was not a period of deregulation, it actually routinely generated more than 70,000 pages in the Federal Register.

6. Economically significant rules are those that are estimated by the feds to cost at least $100 million each.  Washington finished up 57 such rules in 2012 and another 167 are in the pipeline.  These are primarily due to the Affordable Care Act, the Dodd-Frank financial reforms and the EPA’s effort to use regulations to impose an anti-carbon fuels agenda that the Senate won’t pass.

7. A great example is the federal government’s super minimum wage requirements for construction projects.  The 1931 Davis Bacon law requires contractors on all federal projects to pay a prevailing wage—which means the highest local union wage.  It is to be applied to public buildings or works, meaning funded, owned or occupied by the US or DC governments.  Study after study has shown that the law inflates costs and mires projects in red tape.  The Labor Department has ruled that this will be applied to a City Center project in DC.  This project meets none of the requirements for Davis Bacon–private developers are funding the project and neither the federal or DC governments will occupy City Center.  However, in 2011, the acting administrator of Wage and Hour appointed by President Obama ruled that since the DC government leased the land to developers for 99 years, it still technically owns it and retains regulatory construction oversight.  She added that because City Center will supply jobs and tax revenue for the city, these economic benefits mean the project is a public work.  The DC government has sued to overrule the Labor Department to recover $20 million in what they call excess union wages.

8. We also have the first lawsuits against employers alleging discrimination who have used criminal background checks in hiring decisions.  Dollar General and BMW have been sued by the EEOC for violating the 1964 Civil Rights Act.  The EEOC’s logic for the ruling and suit, blacks have higher conviction rates than whites, therefore criminal checks discriminate against blacks.

These are 2 examples of how President Obama’s appointees are using regulation to achieve policy goals they can’t get through Congress.  Can we afford more regulation?  The last time we actually saw a reduction was when President Reagan was in office.  It’s time we not just slow and stop the increase, but actually have a reduction.  It is the “Right Thing to do.”

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    3 years ago

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