Our guest blogger is Sidney Shapiro, University Chair in Law at Wake Forest University and Vice-President at the Center for Progressive Reform.
The United States Chamber of Commerce, which spends millions of dollars donated by large corporations to lobby against government regulation, has kicked off a new anti-regulatory road show, starring former Sen. Evan Bayh (D-IN) and Andrew Card, George W. Bush’s former chief of staff. In a press conference at the Chamber yesterday, Bayh bashed “excessive” regulations, saying they “suck the vitality” out of the economy. And in an op-ed today, Bayh and Card laid out their case on behalf of the REINS Act, legislation that would virtually halt new or updated health and safety protections (see here, here, and here) by requiring that Congress vote to approve final regulations before they go into effect.
Their case is not only weak; it is false. Bayh and Card, hewing to the Chamber’s talking points, claim that the economic recovery depends on cutting back on government regulation, because “more regulations impose heavy burdens on job creators.” The answer is to “get Americans back to work by removing excessive and costly regulations that make it hard for businesses to grow.” The available evidence supports neither of these claims.
To support their claim about excessive regulatory costs, Bayh and Card cite a study commissioned by the Small Business Administration’s Office of Advocacy, which claimed that regulations cost $1.75 trillion in a year. That study is popular with anti-regulation advocates, but never stood up to scrutiny. A Center for Progressive Reform report I co-authored details the serious methodological problems with this estimate; 70 percent of which was based on a regression analysis using opinion polling data on perceived regulatory climate in different countries. The nonpartisan Congressional Research Service backed up and expanded upon this critique . In congressional testimony, Cass Sunstein, the President’s point person on regulation, described the statistics now cited by Bayh and Card as an “urban legend.”
As with any type of spending, regulatory compliance generates economic activity. While it is difficult to measure whether on balance job gains from this spending offset any job losses, existing studies (described in congressional testimony I gave) do not support the conclusion that regulation retards economic recovery. Instead, the studies find either no overall impact or, in some cases, an actual increase in employment.
This result is not surprising. After all, money spent on regulation contributes to the economy, because firms must buy equipment and labor services in order to upgrade their operation — to improve their environmental safeguards, for example, to comply with regulation. In some cases, regulations can also increase employment by making the affected industry more profitable and more productive.
Employers themselves consistently attribute “unextended mass layoffs” to causes other than regulation; Department of Labor statistics analyzed by the Economic Policy Institute show that from 2007 to 2009, only .3 percent of such layoffs were pinned to rules. Extreme weather events actually accounted for more layoffs. And it’s important to remember that our current economic situation comes thanks largely to under-regulation of financial institutions.
Bayh and Card see regulators as having “unprecedented power” and call for “restoring balance and accountability in the process.” I don’t know what regulatory system they are viewing, but it bears no resemblance to the one operating currently in the United States. Far from having “unprecedented power,” agencies find it difficult to complete any type of controversial regulation in less than six to ten years because they must negotiate a complex gauntlet of analysis and reviews before they can issue a regulation, including judicial review at the end of the road.
The capacity of regulators to jump over these hurdles has been seriously eroded in recent years as agency budgets and staff have been held constant or even reduced by Congress, even as the number of imported toys, new chemicals, and job hazards and other dangers to people have increased. This explains why agencies have been unable to prevent a series of catastrophic regulatory failures, such as the BP oil spill, salmonella outbreaks, and the Upper Big Branch Mine Disaster. This is a regulatory system gasping for air, not running roughshod over regulated entities.
The Chamber is hoping that, with its millions of dollars, and its slick bipartisan salesmen, it can sell its anti-regulatory message to the public. It will not let something as important as the facts get in its way.