Regulate or Deregulate?

To the editor:

A recent letter (8/9) cited the “Conservative” Enterprise Institute’s calculation that “households are paying an average of $15,788 in hidden regulatory costs.” (Its actual name is Competitive Enterprise Institute.) Using a household average to measure the societal impact of regulation is misleading and more politics than economics. CEI calculated that the annual cost of regulation is $2.1 trillion. The National Association of Manufacturers pegged that cost at $3.079 trillion. Using a different approach, The Cato Institute estimates “that the average US firm spends between 1.3 and 3.3 percent of its total wage bill on regulatory compliance.” Using data from the Office of Management and Budget, Kenan’s Institute of Private Enterprise calculated that “U.S. companies dedicate, annually on average, 3.2% of total working hours and 3% of total wages to regulatory compliance.”

Readers probably know someone whose job entails regulatory compliance. Professions, such as healthcare, architecture, construction, and engineering, incorporate regulatory compliance into their curricula, licensing, and professional practices. Discussion of regulatory guidelines is built into curricula at UT and TAMU, and Texas State Technical College, which the Record (8/23) noted recently certified a local young man in Electrical Construction.

Since 1980, substantial efforts have been exerted to understand the positive and negative impact of approximately 40,000 regulations. Federal and state regulation should correct bad corporate actions while promoting economic growth and public safety. The Goldilocks Effect calls for accurate regulatory cost calculations and truthful assessment of regulation’s impact on our country. Goldilocks must be pleased because the US stock exchange is at 41,000, an all-time high.

To appreciate the societal value of regulation, we can recall some cases. One cost of using natural gas is oderizer that is added so users can detect leaks. That regulation resulted from an explosion in New London High School in Rusk County, Texas in 1937. More than 500 students, teachers, and staff died when a school building filled with oderless natural gas blew up because of a spark from an electric wood-shop sander.

In 2007, highly popular Thomas Train Wooden Railway Toys were recalled because they were painted with lead paint. They were made in China, which has lax product safety. The company that sold the toys did not have a quality assurance/quality control program to catch such problems. The Consumer Protection compliance memo said, “Surface paints on the recalled products contain lead. Lead is toxic if ingested by young children and can cause adverse health effects.” Regulations reduce citizens’ exposure to harmful chemicals.

During the Great Depression, the market crash prompted dozens of regulatory measures regarding banking and investment, to protect citizens. The Sarbanes-Oxley Act increased IRS and SEC scrutiny of business practices following the accounting scandals of Enron and WorldCom. How much harm did regulation reduce after the Great Recession of 2007-2009?

During the 20th century, vehicles have become safer. Engineering design standards for roads and highways, as well as safety barriers and warning devices, have made travel safer. Constitutional purists among us might argue that the Constitution does not explicitly specify that the US government can regulate automobile safety, but that is more a flaw in originalism than constitutional government.

E. coli, which can be deadly, has become a household term associated with food safety, as has the term, listeria. Leafy vegetable fields near farms, diaries, and feedlots with thousands of cattle can become contaminated with E. coli which lives in animals’ guts. In 2018, the federal government cut back regulations of leafy crops which had been increased in 2011 after people got sick, and some died. The 2018 cut back was targeted deregulation which experts estimated helped farmers save $12 million, while customers paid millions in medical costs.

Current regulatory battles are waged over social media, and in Fayette County over windmills and battery storage facilities. A citizen was quoted in the 8/20 Record: “Those places need to be safe” and not “an eyesore and public nuisance.”

A current regulatory debate is assessing whether concentrated corporate power falsely uses inflation to justify raising product prices. The American Liberties Project argues that “combined with lower wages, corporate consolidation costs the American household $5,000 a year in lost purchasing power.” (Another pesky average) Mergers have produced an average price increase of 7 percent. “Since 1980, markups—how much companies charge for products beyond their production costs—have tripled from 21 percent to 61 percent due to growing consolidation.”

The USA presumes that regulation must serve the public interest and that businesses needing regulation should listen to the people.

Bob Heath Carmine