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Trump's endless war on regulation
THE most obscure part of US President Donald Trump's economic agenda is deregulation. This is not because anyone is deliberately hiding it. The real reason is more mundane: Deregulation is obscure, because it is genuinely complicated and confusing.
The issues are highly technical, and they vary by industry. Only those who have a need to know are likely to take the time to master the complexities. By now, the debate is familiar as a new report from the White House makes clear.
Business groups complain that excessive regulatory costs are passed along to consumers in higher prices or to workers in lower wages. Consumer and labour groups argue that we need regulations to protect against market failures (air and water pollution, consumer fraud).
Most deregulation is portrayed as a favour to lobbyists and industry groups. In theory, cost-benefit analysis ought to settle the issue. If regulations deliver more benefits (say, cleaner air or safer drugs) than costs (for example, the installation of anti-pollution "scrubbing" devices on electric utility plants), they are worth doing. If not, they should be rejected.
Precisely, argues the administration. Its report, done by the White House's Council of Economic Advisers (CEA), contends that many recent regulations do not pass that test. It examined 20 regulations that were either opposed or repealed by the administration. Several of these involved regulations governing access to the Internet; others involved labour rules.
Together, the net costs of all 20 regulations came to US$235 billion. That is a lot of money - or maybe it is not. In a US$20 trillion economy, US$235 billion is just a bit more than one per cent. The CEA study asserts that after three to five years when all of these deregulatory steps are fully adopted, the average annual gains per household will total about US$3,100.
That, too, seems like a lot of money, but it needs to be qualified. The difficulty with cost-benefit analysis is that the costs and benefits need to be estimated and the criteria for one industry may not fit the criteria for another. Economist Jared Bernstein of the left-leaning Center on Budget and Policy Priorities - and a one-time economic adviser to former vice-president Joe Biden - puts it this way: "I read the report and am suspicious of the estimates, though it would take more work than I've done to be sure. The tricky part in this work is placing a realistic monetary value on existing against which to weigh cost savings . . . I'd hesitate to endorse the results until such digging is completed."
In practice, it seems doubtful that typical families would receive anything close to a US$3,100 windfall. One reason is that some of the savings occur from an assumption of what regulatory costs would have been under a Democratic White House - that is, the "savings" involve costs that were never incurred, says economist Benjamin Page of the non-partisan Tax Policy Center. Another reason is that Mr Trump's higher trade tariffs would add to consumer costs and, thus, offset some of the savings from deregulation. Still, we should not be deterred by the complexities. Government regulation is too pervasive to pretend that it is automatically productive. There are bound to be excesses. We need to stay on the case. The White House has a point - even if it is overstated. WP