Businesses don't like regulation. What else is new?

How to protect your pockets.
Feb. 7 2011 6:47 PM

Darrell's Delusion

Businesses don't like regulation. What else is new?

Chairman Darrell Issa. Click image to expand.
Rep. Darrell Issa, R-Calif.

In December Rep. Darrell Issa, R.-Calif., then-incoming chairman of the House committee on oversight and government reform, sent letters to 150 businesses and pro-business groups asking them to tell him which regulations they hate. Now we have their answer: 1,947 pages of grumpy replies. The online PDF is more than 57 megabytes, which is more than my computer can handle, but this pile isn't meant to be read so much as weighed. Look at all these complaints about job-killing regulations!

A committee press release congratulates Issa for bringing "the voice of job creators nationwide directly to Washington," but Washington is no stranger to the needs and desires of business. Regulations typically are issued in a three-step process. First comes the "proposed rule," which is published in the Federal Register. Then the public is invited to comment on the proposal and how it should be changed. What's that you say? You've never offered your opinion about a proposed regulation to a federal agency? That's because "the public" is in this instance a euphemism for business interests, which provide the overwhelming majority of comments on proposed regulations. The federal agency in question reviews various criticisms from business (along with an occasional comment sent in from a nonprofit representing the health, safety, or economic concerns of the broader public) and makes whatever adjustments it deems necessary. The White House meanwhile looks over the agency's shoulder and offers, through its Office of Information and Regulatory Affairs—currently administered by Cass " Nudge" Sunstein—its own opinion about how the rule should be written. Then the agency issues a final rule. If the government issues a regulation that business doesn't like, it isn't because the government failed to consider how it would affect business. It's because it weighed the arguments from business and found them wanting. (A more detailed explanation of how a rule is enacted is available here.)

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Business dominates the regulatory process so thoroughly—even in Democratic administrations—that it's hard to escape the suspicion that Issa's real purpose in soliciting business opinion was to elicit contributions to his campaign committee or to his two leadership political action committees. But let's take Issa at face value. Should we care when business complains about burdensome regulation?

Not a lot. By definition, a regulation is a government requirement that business uphold responsibilities to the public at large that, left to its own devices, business would rather avoid. If business leaders were naturally inclined to sacrifice their companies' narrow interests whenever these conflicted with those of the general population, regulation would be unnecessary (and business leaders would not be recognizably human).

(Incidentally, the federal agency most frequently criticized by the businesses surveyed is the Environmental Protection Agency, according to news reports. That's mainly because the EPA typically produces more regulations than most other agencies; currently it has 32 actions pending, compared with 23 at Health and Human Services and 14 at the Agriculture department.)

Granted, not all problems that arise from regulation are foreseeable during the rulemaking process. But when they aren't, business has little trouble making its complaint heard in Washington. The amount of money spent last year on lobbying—just on lobbying, not on campaign contributions—was $3.47 billion, which is more than double the $1.56 billion spent 10 years earlier. Some of that money was spent by labor unions and public-interest groups, but the overwhelming majority of it was spent by businesses. The U.S. Chamber of Commerce alone spent $132 million last year on lobbying. The Chamber occupied the top spot on the list of top spenders, as it did every year of the previous decade except 2000, when it dropped to no. 2, after the pro-Business Roundtable. Small wonder that President Obama romanced the Chamber on Feb. 7. In 2010, pro-business lobbies occupied every spot in the list of top 20 spenders except for no. 6 (the AARP, which lobbies for the elderly but also defends its interests as an insurance provider).

When businesses affirmatively like regulations, that's when to reach for your wallet. Writing in the Wall Street Journal, Stephanie Simon notes an uptick in licensing requirements for various occupations—locksmiths, "shampoo specialists," librarians, masseuses, and so on. In 1950 only 5 percent of all U.S. workers performed work that required them to obtain licenses; by 2008 that proportion had risen to 23 percent. Since the mid-1980s, the number of jobs requiring formal certification jumped from 800 to 1,100. Why isn't business complaining about that to Issa? Partly because professional licensing occurs at the state level. But as Simon notes, business's dirty little secret is that it favors this type of regulation because by limiting entrants into various occupations it can increase fees for those independent operators who have already obtained certification.

On Jan. 18 President Obama issued an executive order calling for a careful review of existing regulations to make sure they aren't "outmoded, ineffective, insufficient, or excessively burdensome." In a Feb. 7 blog post  on the White House Web site, OIRA's Sunstein promised "smarter regulation" and cited a few examples of regulations that were recently pulled back after complaints from "stakeholders," which in most instances meant businesses. Washington, D.C., is a city largely committed to figuring out what business wants and then providing it. Democrats provide a little less than Republicans.

Obama has gotten an anti-business rap because he presided over the health care reform bill and the financial reform bill. But the health care bill provides massive new subsidies to a health insurance industry that otherwise faces a bleak future, given rising medical costs, and the financial reform bill is largely an attempt to prevent a future massive bank failure that may happen anyway because the banks lobbied successfully against the bill's toughest provisions. The idea that the business world's needs get ignored in Washington is perpetuated by business so it can fulfill even more of its needs, real or imagined. To take it at face value, as Issa at least pretends to do, is pure fantasy.

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