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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

August 23, 2011 at 10:00 AM

The White House regulatory overhaul and trade-offs

This morning, President Obama announced plans to streamline and roll back a number of regulations with the goal of saving at least $4 billion over the next five years. This is just a few days spending on our military adventures, but no matter. The move is partly political, to cover the president against criticism from conservatives, some of whom would mostly abolish the Environmental Protection Agency. And it’s Bill Clinton small-ball — who could argue with this good (small) idea — especially, the changes that would supposedly help small business.

A Small Business Administration report in 2010 stated that the cost of complying with federal regulations increased from $7,647 per employee per year in 2005 to $10,585 in 2008. They probably at least continued to grow at the same pace during the Obama years. To play devil’s advocate, I’ll also mention a 2006 study by Tufts University economist Frank Ackerman that argued:

Reports of the economic burden imposed by regulatory costs have been greatly exaggerated. The widely imagined trade-off between economic prosperity and environmental protection rests on multiply mistaken premises. Many environmental policies impose little or no net costs on the economy; even when regulatory costs appear significant, there may be no short run opportunity to exchange those costs for additional economic growth; and even when growth occurs, it may not lead to desired outcomes such as reduced mortality.

Everybody hates regulations. The regulatory regime has grown monumentally at the national, state and local level since the 1960s, under Democrats and Republicans (the EPA was begun under Richard Nixon). Yet most people like the broad outcomes: Cleaner air and water, safer workplaces, etc. The NIMBYs in the reddest red state would fight any attempt to lower regulations on developers or, say, the hazmat company that wants to move next door. Our society is more complex and urbanized, and behind every regulation is a constituency. In addition, incentives and innovation are fine for addressing climate change, but at some point regulation will be necessary.

But I’ve give Obama the benefit of the doubt. Let governors and mayors follow suit. There are no doubt thousands of regulations that don’t make sense or duplicate or could be simplified. Besides the usual political vitriol in the comments, what are your ideas for that should be reformed or eliminated? And what will be the trade-offs (don’t forget the costly consequences of banking deregulation or what we can expect from the current budget-starved SEC)?

Note to readers: I’m blogging less this month (some of you can celebrate!), and will be back to every business day in September.

Today’s Econ Haiku:

The Dow is back up

Is it the fundamentals?

Or fun-da-Ben-tals?

Comments | More in Regulation


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