Category: Regulations

Better Policies Can Turn Stagnation into Growth

(p. A19) . . . , now ought to be the time that policy makers in Washington come together to tackle America’s greatest economic problem: sclerotic growth. The recession ended more than seven years ago. Unemployment has returned to normal levels. Yet gross domestic product is rising at half its postwar average rate. Achieving better growth is possible, but it will require deep structural reforms.
The policy worthies have said for eight years: stimulus today, structural reform tomorrow. Now it’s tomorrow, but novel excuses for stimulus keep coming. “Secular stagnation” or “hysteresis” account for slow growth. Prosperity demands more borrowing and spending–even on bridges to nowhere–or deliberate inflation or negative interest rates. Others advocate surrender. More growth is impossible. Accept and manage mediocrity.
But for those willing to recognize the simple lessons of history, slow growth is not hard to diagnose or to cure. The U.S. economy suffers from complex, arbitrary and politicized regulation. The ridiculous tax system and badly structured social programs discourage work and investment. Even internet giants are now running to Washington for regulatory favors.
. . .
So why is there so little talk of serious growth-oriented policy? Regulated and protected industries and unions, and the politicians who extract support from them in return for favors, will lose enormously. The global policy elite, steeped in Keynesian demand management for the economy as a whole, and microregulation of individual businesses, are intellectually unprepared for the hard project of “structural reform”–fixing the entire economy by cleaning up the thousands of little messes. Even economists fight to protect outdated skills.

For the full commentary, see:
JOHN H. COCHRANE. “Don’t Believe the Economic Pessimists; Memo to Clinton and Trump: The U.S. economy can and will grow faster with the right policies.” The Wall Street Journal (Mon., Nov. 7, 2016): A19.
(Note: ellipses added.)

E.U. Regulations Protect Paris Rats

(p. A4) PARIS — On chilly winter mornings, most Parisians hurry by the now-locked square that is home to the beautiful medieval Tour St. Jacques. Only occasionally do they pause, perhaps hearing a light rustle on the fallen leaves or glimpsing something scampering among the dark green foliage.
A bird? A cat? A puppy?
No. A rat.
No. Three rats.
No. Look closer: Ten or 12 rats with lustrous gray-brown coats are shuffling among the dried autumn leaves.
Paris is facing its worst rat crisis in decades. Nine parks and green spaces have been closed either partly or entirely
. . .
In the 19th century, rats terrified and disgusted Parisians who knew that five centuries earlier, the creatures had brought the bubonic plague across the Mediterranean.
The plague ravaged the city, as it did much of Europe, killing an estimated 100,000 Parisians, between a third and half the population at the time. It recurred periodically for four more centuries. Not surprisingly, the experience left Paris with a millennium-long aversion to rodents.
. . .
. . . why are they proliferating? Could it be everybody’s favorite scapegoat — the European Union and its faceless, unaccountable bureaucrats?
Yes, it could.
New regulations from Brussels, the European Union’s headquarters, have forced countries to change how they use rat poison, said Dr. Jean-Michel Michaux, a veterinarian and head of the Urban Animals Scientific and (p. A14) Technical Institute in Paris.
. . .
While the poison could be a risk to human beings, so are the rats — potentially, although no one is suggesting that the bubonic plague is likely to return.

For the full story, see:

ALISSA J. RUBIN. “PARIS JOURNAL; The Rats Came Back. Blame the E,U.” The New York Times (Fri., DEC. 16, 2016): A4 & A14.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 15, 2016, and has the title “PARIS JOURNAL; Rodents Run Wild in Paris. Blame the European Union.”)

Government Permission to Build Takes Longer than It Takes to Build

(p. A21) America used to be the envy of the world in building great projects responsibly, efficiently and on time. The Pentagon was built in 16 months. The 1,500-mile Alaska-Canadian Highway, which passes through some of the world’s most rugged terrain, took about eight months. Today, infrastructure projects across America often require several years simply to get through the federal government’s pre-build permitting process. Consider a few examples.
New U.S. highway construction projects usually take between nine and 19 years from initial planning and permitting to completion of construction, according to a 2002 Government Accountability Office study. It will have taken 14 years to permit an expansion of Gross Reservoir in Colorado, and it took almost 20 years to permit the Kensington gold mine in Alaska.
It took four years to construct a new runway at Seattle-Tacoma International Airport, but it took 15 years to get the permits. Todd Hauptli of the American Association of Airport Executives bitterly joked to the Senate Commerce Committee last year, “It took longer to build that runway than the Great Pyramids of Egypt.”
These problems have been building for decades as the U.S. regulatory state has grown.

For the full commentary, see:
DAN SULLIVAN. “How to Put Building Permits on a Fast Track; It can take 15 years to win approval for a new airport runway. No wonder U.S. infrastructure needs a lift.” The Wall Street Journal (Mon., Dec. 5, 2016): A21.
(Note: the online version of the commentary has the date Dec. 4, 2016.)

Unbinding Entrepreneurs Can Create Jobs and Speed Growth

(p. A21) This week more than 160 countries are celebrating Global Entrepreneurship Week. The Kauffman Foundation, which I once led, created this event eight years ago to encourage other nations to follow the American tradition of bottom-up economic success. Yet this example has been less powerful in recent years, as American entrepreneurship has waned. Fortunately, President-elect Donald Trump has plenty of options if he wants to resurrect America’s startup economy.
Consider the economic situation that the president-elect is inheriting. Despite the addition of 161,000 jobs in October, the labor-force participation rate fell to its second lowest level in nearly 40 years, according to the St. Louis Federal Reserve. More people have joined the ranks of the chronically unemployed, slipping into poverty at alarming rates as their skills decay and dependency on public assistance grows. Considering population growth, America needs at least 325,000 new jobs every month to stanch the growing numbers of discouraged workers, according to the Bureau of Labor Statistics.
Merely bringing back factories from overseas will not solve this problem. Technology has made every factory more productive. Fewer workers make more goods no matter where they’re located. At the same time, fewer U.S. businesses are being started. New firms are the country’s principal generator of new jobs. Data from the Kauffman Foundation suggest companies less than five years old create more than 80% of new jobs every year. While the nation seems more enthusiastic than ever about the promise of entrepreneurship, fewer than 500,000 new businesses were started in 2015. That is a disastrous 30% decline from 2008.
. . .
What can President Trump do to encourage more entrepreneurship?
. . .
Government must . . . widen the scope of innovation by stepping back and letting the market find the future. By promoting trendy ideas and subsidizing politically favored companies, government dampens diversity in creative business ideas.
. . .
Mr. Trump can also reverse regulatory sprawl and cut government-imposed requirements that add to every entrepreneurs’ costs and risks. Anti-growth policies like ObamaCare and minimum-wage increases make hiring workers prohibitively expensive.
. . .
With these policies in mind, President Trump should set another goal: that his administration will create an environment that enables one million Americans to start companies every year. Such an outcome would assure his target of 4% GDP growth, as well as full employment.

For the full commentary, see:
CARL J. SCHRAMM. “The Entrepreneurial Way to 4% Growth; Trump should set a goal: fix the business climate so a million Americans a year can start companies.” The Wall Street Journal (Weds., Nov. 16, 2016): A21.

Europeans Regulate, or Not, Based on Which Label They Arbitrarily Apply to Uber

(p. B8) LUXEMBOURG — Uber asserted on Tuesday [November 28, 2016] that it was helping to bolster Europe’s digital economy as part of its defense in a long-awaited hearing to decide how the popular ride-hailing service should be able to operate across the region.
. . .
At the heart of the European court case — a ruling is not expected until April, at the earliest — is whether Uber should be considered a transportation service or a digital platform, which acts independently to connect third-party drivers with passengers.
If the company is defined as a transportation service, it must comply with national laws that may restrict how Uber grows in Europe.
Yet if the judges rule the company is just an intermediary that connects drivers with passengers, legal experts say, Uber may gain greater freedom to offer more transportation, food delivery and other services to European consumers.

For the full story, see:
MARK SCOTT. “Is Uber a Car Service or a Digital Platform?” The New York Times (Weds., NOV. 30, 2016): B8.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date NOV. 29, 2016, and has the title “Uber, Seeking to Expand, Defends Itself at Europe’s Highest Court.”)

Tesla Fights Car Dealership Monopoly

(p. B4) Tesla Motors Inc. filed an application for a dealership license in Michigan, setting up a potential legal fight over the state’s ban on selling cars directly to consumers.
. . .
About a year ago, Michigan passed a law prohibiting car makers from selling directly to customers in the state without an independent dealer as an intermediary. Tesla has opposed such dealer-franchise laws, calling them anticompetitive. Tesla allows customers to order vehicles directly from the company, something that other manufacturers are prohibited from doing.
A formal denial of its application by Michigan could prompt Tesla to pursue additional legal avenues to fight a law it calls “very harmful.”
“Tesla is committed to being able to serve its customers in Michigan, and is working with the legislature to accomplish that. The existing law in Michigan is very harmful to consumers,” a Tesla spokeswoman said. “Tesla will take all appropriate steps to fix this broken situation.”
. . .
Michigan and Texas are among a small group of states that have a flat prohibition on any direct sales. The laws were created to prevent car makers from building their own stores that would ​then ​compete with independent​dealerships. Michigan Automotive Dealers Association couldn’t immediately be reached for comment.
Such competition could potentially undercut independent dealerships’ prices and undermine investments made in their stores, according to lawyers and economists who have scrutinized dealer-franchise laws.

For the full story, see:
Ramsey, Mike. “Tesla Seeks License to Sell Cars in Michigan.” The Wall Street Journal (Tues., Feb. 2, 2016): B4.
(Note: ellipses added.)
(Note: the online version of the article has the date Feb. 1, 2016, and has the title “Tesla Motors Files for a Dealership License in Michigan.” The online version is slightly different from the print version. The passage quoted above is from the online version.)

Federal Regulations Suppress Organic Innovation In Order to Protect Incumbents

(p. A1) If a fruit or vegetable isn’t grown in dirt, can it be organic?
That is the question roiling the world of organic farming, and the answer could redefine what it means to farm organically.
At issue is whether produce that relies solely on irrigation to deliver nutrients to plants — through what is known as hydroponic and aquaponic systems — can be certified organic. And the National Organic Standards Board, an advisory group that makes recommendations to the federal secretary of agriculture, will get an earful on the topic at its meeting in St. Louis this week.
On one side are the growing number of big and small growers raising fruits and vegetables in these soil-free systems. They say their production methods are no different from those of farmers who grow plants in dirt — and, they add, they make organic farming more sustainable by, for instance, reducing water use.
“Soil to me as a farmer means a nutrient-rich medium that contains biological processes, and that doesn’t have to be dirt,” said Marianne Cufone, an aquaponic farmer and the executive director of the Recirculating Farms Coalition, which lobbies for aquaculture.
. . .
(p. B2 [sic]) The Organic Foods Production Act of 1990 states: “An organic plan shall contain provisions designed to foster soil fertility, primarily through the management of the organic content of the soil through proper tillage, crop rotation and manuring.”
“To me, it seems simple and always has been,” said Sam Welsch, chief executive of OneCert, an organic certification business in Nebraska that has refused to certify hydroponic produce. “There are things the law and regulations require you to do to the soil that you cannot do in a hydroponic system.”
. . .
Colin Archipley’s farm, Archi’s Acres, grows kale, herbs and other produce hydroponically in greenhouses in San Diego. He is frustrated that there is even a debate over whether his produce is organic.
“The reason this has become such a big deal is that systems like ours are becoming more popular because they’re more efficient, which means farmers are more sustainable and profitable,” he said. “That’s put competition on farmers, specifically in Vermont, and so what this really is about is market protection.”

For the full story, see:
STEPHANIE STROM. “Is It Organic? Ground Rules May Be Changing.” The New York Times (Weds., NOV. 16, 2016): A1 & B2 [sic].
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 15, 2016, and has the title “What’s Organic? A Debate Over Dirt May Boil Down to Turf.”)

U.S. Start-Up Helps Foreign Start-Ups Navigate U.S. Bureaucracy

(p. B7) Stripe, the San Francisco-based e-commerce start-up, thrives when other businesses do well. So the company wants to help many more businesses get off the ground.
That is the reason behind Stripe Atlas, a new product the company unveiled this week at the Mobile World Congress in Barcelona, Spain. It aims to make it easier for entrepreneurs to set up small businesses in the United States. If all goes according to Stripe’s plan, Atlas could let start-up founders sidestep some of the bureaucratic hurdles that often hamper building a new business.
Determining eligibility requires little more than filling out a form. After that, Stripe will incorporate an entrepreneur’s company as a business entity in Delaware, and provide the entrepreneur with a United States bank account and Stripe merchant account to accept payments globally.

For the full story, see:
MIKE ISAAC. “A U.S. Start-Up Offers to Lend a Hand to Foreign Entrepreneurs.” The New York Times (Thurs., FEB. 25, 2016): B7.

(Note: the online version of the story has the date FEB. 24, 2016, and has the title “Stripe Atlas Aims to Ease the Way for Foreign Entrepreneurs.”)

Longer Permit Delays Slow Construction of Houses

(p. A3) Home prices and rents are surging in Denver, but local builder Jared Phifer said his construction work virtually ground to a halt last fall.
The reason: He can’t get permits for new projects.
The process can take as long as eight months, at which point the prices he quoted buyers often are out of date, he said.
The delays are “almost making us go bankrupt,” he said. “We’ve had to put a halt on so many projects that I’m in the process of getting a loan for $150,000 to cover all of our expenses.”
. . .
Developers of single-family homes reported that the median delay was seven months in 2015, compared with four months in 2011, according to the National Association of Home Builders.
. . .
Last July [2015], Denver saw the biggest permit backlog in its history, according to Brad Buchanan, the executive director of community planning and development. Residential projects were taking as long as three months to review, three times the target duration. Apartment and office projects were taking two months to review, although some developers and homeowners reported waiting much longer.
“Last summer our phones were ringing off the wall with people who couldn’t even get permits to change out water heaters,” said Jeff Whiton, chief executive officer of the Home Builders Association of Metropolitan Denver.

For the full story, see:
LAURA KUSISTO. “Home Builders Slowed by Permit Delays.” The Wall Street Journal (Fri., March 4, 2016): A3.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date March 3, 2016.)

Regulatory Restrictions on Business Have Doubled Since 1975

GrowingRegulatoryRestrictionsGraph2016-10-31.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A2) Measuring the regulatory state is no easy task. The Code of Federal Regulations contains more than a million restrictions, as signified by the use of the words “shall,” “must,” “may not,” “required,” and “prohibited,” according to two scholars from the Mercatus Center, a free-market think tank. The total has doubled since 1975, pausing only during Ronald Reagan’s first term and Bill Clinton’s second.

Rule enforcement is also getting more serious. Responding to accusations of lax oversight in the past, federal authorities have imposed criminal penalties, in particular on financial companies, averaging $7 billion a year in the past four years, up fourfold from the prior 11, according to Brandon Garrett, a law professor at the University of Virginia.
. . .
Brent Skorup, a scholar at the Mercatus Center, says regulators like the FCC increasingly extract behavioral conditions from companies via transaction approvals rather than rule-making. For example, Comcast Corp. acquired NBC Universal in 2011 after agreeing to a long list of conditions, from not charging for faster network access (aka abiding by “net neutrality”) to expanding local, public-interest and children’s programming.

For the full commentary, see:
GREG IP. “CAPITAL ACCOUNT; AT&T Feels Growing Reach of Presidency.” The Wall Street Journal (Thurs., Oct. 27, 2016): A2.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Oct. 26, 2016 title “CAPITAL ACCOUNT; Reaction to AT&T-Time Warner Deal Shows Presidency’s Growing Reach.”)

The data presented in the left panel of the graph above is described in the following article:
Al-Ubaydli, Omar, and Patrick A. McLaughlin. “Regdata: A Numerical Database on Industry-Specific Regulations for All United States Industries and Federal Regulations, 1997-2012.” Regulation and Governance (2015), doi: 10.1111/rego.12107.

The data can be downloaded at:
http://regdata.org/data/

The Garrett results mentioned above, are reported in his article:
Garrett, Brandon L. “The Rise of Bank Prosecutions.” The Yale Law Journal Forum (May 23, 2016): 33-56.

Land Use Regulations Increase Income Inequality

IncomeAndPopulationInRichAndPoorStatesGraph2016-11-14.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A3) In this year’s election, candidates have focused blame for rising income inequality on broad economic forces, from globalization to the decline of the American manufacturing base. But a growing body of research suggests a more ordinary factor: the price of the average single-family home for sale, from Fairfield, Conn., to Portland, Ore.

According to research by Daniel Shoag, an associate professor of public policy at Harvard University, and Peter Ganong, a postdoctoral fellow at the National Bureau of Economic Research, a decadeslong trend in which the income gap between the poorest and richest states steadily closed has been upended by growth in land-use regulations.
Moving to a wealthier area in search of job opportunities has historically been a way to promote economic equality, allowing workers to pursue higher-paying jobs elsewhere. But those wage gains lose their appeal if they are eaten up by higher housing costs. The result: More people stay put and lose out on potential higher incomes.
. . .
Messrs. Shoag and Ganong looked at mentions of “land-use” in appeals-court cases and found the number of references began rising sharply around 1970, with some states seeing a much larger increase than others. For example, the share of cases mentioning land use for New York rose 265% between 1950 and 2010 and 644% in California during the same period. By contrast, it increased by only 80% in Alabama.

For the full story, see:
LAURA KUSISTO. “Land Use Rules Under Fire.” The Wall Street Journal (Weds., Oct. 19, 2016): A3.
(Note: ellipsis added.)
(Note: the online version of the story has the date Oct. 18, 2016, and has the title “As Land-Use Rules Rise, Economic Mobility Slows, Research Says.” A few extra words appear in the online version quoted above, that were left out of the print version.)

The research by Ganong and Shoag, mentioned above, is:

Ganong, Peter, and Daniel Shoag. “Why Has Regional Income Convergence in the U.S. Declined?” Harvard University, John F. Kennedy School of Government, Working Paper Series, Jan. 2015.