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Streetwise Professor

January 19, 2011

He’s From the Government, and He’s Here to Help Us

Filed under: Economics,Politics — The Professor @ 10:16 am

Yesterday President Obama took to the oped page of the WSJ to announce his plans to promulgate an executive order that

requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.

All well and good, perhaps, but the piece leaves about the same impression as a promise by Ghengis Khan that his Mongols will wipe their feet on the doormat before pillaging your home.

I exaggerate, of course, but there is an immense disconnect between the words in the oped and the ongoing actions of the administration.  Yes, discarding bizarre rules like those that require treating saccharine like industrial waste is beneficial.  But that victory, such as it is, took place when every department of the federal government has gone on a regulatory binge.  I am most familiar with what is going on at CFTC, and that is enough to make me shudder as I watch an agency that historically has earned the sobriquet “stepchild” systematically re-engineer every aspect of the immensely complex derivatives markets.  But even a cursory glance across the regulatory landscape reveals hyperactivity everywhere, from Net Neutrality at the FCC, to the new Consumer Financial Protection Agency, to the EPA, which is beavering away at a scheme to regulate carbon emissions–something that an overwhelmingly Democrat congress failed to pass.  And then, of course, there is Obamacare.

Even the example that Obama touts–fleet fuel efficiency standards–illustrates the point.  Yes, perhaps the changes Obama mentioned mitigated the harm of the regulations.  But fleet fuel standards are a grotesquely inefficient way to achieve the policy objectives that Obama sets out, and they have wreaked tremendous havoc on the American auto industry–as Holman Jenkins has pointed out repeatedly on the same WSJ oped pages.  At best, the changes that Obama mentions made the regulation less horrible.

In other words, this executive order is, at best, microsurgery on the capillaries, undertaken at a time that blood is gushing from all the major arteries.

Given the disconnect between the nanoscale of the executive order, and the macroscale of the regulatory state, there is room for skepticism–and indeed, even cynicism–about the initiative.  This smacks of a PR venture–”See, I am actually pro-growth”–intended to counter the widespread–and well-earned–criticism of the effects of the metastasization of the regulatory state.  A shiny object dangled in front of the easily distractable to divert attention from the fact that the  regulation is continuing to grow inexorably.

Yes, I guess it is a good thing that Obama is promising that Leviathan will slick down that cowlick and clean under its fingernails.  But that’s very small comfort given that Obama and Congress have fed the beast a steady diet of steroids over the past two years and show every intention of continuing with the regimen as long as they can.

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4 Comments »

  1. OK, let’s take one point here.

    Even the example that Obama touts–fleet fuel efficiency standards–illustrates the point. Yes, perhaps the changes Obama mentioned mitigated the harm of the regulations. But fleet fuel standards are a grotesquely inefficient way to achieve the policy objectives that Obama sets out, and they have wreaked tremendous havoc on the American auto industry–as Holman Jenkins has pointed out repeatedly on the same WSJ oped pages.

    International fuel economy standards – chart.

    So perhaps – just perhaps – the woes of the US auto industry are self-made, or even because of the absence of stringent fuel economy standards that encouraged automakers to produce gas-guzzling SUV’s that are utterly undesirable in a world of high oil prices?

    Meanwhile, your silence on by far the most disturbing example of government regulatory activity – the ongoing legalization of “war on terror” policies such as torture, arbitrary detention, assassinations, etc – is quite deafening.

    Comment by Sublime Oblivion — January 19, 2011 @ 2:00 pm

  2. What is most striking about Mr. Obama’s article is the complete absence of any direct mention, or even a hint, that the executive and legislative branches of the federal government can or should be limited in scope by the Constitution of the United States or by any other principle limiting government control over its citizens.

    He points to upcoming regulatory achievements that he is apparently proud of, such as “new safety rules for infant formula,” without even giving pause to the idea that the federal government was not vested with either the power or authority to create such rules.

    To the President, there is never a question of policy over whether or not the federal government can do something, merely if it should. If the President and his appointed team of “experts” believe that the benefits of doing whatever it is they see fit outweighs the costs, then they have every right to make as many mandates as they want. Don’t think they have the authority to do so? You’re probably a right-wing nutjob, still clinging to your guns and religion.

    Comment by Steven R. Christopher — January 19, 2011 @ 7:26 pm

  3. Sublime: Gas guzzling SUV’s are certainly not “utterly undesirable” to the consumers who buy them yielding just about the only profitable
    line that worldwide carmakers produce.

    Comment by SR — January 22, 2011 @ 5:10 pm

  4. S/O–The fuel economy standards are, as I say in my post, a disaster. They are a disaster on their own terms, and in terms of the collateral damage they impose.

    Obama claims they save millions of barrels of oil consumption. False. Demonstrably false. Indeed, their effect on oil consumption is basically zero, for economically straightforward reasons. Most notably, the marginal cost of driving an additional mile is smaller, in smaller more fuel efficient cars. So in response to the economy standards, people drive more miles. Fewer gallons per mile but more miles, and as it turns out empirically, the net effect is a wash as the latter almost exactly offsets the former. No decline in consumption.

    Obama’s number is based on the idiotic assumption that driving behavior does not change even though the standards change the economics of driving. Only a fool would believe that. But then we *are* talking about Obama, and he is an economic fool.

    As for the collateral damage. The mortal: literally thousands of additional traffic deaths. The annoying: people have to utilize vehicles that are less suited to their needs, and depriving them of their ability as adults to choose the combination of fuel mileage, interior room, power, etc. that best suits their needs.

    Regarding international standards. Is mass idiocy preferable to individual idiocy? If something is dumb, it is dumb if one person does it or a million.

    With respect to the US auto industry, well duh it has numerous other problems. I would never say otherwise–nor did I. But the fuel economy standards hit the industry very hard by limiting the ability of the industry to build the vehicles in which it had a comparative advantage. Pain for no gain.

    Insofar as gas guzzling SUVs unsustainable, etc., is concerned. That’s self-correcting. The composition of vehicle output would–and has–changed in response to price changes. The problem is the imposition of constraints that do not permit rational responses to price signals, and which in fact prevent people trading off fuel economy against other attributes they value.

    Insofar as WOT is concerned, that’s a stretch even for you to bring that into a post on economic regulation. I was responding to Obama on his own terms. You aren’t doing the same. Don’t play whatabout on this too. Or are some habits just too hard to break?

    Perfectly glad to discuss the other issues in context.

    The ProfessorComment by The Professor — January 23, 2011 @ 9:34 pm

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