BRANNON & BATKINS: Absurdity of regulatory Keynesianism – Washington Times

BRANNON & BATKINS: Absurdity of regulatory Keynesianism – Washington Times.

Belief that hiring more workers to implement rules can lift economy is fanciful

By Ike Brannon and Sam Batkins – The Washington Times

President Obama’s latest plan to create jobs by spending government money appears dead on arrival on Capitol Hill as the administration struggles to gain the support of Democratic lawmakers, let alone Republicans. But the White House is trying a different method to use government-directed spending to supposedly create jobs. By tightening current regulations and writing new ones, says the administration, businesses will be forced to spend more money to comply with the new rules, which, in turn, will create jobs and spark economic growth.

This idea has emerged just as Congress and the courts have begun pushing back against costly regulations of questionable merit that the Environmental Protection Agency (EPA) and its regulatory brethren have issued.

Even EPA has retreated somewhat, announcing this week that it would save farmers from potentially onerous “farm dust” regulations, and earlier this month it made an effort to lessen the burden on states and utilities from its $2.7 billion Cross-State Air Pollution Rule.

In response to these perceived setbacks, the administration and its left-wing allies have trucked out the “regulation creates jobs” story, or “regulatory Keynesianism.”

One of the most ardent proselytizers of this idea is far-left columnist Paul Krugman. In fact, Mr. Krugman has criticized the White House for not being committed enough to the regulatory Keynesianism story. The Obama administration recently acquiesced on proposed standards for ground-level ozone after affected industries voiced serious concerns that the standards would increase operating costs and reduce employment. Mr. Krugman dismissed those concerns: “Tighter ozone regulation would actually have created jobs, forc[ing] firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money – but that’s the point!”

Mr. Krugman isn’t the only one arguing that costlier regulation will create jobs. A report by a group of environmentalists and labor unions claims that the proposed tightening of two air pollution rules would create as many as 1.5 million new jobs. The report’s authors would have the public believe that the rules’ estimated $200 billion cost wouldn’t hurt employment or the economy. One wonders: If these two proposed rules would create 1.5 million jobs, why doesn’t the report call for another 10 new rules and return the U.S. economy to full employment?

The economic and rhetorical sleight of hand being performed here is truly awesome. Instead of treating the proposed rules as imposing a “cost” on businesses – and eventually consumers – the administration and its supporters repackage that cost as a boon for job creation. In their analysis of the air pollution report they note that that “constructing such new capacity and installing pollution controls will create a wide array of skilled, high-paying jobs.”

Regulatory Keynesianism is already deeply ingrained in the Obama EPA. In several of the agency’s recent analyses, the EPA treats the cost of hiring new workers and buying pollution-control equipment as a regulatory benefit, theorizing that “an increase in labor demand due to regulation may have a stimulative effect that results in a net increase in overall employment.” Not surprisingly, reclassifying these costs as benefits bolsters expensive rules that undergo cost-benefit analyses.

To pretend that forcing businesses to hire new workers to comply with a regulation represents a benefit to the economy rather than a very real cost is the reductioadabsurdum of the administration’s cynical abuse of economics. It is also a manifestation of their contempt for the voters’ intelligence.

We all want our economy to create more jobs, but placing more constraints on the private sector and hiring more regulators to enforce those constraints is not a recipe for success. The government needs to stop pretending that it can spend or regulate its way to a recovery. Instead, it needs to get out of the private sector’s way. It is non-intuitive thinking for the American left, but the EPA seems to be getting the idea with its recent pullback on dust and interstate pollution regulations. Unless Mr. Obama accepts the idea that regulations don’t create jobs, he’ll watch another president follow that ethos in 2013.

Ike Brannon is director of economic policy and Sam Batkins is director of regulatory studies at the American Action Forum. Their paper “Obama, Ryan and the Future of Regulatory Reform,” appears in the fall issue of Regulation.

BARRASSO: Regulatory overreach smothering economy – Washington Times

BARRASSO: Regulatory overreach smothering economy – Washington Times.

Obama review has killed one regulation

By Sen. John Barrasso – The Washington Times

Last year, President Obama promised Americans a recovery summer. This year, he’s given us a regulatory summer. He’s thrown a giant wet blanket on economic recovery and has given Americans a summer of more burdens, more costs and more rules.

At the beginning of this year, the White House issued an executive order to all agencies to review regulations. The goal was to cut costs and take Washington off the backs of business. The president’s order instructed all agencies that all rules “must promote predictability and reduce uncertainty” and “must identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends.”

Since that order, more than seven months ago, the administration has repealed only one rule – a rule that effectively treated spilled milk like an oil spill. By contrast, since the start of the year, the administration has proposed more than 340 regulations at a cost of more than $65 billion to job creators. It is important to note that these are only the regulations for which the administration actually conducted an economic analysis. For hundreds more, it has regulated blindly, with no cost or job numbers associated with its rules.

The president said on his recent bus tour that “there is some red tape that needs to be cut, and we should cut it.” Yet in just one week in August, two new rules were finalized by the Environmental Protection Agency (EPA) – rules that increased the regulatory burden on job creators by $10 billion.

The first of these two rules is the so-called “transport rule,” which purports to regulate emissions from utility companies. Its proposed method is expensive and heavy-handed. The EPA itself admits that the transport rule will cost thousands of jobs and unleash a $2.7 billion burden on the private sector. This rule raises the cost of energy and will make it more expensive to run factories and small businesses.

The second rule is literally unprecedented. It is the first-ever rule released that regulates mileage for medium- and heavy-duty trucks. This is a costly move that adds complexity, and the impact will be broad-based. Regulating these vehicles will affect small businesses, cities and towns that purchase emergency vehicles such as firetrucks and ambulances, and recreational vehicle owners. Everything from delivery vans to full-size pickups to even school busses will be hampered by these new environmental requirements. At a time when building strong, safe vehicles in America should be a priority, these new regulations are making it harder.

Under this rule, consumers will end up paying $1,000 more for every medium- to heavy-duty truck. The total cost of the rule is $8.1 billion. It would be nice if we knew what effect this would have on American jobs. The EPA conveniently forgot to do an analysis of the jobs impact of this rule. A little common sense tells us this means the rule is bad news for already struggling American manufacturing jobs.

Waiting on the horizon is the single most expensive environmental regulation in history: the EPA’s ozone rule. It is estimated that it will cost nearly $1 trillion. The administration has temporarily delayed this rule, but it needs to be canceled. Our economy must not take a third strike, a third major rule this summer.

I have introduced, in the Senate, the Employment Impact Act. This common-sense legislation will force Washington always to take into consideration the impacts regulations have on jobs.

While the president tells Americans that he wants to cut red tape, his administration is still churning it out. Now he is planning on proposing yet another jobs plan next month. If he wants to take this issue seriously, part of that plan must scrap his administration’s expensive ozone rule. His administration’s own analysis shows that unless it cancels this rule, no jobs plan will matter. Instead, no-job zones will spring up all across America.

New regulations and uncertainty continue to take a toll on our economy. America’s job creators should not have to suffer through another summer of Washington’s job-destroying regulations.

Sen. John Barrasso of Wyoming is vice chairman of the Senate Republican Conference.