Too many regulations? Burdens and costs vs. protections and net economic benefits
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Wednesday, May 23, 2018

Too many regulations? Burdens and costs vs. protections and net economic benefits

On May 23, the House Education and the Workforce Subcommittee on Workforce Protections held a hearing on “Regulatory Reform: Unleashing Economic Opportunity for Workers and Employers.” Most of the invited witnesses tended to see regulations as costly and burdensome to employers. However, one witness cited the worker safety and the economic upsides of federal regulations.

“Not all regulations are bad, but today’s hearing will explore the benefits of responsible regulatory reform, how regulatory costs can be controlled to allow for the continued growth of the nation’s economy, and the importance of Congress and the administration continuing to collaborate on a regulatory reform agenda,” Chairman Bradley Byrne (R-Ala.) said in his opening statement.

Small businesses say they are hit hardest. In a press release, the Subcommittee noted that according to the National Federation of Independent Business (NFIB), nearly half of small businesses view regulation as a “very serious” or “somewhat serious” problem.

Echoing that sentiment, Karen R. Harned, Executive Director of the NFIB Small Business Legal Center said, “Overzealous regulation is a continuous concern for small business. The uncertainty caused by future regulation effectively acts as a ‘boot on the neck’ of small business—negatively impacting a small business owner’s ability to plan for future growth, including hiring new workers.”

Harned also observed, “When it comes to regulations, small businesses bear a disproportionate amount of the regulatory burden . . . The small business owner is the compliance officer for her business, and every hour that she spends understanding and complying with federal regulation is one less hour she has available to service customers and plan for future growth.”

Compliance costs. Dr. Douglas Holtz-Eakin, President of the American Action Forum, contrasted the Obama Administration’s regulatory regime with the Trump Administration’s efforts to remove the compliance costs suffered by American businesses large and small. “The Obama Administration finalized a costly regulation at the average rate of 1.1 per day, and the cost of complying with those regulations added up to $890 billion—according to the agencies themselves that issued the regulations, he said. “That cost is an average stealth tax increase of over $110 billion a year.” Holtz-Eakin said.

“New regulatory cost burdens fell by more than two-thirds—from an average $110 billion per year during the Obama Administration to $30.6 billion in 2017,” Holtz-Eakin observed. “And the vast majority of those costs originated from rules published in the last few days of the Obama Administration.”

Correcting workplace safety culture. “Burdensome and confusing obligations on our employers often do nothing to improve jobsite safety, but instead stifle our workforce and ignore insightful input from our industry experts,” Ryan Odendahl, Chairman of the Associated Builders and Contractors National Safety Committee and President of the construction firm Kwest Group, told the Subcommittee. “Congress and this administration have already taken important steps toward correcting the workplace safety culture, including this Committee’s important work to repeal the controversial ‘Volks’ Rule.”

“The construction industry continues to see the benefits that have come from a common-sense regulatory agenda and pro-growth tax policies that have allowed us to hire and train more workers and reinvest in our businesses and communities,” Odendahl concluded.

What about protecting workers? Heidi Shierholz, Director of Policy at the Economic Policy Institute, previously the Chief Economist at the U.S. Department of Labor, explained how regulations “play an essential role in protecting workers—ensuring safe workplaces and fair pay and protecting workers’ rights to organize and join a union so they can bargain collectively with their employers.”

Shierholz explained that while safety regulations may require substantial upfront investments in safety equipment, “those investments pay off over the long term through a reduction in illnesses like lung cancer and through lives saved over decades.” She also noted that “the need for the safety equipment creates jobs for the people producing the equipment.”

Net benefit to the economy. In addition, research shows that federal regulations provide a large net benefit to the economy, according to Shierholz. “Rhetoric attacking regulations generally alleges that regulations are overly burdensome for employers and cost jobs, and opponents of regulations routinely emphasize the costs associated with regulations while ignoring their benefits. However, research shows that federal regulations in fact provide an overall net economic benefit and that they have a modestly positive or neutral effect on employment.”

Shierholz pointed to an Office of Management and Budget (OMB) report finding that during the Obama administration, from January 21, 2009, to September 20, 2015, the estimated annual net benefit (benefits minus costs) of major federal regulations was between $103 and $393 billion. “In other words, federal regulations are providing a net benefit to society of over $100 billion per year,” she said. “And these numbers are consistent with prior OMB reports. OMB reviewed major regulations from 2000 to 2010 and estimated that the average annual benefit of major regulations is about seven times the cost.” Shierholz said these findings are even more significant in light of studies showing that government regulators generally overestimate costs, and many benefits are never monetized, but almost all costs are.

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