President Obama Big Government Regulation Has Helped the US Economy
Last wednesday, Mitt Romney was speaking in San Antonio and he criticized Obama for his regulatory strategy. The Washington Post characterized Romney’s speech this way:
He [Romney] said the administration has driven up the price of energy and made it harder for U.S. businesses to sell goods and services overseas. He said the health care overhaul has stopped businesses from hiring more workers. And he said businesses were being hurt by the “ever-growing intrusiveness of federal regulations.”
The issue of Obama’s regulatory record came up most powerfully about a year ago, and now it’s just one talking point among many. The charge is that Obama has over-regulated the economy and that this attitude toward regulation has killed jobs. The record is much more complex, and some of it was debated by Cass Sunstein, Obama’s regulator, in an op-ed a while back.
The record however, as evidenced by this report, is that Obama has benefitted U.S. citizens with regulation, primarily through environmental regulations, and before one starts to go off on environmentalism, it’s worth noting that the previous Bush did the exact same thing.
You see, Sunstein and others focus on two metrics: the cost of various regulations and how many of them were passed. On this metric, things are kind of complicated (a good summary is here).
Basically, Sunstein and supporters of President Obama cite the fact that Bush’s regulatory costs were higher in the last two years of Bush than under the first two years of Obama. They also point out that Obama passed slightly fewer regulations than those passed by Bush at similar point in his presidency.
These are not very helpful statistics though. The figures about the number of regulations passed to me seems completely irrelevant. If there is one regulation that would cost 5 million, but instead I pass three regulations to accomplish the same goal for a cost of 3 million, then I’m being a good regulator. I’m saving the country money by passing three more nuanced regulations than one crude but simple regulation. Though it is worth wondering how much the added complexity of three rules compared to one costs the aggregate economy in the long term. I doubt it would be much.
Second, comparing the costs of the ending of the Bush presidency with the beginning of the Obama presidency is deceptive because a lot of regulations get passed at the last minute. These “midnight regulations” before an administration change are common and it’s not surprisingly that the cost of regulations would swell at the end of the Bush administration. We need to compare this period to Obama’s last year or so.
Other metrics would be more helpful, like average regulatory cost imposed per year. Bush’s average across all the years of his presidency was low. Obama’s is higher (see pg. 21 of this).
Another good question to ask would be, when did these presidents impose costs on the economy? Right after the crash in 2008, Obama imposed less regulatory cost on the economy than Bush did in 2001, when the U.S. was reeling from a smaller downturn. Of course, Bush might have done other things that were more helpful to the economy than Obama has been, but the point is just to add context. Regulation is aimed at some social mission and cannot be so simply blamed in a “job creation” calculus.
But all this is just a warm up to the most important metric, which is to look not just at the cost of regulation, but of its cost versus its benefit; its net effect on the economy. This is very hard to do and there are many reasons -- some practical (accounting methods, available data), and some theoretical (what is the value of a life, of greater health, of prettier national parks?) -- why estimates cannot be very precise.
However, some data indicates that under Bush and Obama, regulations produced more gains for the economy than costs. This means that we should applaud both of them for making us better off. Of course, if someone wanted to dig into individual regulations and find fault with them, that would be one thing, but people are throwing around “regulation” as if that term is connected to a meaningful criticism. At a first look, regulation has been a good tool for the current and most recent president, so more needs to be done to make this criticism stick.
One other thing to note is that Bush produced more net gains for the economy than Obama in total and on average each year. Thus, Bush, so far, is the smarter regulator, but partisans never actually point to that fact.
An interesting wrinkle though is that Bush racked up his big regulatory gains by beefing up environmental regulation (his order on particulate matter in 2007 was estimated to create huge health gains for people). This means that not only should people on the left re-think criticisms of Bush’s environmental record, but people criticizing Obama on regulation and for being an environmentalist should be aware that according to the study I've been citing, environmental regulation is the best type of regulation there is for America, though it may destroy the most jobs. That debate is for another time.