Happy Lack of Labor Day! — 5 September 2011

This Thursday an anxious and impatient America will wait with collective breath baited for a) the President’s long-awaited speech on job creation, or b) the start of the pro football season.  Take your pick.  With last Friday’s very downbeat employment figures, the speech looms important; I doubt if it will measure up to the occasion.

Before we dig into the substance, let’s discuss for a moment the kerfuffle about the timing of the speech.  Last week, the White House announced that it was requesting a joint session of Congress on Wednesday, at a time that conflicts with the next GOP Presidential debate, and the country’s first real look at Rick Perry, the new front runner.  Speaker Boehner demurred, suggesting the same time on Thursday, coinciding with the kickoff of the Saints-Packers game.  After a brief tug-of-war, the President capitulated.  He moved the speech, and set the timing an hour earlier (and less prime-time) to avoid losing audience to a pigskin.

Obama’s critics see in this more evidence of his weakness, and his supporters see it as incontrovertible evidence that there is no limit to how petty Republicans can be.  To me it screams one word, which increasingly has come to define this administration: incompetence.  Did it occur to anyone that the House might push back on this request?  Even the most junior p-r flack knows you don’t make an announcement this important if you might have to walk it back.  Why did they not have it buttoned up – including agreement from both Houses, as is customary after all – before they went public?  This is just bush league (small “b”).

Now, on to the speech itself.  Apart from the State of the Union, the President requests a joint session of Congress for grave moments like the declaration of war (Oh, Lord, he’s not going to resuscitate Jimmy Carter’s “moral equivalence” is he?).  While the current circumstances are indeed dire, I don’t see this speech has having that import.  Unless Obama pulls a wonderful surprise, his proposals are unlikely to become legislation, so at heart this is an elaborate campaign event.  No wonder Boehner balked.

And what’s he going to say, after all?  That he’s going to “pivot” toward job creation?  That jobs are going to be the top priority for the rest of his term?  Been there.  Wait, maybe he’ll get a bunch of savvy business types, led by GE’s Jeffrey Immelt, to form a high-level jobs council.  Done that.  In any case, Immelt would recommend the GE way: engage in as many government-favored industries as possible, and collect subsidies and tax breaks along the way, thus transferring wealth from the American taxpayer to your shareholders.  Imagine what a robust economy we would have if we replicated that nation-wide!

Among the many things Obama could say that would really help generate jobs, one of the most potent would be to promise a campaign against regulation. Although he has paid lip service to the idea of reducing unnecessary or duplicative regulation, his efforts so far have been like taking a cup of dirt from the side of Kilimanjaro.  A few recent articles have pointed up how serious a detriment this has been.

Frank Keating, head of the American Bankers Association, reports that a small banker in Nebraska told him he now has more people working on compliance than he does generating revenues.   Imagine how growth-stunting that is – all that second-guessing slows down business decisions and makes management cautious; every sales dollar is burdened with more payroll costs, leaving less for profit and expansion; every decision to hire a loan officer is effectively a decision to hire two people, one to look over her shoulder.  More regulation is far from costless.

Indeed, Congress has asked the Obama administration for a list of pending regulations with “major” cost implications – meaning those expected (in Washington’s rosy lowball view) to cost $100 million or more.  Last year, the figure was 191; this year it is 219.  Think of that – even if they all come in at the minimum it means that just through regulation the administration is adding the equivalent of a $20 billion tax hike on business every year.  And of course they don’t all come in at the minimum.  This year Congress has asked for those expected to cost over $1 billion in and of themselves, and there were seven of them.

And the grandaddy of them all was the EPA’s proposed tightening of the Bush-era ozone limits from 75 parts per billion to 60-70 ppb.  Now, I’m not an expert on gaseous diffusion, except insofar as it pertains to politicians’ rhetoric, but I did a quick calculation on the basis of liquids.  Seventy-five parts per billion is about the equivalent of a tablespoon of some substance poured into an eight-lane Olympic-sized swimming pool.  You could pour that much hydrochloric acid into a pool and not bother anybody.  And yet the EPA says that to control smog and its bad side effects we need to reduce that by another 10-20%.  At a projected cost to municipalities and utilities across the nation of $90 billion.

Can it possibly be worth it?

Obama apparently thinks not, because this week he pulled back on the reins of this particular harmful ruling.  Except that in classic Obama fashion, he did not completely scupper the rule, he put off adoption of it until a reconsideration in 2013 – as if the stay of execution would induce local authorities and energy companies to increase spending and pretend the worst won’t happen.

Defending regulation, Obama uses his favorite trope – attacking a straw man.  “We all want clean air and water,” he says, as if anyone who objects to his rule regime is in favor of breathing auto exhaust.  But how clean?  Is it worth a million jobs to reduce ground level ozone by the equivalent of a half-teaspoon?

One of the central fallacies of this regulatory stampede is the notion that government can manage the economy better than the private sector.  People find it easy to persuade themselves that the current downturn is an example of “market failure.”  But why isn’t it equally true that the disastrous policy reaction to it has been “government failure”?  Nobel winner Gary Becker has a persuasive discussion of this, and his principal point is that “competitive pressures discipline market behavior much more effectively than government actions.”  The notion that bureaucrats – even if they have the best intentions – have the right answers for complex questions of competing demands is supported by very little empirical evidence.

If Obama really wants to justify his call for a joint session of Congress, he could do worse than to express a little humility about the snowstorm of regulations he has fostered, and call for a moratorium.  I don’t expect anything like that, of course, which means my attention will be on the kickoff.

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