Slaying a New Dragon- Will it be Taxation or Deregulation?
By Garreth Bloor
For the Reagan era it was taxation – is it deregulation today?
When President Trump invited a group of business tycoons to the White House the number one complaint constraining further employment was not tax, it was regulation: “Get the government off our backs,” rung out unanimously among executives present. In Trumponomics, free market veterans Stephen Moore and Arthur Laffer recount the meeting and offer a review of some of the key issues around deregulation efforts as they see it – from the vantage point of within President’s Advisory Council.
The effects of regulation are rarely quantified. So too are the losses in the form of unrealized growth, tantamount to the lost foregone imposed by undue undue tax burdens. Over-regulation can even eclipse massive corruption costs in parts of the developing world in terms of unrealized growth.
The Mercatus Center at George Mason University has undertaken two fresh measures to address the challenge of overregulation in the United States. The first is quantifying regulation quickly and effectively. The second is tackling the state-level burden, where regulations are even more numerous than in the federal sphere. Both initiatives saw the group acclaimed on this year’s short list for the Templeton Freedom Award at the recent Atlas Liberty Forum in New York City.
Quantifying the costs, creating space for reform
The Program for Economic Research on Regulation uses ground-breaking RegData software to demonstrate how reducing state-level regulations can have a measurable improvement on economic growth. Regdata is a Mercatus-developed software program able to assess immense regulatory codes for the first time. And it is proving valuable in areas like state-level reform.
State Level Leviathan?
“Reducing a state’s regulatory burden is critical for driving economic growth,” argues Patrick McLaughlin, a director of the policy analytics project at Mercatus. During an address at Atlas he stated that “(s)tate regulatory codes sit on top of rules created at the federal level, making it impossible for any one person to make sense of this massive system of regulations. Quantifying the amount of regulation in each state is an important first step for eliminating unnecessary rules burdening individuals and small businesses.”
Using RegData, the state of Kentucky reviewed over 2,300 regulations, repealing 453. An additional 424 were amended and hundreds are still under assessment.
Counties and Local Councils
A third area into which Mercatus’ efforts have expanded include city and local councils. As a former city council economic commissioner in South Africa, quantifying outdated legislation was vital to reform. Over 330 pieces of legislation were eliminated when I had the opportunity to serve a four-year term. The response was almost unanimously favourable from the public, while providing vital lessons on the method and nature of effective reform. Growth followed with a 48% year-on-year rise in the value of building plans completed when measured 12 months after the repeal.
One the one hand, politically, the official opposition highlighted the reforms (shredding volumes of regulations) as a Workers’ Day message: lets create jobs and only protect existing workers.
Detractors questioned not the measure itself, but the fact that there could even be so many regulations in the first place. To the surprise of many, hundreds and thousands of regulations exist beyond what is commonly perceived to be the case.
Furthermore, the case for deregulation is especially urgent when regulations are predicated ideas of spatial planning that resemble command-and-control ideas of economics, rather than a contemporary Hayekian view of dynamic markets. At its extreme, apartheid spatial planning is a case in point; most of the hundreds of pieces of legislation repealed in the case above dated back to an era where this form of national socialism was the presumption behind city and town planning regulations.
Reflections: Toward Two-Fold Reforms in Deregulatory Initiatives
Too often, deregulation is simply treated as making compliance easier (think government one-stop shops) instead of removing the red tape inherent in regulations.
Two key elements of real reform involve the method and nature of repeal once the barriers have been identified. Method should involve passing new legislation which automatically removes outdated regulations in great numbers. This approach is better – allowing for the repeal a compendium of redundant legislation in one process that concludes with the passage of a new bill, by-law, policy or a mix thereof. The method focuses efforts on positive reforms and the actual legislation proposed to replace (often hundreds of) redundant articles of legislation. In my experience, it also encourages bi-partisan cooperation, with a focus on what is desirable for replacement legislation. There are also fewer potential red herrings than when laws are individually repealed, because of the reduced ‘temptation’ to use individual repeals as proxies for unrelated partisan battles.
The second element involves the nature of the replacement legislation, through limiting executive discretion. Too many regulations come into being not just because legislators can be busy-bodies. Laws often grant widespread discretion to executive politicians and bureaucratic department heads to create regulations. Both are in keeping with a wider trend: executive powers create new rules without going back to legislatures (and the public) for approval.
We may be in an exciting era for deregulation, though we are arguably only in the early stages. City and local authorities are the most underexplored on the issue of unnecessary regulatory constraints to economic liberty. New research is emerging showing notably non-partisan reform efforts underway, perhaps given the very real effects of burdensome regulatory regimes on human life and the proximity of local representatives to the people they serve.
Technology is proving an excellent tool for reforms underway in the United States and around the world which demonstrate liberating economic freedom from death-by-regulation is possible.
Garreth Bloor is a vice president of the IRR, the oldest classical liberal think tank in South Africa. He served as a former executive politician in the country and is the founder of a venture capital firm. Bloor currently resides in Toronto.