OPINION:
Republicans could play a populist card and also boost the economy by targeting federal regulations. With President Obama’s economy still lagging after seven years, 2016 GOP presidential contenders have a perfect opportunity to differentiate themselves from Democrats in a way that even tax cuts and spending reductions cannot. The reason is that federal regulations have thwarted Republicans in their recently assaults on big government.
Mr. Obama’s economic underperformance is as clear as it is publicly accepted. Not surprisingly, the president has polled lower on the economy than any other major issue, and the economy continues to be the public’s top concern.
While the economy has slumped, federal taxes and spending have jumped and federal debt more than doubled — making both obvious targets for Republicans. Not so obvious, but potentially more potent, are federal regulations’ big costs to the economy.
Over the past two years, the Competitive Enterprise Institute and the National Association of Manufacturers each estimated federal regulations’ annual cost at approximately $2 trillion. That equals 61 percent of 2014’s total federal revenues. It is 30 percent larger than total federal income tax revenue, almost double federal payroll tax revenue, and almost six times greater than federal corporate tax revenue.
Reducing federal regulations on the private sector would have as positive an impact on the economy as decreasing federal taxes would. It is also fiscally cheaper and more politically attainable.
If the $2 trillion estimates are correct, even a 5 percent cut would amount to a $100 billion reduction annually. Consider how politically difficult it would be to decrease federal taxes by that amount. Then consider that reducing federal regulations would not result in any fiscal cost.
While the economic impact alone makes federal regulations a worthy target, their reduction also offers another political bonus. Citing their increase under Mr. Obama further highlights this administration’s poor economic record. And it makes a broader case against big government’s economic impact, too.
Most importantly, targeting federal regulations reverses the political calculus that has stymied Republican attempts to reduce federal taxes and spending.
Income and corporate taxes are focused on electoral minorities. Reducing them requires building a political majority around a minority — a tall political order, and even more so when the taxes are justified as paying for federal spending.
Federal spending is spread over a decided majority. Despite its adverse effect of shifting money from the more productive private sector, a political majority directly receives benefits from the multitude of federal programs comprising this spending. The case for reducing federal spending, therefore, while ultimately economically beneficial, is initially politically difficult. The economic benefit is pitted against the direct benefit a majority receives from various programs. Little wonder economics routinely loses to politics.
While regulations are an economic drain, just as taxes and spending are, their political composition is very different.
Regulations are not direct products of the political process as taxes and spending are. They are the product of a bureaucratic process. The political support that created the law underlying a regulation may be long gone by the time the regulation itself is produced.
Because there is no budgeting — as with taxes and spending — there is no incentive to control regulation costs and scope by the bureaucrats who implement and manage them. Rather, the opposite incentive exists with bureaucrats accruing power from regulations’ increase.
Without oversight from today’s gridlocked Washington, there is no external check from government, either. And because bureaucrats are unelected, there is no check on their actions by voters.
None of these exemptions from control apply to federal spending and taxes. The dissimilarity does not stop there.
Unlike federal spending, where a majority of Americans benefit from one program or other, the public perception is that regulations’ greatest beneficiaries are the bureaucrats implementing and enforcing them. It would be hard to conjure less sympathetic beneficiaries than federal bureaucrats.
Unlike taxes’ direct impact on a minority, regulations’ costs affect an enormous swath of Americans. Employers and employees alike feel — and often resent — their impact at work, while Americans in their private lives are also affected.
Instead of simply focusing on taxes and spending, Republicans need to target the weakest link in the big-government chain encircling America’s economy. Not only would reducing federal regulations help the economy, it would also help convince a jaded electorate that reducing big government can work and should again be tried on federal taxes and spending.
The best route to reducing taxes and spending might well run through reducing regulations first. While seemingly circuitous, such a route could prove fortuitous for Republicans.
• J.T. Young has served in the Treasury Department, the Office of Management and Budget and as a congressional staff member.
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