The Truth About Uncertainty is That It’s (Mostly) True

In this week’s Bloomberg View (“The Truth About Uncertainty Is That It’s (Mostly) Untrue”), the editors paint a misleading picture of the president’s contribution to policy uncertainty, distort the facts about the current regulatory state and the administration’s record on red tape, and trip over themselves in the end.  Consider:

• “Is the uncertainty complaint really just an excuse for inaction -- and cover for lobbyists looking to build support for less regulation? Or is there substance to the anxiety?”

There is substance.  Start counting the countless jobs that were never created in the first place because of recent regulatory action.  The Ben Hill power plant in Georgia was supposed to create 1,600 jobs to build and maintain the site, but EPA rules and powerful local groups shuttered the plant, and any potential new jobs.

• “Many executives blame Obama’s health- care overhaul for the uncertainty. The law has multiple parts that take effect over many years and, yes, it can be confusing. But the law is the law; it’s been passed. If there is uncertainty, it’s from what Obama’s political opponents are doing: challenging its constitutionality.”

President Obama rammed through a policy that is likely unconstitutional and he bears no responsibility for the legal challenge? 

• “Those figures don’t cover independent agencies, where most of the rulemaking under the Dodd-Frank financial reform law, another major source of overregulation gripes, is happening.”

False.  Independent agencies do need to report on “major” rules under the Congressional Review Act.  For example, the National Labor Relations Board considered its union notification rule to be a “major rule … because it will have an effect on the economy of more than $100 million.”  Independent agencies are only exempt from the “economically significant” designation.

• “Wall Street firms do have to comply with a host of new financial regulations. Some of Dodd-Frank is unnecessarily intrusive, and costs to industry deserve close consideration.”

They deserve more than our consideration.  The most onerous rules deserve repeal.  Dodd-Frank has produced more than 50 million hours worth of paperwork and its regulations are exacting a substantial toll on employment.  It was recently announced that a small credit union in Connecticut no longer had the capital to add regulatory compliance officers.  Instead, they merged with a larger credit union.  Their CEO, Barton Werner, lamented, “We are too tiny with all the regulations.  We looked at getting out before it got too overwhelming.”

• “Lately, however, the EPA has more often postponed or withdrawn rules (sometimes under White House pressure) than imposed them.”

If you’re running President Obama’s reelection campaign then, yes, this is 100 percent accurate.  If you drill, use water in your energy process, burn anything, drive a car, or own a home near wetlands, the story is drastically different.  During the last 18 months, EPA has either proposed or finalized more than $178.6 billion in regulatory burdens.  Compare this to the $100 billion in spending reductions that could slow economic growth by “0.5 percent next year.”  If spending cuts slow growth and EPA adds $178 billion in costs, what happens next to economic output? 

• “Investment in scrubbers, filters and other technologies to control pollution would create jobs for the people who design, manufacture and install such equipment.”

The administration, especially EPA, has advanced this Regulatory Keynesianism idea for several years.  However, this line ignores dozens of power plants that will close as a result of EPA’s Utility MACT and CSAPR regulations.  The affected energy companies admitted to their shareholders, their employees, and the public that the cost of compliance was too great; to them, it was more economical to shut down than to install retrofit controls.  Now, there are more than 8,000 directly affected employees who will disagree with the notion that regulations create jobs.    

• “Moreover, the annual benefits of nine major EPA rules that will take effect under Obama exceed costs by at least 4-to-1, according to government estimates.”

What about other “government estimates” unmentioned in this article?  The macro numbers, and even White House data, illustrate that the regulatory burden has never been greater.  According to OMB, the cumulative time spent complying with federal paperwork is a hefty 10.35 billion hours. 

Last year, Administrator Cass Sunstein reported a burden of 9.8 billion hours.  What are the benefits of filling out more than 9,100 federal forms?  To put this federal regulatory burden in perspective, it took a mere 7 million hours to complete the Empire State Building.  Instead of constructing 1,400 new skyscrapers, Americans are filling out government forms, and Dodd-Frank and ObamaCare only add to the load.  If one assumes an hourly rate of $30.66 (BLS’s mean wage for a compliance officer), the paperwork burden alone is $374 billion, or more than the last two quarters of GDP growth combined.

• “Much of the problem is self-inflicted by Congress. Lawmakers are putting off until after November’s elections a crush of expiring Bush-era tax cuts, the payroll tax reduction and dozens of other tax breaks and spending programs.”.. “Congress also lacks a plan to attack the long-term problem of entitlement spending and has yet to fix an overly complicated tax code. Worse, lawmakers have purposely built instability into the system by disingenuously adding expiration dates to tax cuts to meet budgetary rules.”

President Obama has provided zero leadership on these core budget issues.  When his party controlled Congress he made no attempt to settle the visible fiscal imbalance.  When Bowles and Simpson provided him with a political and policy blueprint for success he kicked it to the gutter.  His contribution to solving these pressing issues has been the Buffet tax political gimmick and a detail-free corporate “reform” that moves the U.S. policy squarely to the 1950s and ensures competitive failure.  Since when is Congress alone responsible for lawmaking?

• “Business thrives on certainty, to be sure. Obama’s rhetorical broadsides against business leaders aren’t helpful. Nor are declarations like the one by House Speaker John Boehner on May 15, in which he promised another bare-knuckle fight over the debt ceiling.”

John Boehner promised no such thing.  What he actually said was, “Yes, allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without taking dramatic steps to reduce spending and reform the budget process.” Read the speech and you will not find a promise to fight anywhere.

• “Their research shows that monetary policy and taxes, not regulatory policy, are the biggest drivers of uncertainty.”

Regional bank presidents, voting members of the Open Market Committee have voiced their disagreement with Chairman Bernanke’s version of the monetary policy future.  The Bloomberg editors make a dramatic case for tax policy uncertainty, a problem Obama never addressed and continues to ignore.  Yet these are the “biggest drivers of uncertainty” according to their researchers. 

Sounds like uncertainty is (mostly) true!