Regulatory Overkill; D. Bandow

Potomac Principles Regulatory Overkill by Doug Bandow T here may have been a revolution in the way Washington works over the last two years, but its effects remain hard to discern. All told, estimates Americans for Tax Reform, government is costing U.S. citizens $3.38 trillion this year. In effect, only on July 3-Cost of Government Day did people stop working for government. People effectively spent more than half of the year, 184 and a half days, on their jobs before earning anything for themselves. The burden of direct spending-$2.45 tril lion for federal, state, and local govern ments-is obvious enough. Perhaps more incredible are the hidden costs. Federal regulation, for instance, runs Americans $739 billion annually. Another $196 billion is consumed by state regulation, particularly workers' compensation laws and an out-of control tort system. What makes these latter costs so insidious is that the financial bill is rarely known when the legislative bill is enacted. For instance, Congress's politi cally popular move to help the disabled, the Americans with Disabilities Act, will cost counties alone $3 billion by 1998.

The overall result is an incredible regula tory sprawl. Last year, report Melinda War ren and Barry Jones of the Center for the Study of American Business, the federal regulatory workforce hit its highest level Mr. Bandow is a senior fellow at the Cato Institute and a nationally syndicated columnist. He is the author and editor of several books, including The Politics of Envy: Statism as The ology (Transaction). ever, 130,929-28 percent more than the decade before. The number of pages in the Federal Register, Washington's compen dium of proposed rules, was up an aston ishing 68 percent over the same period. Nor is the problem simply the quantity of regulation. The Independent Commission on Risk Assessment and Risk Management recently criticized federal controls as "cum bersome," "fragmented," bedeviled by "confusion and inefficiency," and subject to a "patchwork" of inconsistent laws. Some regulations today are not based on "realistic high-exposure scenarios," that is, the dos ages people face. The language of the Delaney Clause, which bans carcinogenic products, is "inconsistent with modern an alytic detection methods and current scien tific knowledge." And so on. In short, the entire federal rule-making process is seri ously defective.

Similarly critical are Heritage Foundation analysts John Shanahan and Adam Thierer, who report in a recent study that the gov ernment fails to prioritize risks, recognize that not all risks are avoidable, and under stand how regulations can actually cost lives. There are, explain Shanahan and Thierer, "real costs and tradeoffs associ ated with every regulatory decision." This is an insight that many government officials obviously lack. When Congress enacted Corporate Average Fuel Economy standards, it encouraged automakers to downsize their automobiles in order to achieve better mileage. However, since 680 The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 E-mail: freeman@westnet.com October 1996 Economic Ends and Means M ost Americans are in full agree ment on the basic goals of eco nomic policies. They see eye to eye on the desirability of economic growth and prosperity, full employment, stable prices, a healthy environment, social peace and harmony. They even agree on the need for aid and support of the poor and disadvantaged. They concur on economic ends, but differ sharply on some-but not all-of the means that should be used to achieve those ends.

Some Americans eagerly take an IIactivist" line. They would use the full weight of the political apparatus to man date, coerce, punish, tax, spend, engage in deficit spending, and print money in order to attain their ends. They call on govern ment to actively pursue the economic ends. Other individuals, while equally committed to the same goals, would seek to improve conditions by relying less on politics. They would reduce involvement of government in the economy, remove the political constraints, and shun artificial government stimulants. They place their confidence in the free and efficient opera tion of the competitive market order. The difference between the two camps springs from different perceptions and conceptions of social life. According to the most popular social philosophy of our age, the market order is torn by an irreconcil able conflict between the interests of "capi tal" and those of "labor." Private property in the means of production and individual enterprise benefit only a small class of cap italists while they harm the large majority of working people.

This conflict philosophy which owes its great popularity to the writings of Karl Marx and his American admirers is espoused not only by card-carrying Marxians, but no less by many professed anti-Marxians and self-styled champions of free enterprise. It is the official social philosophy of the major political parties and their candidates. They may disagree on basic problems of abortion and drug abuse or on some incidental issues such as the capital gains tax or the allowable rate of depreciation, but they all espouse the thesis that the economic system breeds economic conflict and, therefore, should be abolished or at least be carefully managed in the name of social justice. The commu nists and socialists seek to abolish the sys tem summarily; their ideological cousins readily accept the conflict doctrine, but deplore the presumed conflict, and want to alleviate it with the reforms they recom mend.

In recent decades the economic conflict dogma has provided the intellectual wherewithal for derivative doctrines of racial conflict, gender conflict, and the youth conflict of the 1960s and 1970s. They, too, divide society in distinct classes of exploiters and victims who form vocal organizations that press their charges and plead their cases in the halls of Congress. To listen to the economic debates in the Congress of the United States is to give ear to furious exploitation charges and the wailing of an assembly of victims. We reject and repudiate the conflict dogma. The private property order, we believe, is a harmonious order devoid of social and economic conflict. In the words of Adam Smith, it is guided by an "Invisible Hand" which turns everyone's pursuit of private gain into public benefit and thereby harmonizes the interests of all members of society regardless of class, race, gender, or age. What makes for this harmony is the higher productivity of cooperation and division of labor. Two individuals working together are more productive than two working alone. Two hundred million Americans working together, specializing in their productive tasks and engaging in large-scale produc tion, are more productive per head than a smaller number. Thanks to their coopera tion, the supply of goods and services tends to multiply, which improves their living and working conditions. It removes all traces of social conflict.

It is in the interest of every individual to preserve and extend social cooperation and division of labor. In freedom and the private property order, everyone earns the money equivalent of his contribution to the production process. Even in the employ of a profit-seeking capitalist, the competition among employers, the free dom of workers to sell their labor to the highest bidder, and the freedom to be self employed, all these characteristics of the market order assure that everyone receives his or her full and fair wage. There can be no exploitation in an unhampered labor market. The" activists" who would use the polit ical apparatus to command and direct eco nomic life summarily reject such explana tions. They usually liken economic life to life in a jungle in which one creature preys on another and only the strong survive. To speak of inexorable economic principles that guide human life and of the harmony of interests of all human beings, to the activists, is to suffer from an illusion, engage in wishful thinking, or even wink at cruel exploitation of the weak and sick.

They are quick to question the very motives of anyone who casts doubt on the advisability of the use of the political appa ratus in economic life. Their spokesmen in the media do not hesitate to cast slurs upon the disciples of harmony as the foes of economic growth and prosperity, as the partisans of inflation and unemployment, the advocates of a polluted environment, and the enemies of peace and harmony. To disagree on the means to be employed is to stand condemned also on the ends sought. The conflict reporters who may call themselves "liberals" or "moderates" may go even farther. They may spurn the unhampered market order also on ethical grounds as an unfair and amoral system. To them, the criterion of morality is the people's will, wish, and intent as they manifest themselves in majority votes. They place a high value on individual obe dience and on restraints equally imposed on individuals by majority decision. The state is their instrument of coercion, the supreme arbiter of fairness and morality.

In reality, the opinion and judgment of the majority are not the final proof of what is right. Wisdom and justice are not always on the side of the majority. In fact, individ uals usually live in greater danger of hav ing their rights invaded and their freedom restrained by the commands of an over weening and self-righteous majority than by the machinations of entrepreneurs and capitalists. Evil is evil; it is none the better for being committed on behalf of the majority. Hans F. Sennholz NEW FROM FEE! Required reading for all who have misgivings about today's fiat money: Economics of a Pure Gold Standard by Mark Skousen liTheexcellenceofthe gold standardis to be seen in thefact that it rendersthe determinationofthe monetaryunit'spurchasingpower independentofthe policiesofgovernmentsand politicalparties." -Ludwig von Mises, The Theory of Money and Credit G old was once dismissed as a "barbarous relic." Now, as uneasi ness about the stability of paper money grows, so does interest in the yellow metal. Some central bankers have even confessed to monitoring the free-market price of gold and using it as a barome ter of economic stability. There is also evidence that many of these bankers use the price of gold to set monetary policy.

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small cars lose when hit by big ones, the result has been increased injuries, and deaths in auto accidents. Other examples abound. Studies suggest that chlorine carries with it a slight risk of cancer. Therefore, Peru stopped chlorinat ing drinking water, only to sutTera massive cholera outbreak that killed 7,000 people. Similarly, while the banned pesticide EDB poses a (very low) cancer risk, the food fungus formerly destroyed by EDB presents a greater cancer danger. Switching from disposable to washable diapers saved landfill space. But doing so also increases pesticide use (to grow cot ton), hot water consumption (to wash the diapers), and air pollution (from the trucks of household pickup services). In fact, many forms of recycling otTer similar negative consequences. Paperboard burger contain ers can be recycled, but polystyrene clam shells generate less pollution and use less energy when produced.

There is another more indirect trade-otT. As Shanahan and Thierer put it, "Wealth is health." A more prosperous society will have better medicine, safer transportation, more durable housing, and less dangerous work. Thus, anything that reduces people's incomes is likely to, at the margin, make people less safe. In fact, the White House Officeof Information and Regulatory AtTairs (OIRA) estimates that every extra $7.5 mil lion in regulatory spending results in one lost life as mortality rates rise. Yet today the government regularly reg ulates as if money were free and there were no health trade-otT. Common are the gov ernment rules that cost more than they are worth. Kenneth Chilton and Courtney La Fountain of the Center for the Study of American Business figure the 1990 Clean Air Act amendment governing ozone gen erates between three and five times as many costs as benefits. Many rules otTer dramatically worse deals. For instance, OSHA controls on ben zene would require the expenditure of $168 million to prevent one death. The EPA's standards for dichloropropane would ex pend $653 million to avert one death. And 681 OSHA's regulations on formaldehyde would cost an incredible $119 billion before saving even one life.

Using the OIRA estimate, 22 people are dying for everyone saved by the benzene rule. The ratio is nearly 90-to-one for di chloropropane. The formaldehyde rules cause 1,600 times as much harm as good. Shanahan and Thierer suggest another way of looking at the so-called opportunity cost of these controls. In place of the benzene standard, 3,064 police officers could be put on the street. The dichloropropane rule costs the equivalent of 4,353fire trucks. And pharmaceutical companies could develop 331 new drugs for the money necessary to save one person with the formaldehyde re strictions. Bargains these regulations are not. America's regulatory behemoth requires systemic reform. The starting point must be Congress. Lawmakers should stop attempt ing to micromanage virtually every aspect of society. It is time for them to realize that however imperfect the market, the political process is far more flawed. Even legisla tion resulting from the best of intentions, like the Americans with Disabilities Act, usually ends up having expensive and per verse consequences.

Congress also needs to stop granting blank checks to agencies to implement leg islation. Observes former Senator Malcolm Wallop: "We get to vote for senators, con gressmen, and presidents. But we have less and less control over our lives because we have no control over the people who make the rules by which we live-about how we make and sell our products, which groups get what preferences, how we can use our land." Legislators need to stop delegating their lawmaking powers to unelected bu reaucrats. Congress should allow the rele vant agency to draft only a proposed, not a final, rule. Then Congress should have to vote on the measure before it becomes law. Responsibility is the key to such reform. As attorney Philip Howard put it, "When Americans can identify who is responsible for what, sensible decisions will begin pop ping out of our schools and other institutions like spring flowers after a long winter."