Government regulation of the private sector is one of the most contentious overarching issues related to effective public policy. While there may be some legitimate circumstances, such market mechanism breakdowns of failures of transparency, where some form of regulation is needed, there is always a cost. Determining whether the cost of regulation is greater than the benefit is that most delicate of balancing acts and one where a failure to balance appropriately can lead to devastating economic consequences with real, very human costs.
Often, those seeking regulation point to the necessity of protecting this or that person or industry from harm. There is almost always a default assumption that regulation will prevent that harm and that any increases in the cost of doing business if morally justifiable due to the protections being sought.
Yet, looking at this from the 30,000-foot view, these assumptions often prove wrong.
Two recent blogs from the well-known and regarded historian and author Walter Russell Mead starkly highlight what these kinds of consequences can be. The first is a sobering and sweeping history of the post- "Great Society" generation. The second, very specifically looks at how regulations stifle the creation of the very jobs that will allow people, most importantly those at the low end of the economic spectrum, to begin climbing what could be called the "ladder of success." This "ladder of success" is where skills can be learned at successive levels and, over time, facilitate a rise from poverty to the middle class American dream.
When read together, these blogs paint a sad portrait of how government policy, even that they may have begun as well intentioned, has been completely unable to prevent the emergence of what may become a permanent class of persons unable to escape the quagmire of economic stagnation.
Note this illuminating section,
"The forest of regulations that makes everything from opening a new business to repairing a building complex and expensive must be dramatically thinned. If we are serious about creating conditions in which workers with poor skills can make a living inside great cities, we have to move away from regulations and practices which make it prohibitively expensive to do business there."
A striking example of exactly what kind of rules and regulations stifle rapid economic growth spews forth from the U.S. EPA. Thanks to that agency, a new rule dealing with carbon emissions will cost the utility industry over $2 billion during the next few years by restricting certain emissions from coal power generating plants. Already, AEP is saying it will probably retire several of its coal plants as a result. From the Columbus Dispatch,
"Some utility officials said the new rules and others that the Obama administration plans to enact could force the retirement of several coal plants. That will raise electricity costs for consumers, said American Electric Power spokesman Pat Hemlepp."
Clearly, no one is for bad air. But all Ohioans that care about jobs should understand one number that cuts to the very core of economic development and, thus, job creation.
According to the Public Utilities Commission of Ohio, coal accounts for a whopping 86 percent of the electricity produced in Ohio. Again 86 PERCENT!
Additionally, it has to be pointed out that the consumers of electricity in Ohio are not just homeowners. It's businesses too. That means they will be spending more on power, rather than more on hiring new employees. This will be especially bad for smaller employers where margins are often very tight in the early years of a new business enterprise.
The timing of these regulations is also terribly bad given the recent Bureau of Labor Statistics numbers showing unemployment numbers shooting back up to 9.2 percent. In fact, only 18,000 new jobs were created nationally in June. This move by the EPA could not come at a worse time. Unfortunately, the weight of the EPA's heavy hand will fall very hard an already struggling Ohio. As it does, new generations of those struggling to climb the "ladder of success" will find the first, absolutely essential rungs broken out from underneath them.