On January 30, 2017, President Trump issued an executive order entitled: ‘Reducing Regulation and Controlling Regulatory Costs.’1Known as the ‘One-In, Two-Out’ rule, it calls for dramatically reducing the regulatory burden upon the US economy. This executive order may do more for the US economy than any other economic proposal by the Trump administration, perhaps even far more than any enacted tax cuts.
There is no doubt regulatory reform is needed. From anecdotally looking at the effects upon particular industries (e.g., Dodd-Frank’s impact on preventing new community banks from opening), to the number of pages in the Federal Register, to estimates of lost man hours and direct expenditures from the Congressional Budget Office: the degree of the regulatory burden is clear. The US economy has never suffered to this extent.
How did it get this bad? Three primary reasons exist. First, unlike fiscal or even monetary policy, the burden imposed by regulations is more difficult to quantify and assign causality. Second, regulations exist and have increased in number by benefiting two primary constituents: entrenched businesses using regulations as a barrier to entry, and their politically connected lobbyists. Third, and of most significance, mainstream economists agree that without regulation, planes would crash in the sky, the food supply would be contaminated, and working conditions would degenerate to Neolithic-period levels. The acceptance of regulations is as widespread as the supposed underlying rationales are numerous.
This post was published at Ludwig von Mises Institute on May 20, 2017.