Watch out for the regulatory cliff
With all the media attention on fake Twitter followers, socially conservative corporate executives and a congressman’s inflammatory comments about rape, the recent slowdown in federal regulations has flown under the radar. But people should be paying attention. Over the past four months, the Obama administration has issued new regulations at a pace of 16 per month, down from its pace of 22 per month during 2009 and 2010. That downward trend could have major implications for the economy.
It’s especially significant because of the uptick in regulatory costs during the first half of President Obama’s term. According to a Heritage Foundation report, “From the beginning of the Obama administration to mid-FY 2011, regulators have imposed $38 billion in new costs on the American people, more than any comparable period on record.” Many of the early regulations stemmed from the Dodd-Frank Act, the Affordable Care Act, and EPA rules designed to regulate greenhouse gas emissions.
However, the slowdown appears to be temporary, because it’s largely the result of the administration’s decision to delay implementation of several major regulations until after the November election. If President Obama is re-elected, a dozen postponed major regulations could hit the economy at the same time, an event that would have serious economic consequences.
In its “Unified Agenda,” a document put out by the Office of Budget and Management last year, the administration estimated that 30 economically significant rules — rules with economic impacts of $100 million or more — would be finalized over the course of this year. Ten of these rules have been delayed until after November. Among the postponed regulations are an Environmental Protection Agency (EPA) rule that aims to reduce the amount of fish that are accidently killed by power plants’ water-cooling units, which could cost up to $4.6 billion annually; a controversial EPA rule that aims to reduce ozone pollution, which could cost up to $90 billion annually; and a Department of Transportation rule designed to reduce the number of injuries and deaths resulting from people being hit by backing-up cars, which is expected to cost car manufactures as much as $2.7 billion annually, or $200 per vehicle. These costs, of course, will be passed on to consumers.
In a recent Wall Street Journal op-ed, Senator Rob Portman (R-OH) characterized the looming regulatory onslaught as a “regulatory cliff” and warned that it could slow the economy. “The Obama administration has been quietly postponing several multibillion-dollar regulations until after the November election,” Portman wrote. “Those delayed rules, together with more than 130 unfinished mandates under the 2010 Dodd-Frank financial law, could significantly increase the regulatory drag on our economy in 2013.”
According to recent surveys, uncertainty over regulatory costs is a leading reason small-business owners are reluctant to expand and hire. The regulatory onslaught that will await us if President Obama is re-elected will exacerbate this problem, further hindering economic recovery.
Laura Stanley is a student at James Madison University, where she studies economics and political science.