regulation

Archive for Tag “regulation”


National Public Radio quotes ARI’s Onkar Ghate

NPR SignJust the other day, an NPR reporter interviewed Dr. Onkar Ghate, a senior fellow at ARI, in connection with a story (audio here) arising out of the Boston terrorist bombing and the chemical factory explosions in the town of West, Texas. According to the report, Democrats were busy reminding everyone that opponents of “big government” would leave police and regulators unable to remedy or prevent such catastrophes.

Here’s the published quote, selected from a much longer interview: “They [regulations] impose an enormous cost on companies and all individual Americans of the amount of paperwork and regulations that you have to go through when you’re not doing anything wrong.”

I think it’s worth amplifying on that true and insightful comment with two points of context:

  1. Contra the setup of the story, “big vs. small government” is not the best way to frame the debate. The real issue is “the proper role of government,” a question on which ARI differs from both conservatives and liberals. We are in favor of proper government functions like the police force, a function which in a laissez-faire society would not be reduced. But we would entirely eliminate improper functions, like wealth redistribution programs and regulations that burden the innocent.

  2. There’s a conservative line that “government costs too much”—as if a high price tag should discourage Americans from pursuing justice and saving lives. Dr. Ghate’s point differs from that. The tremendous costs are important, of course, but only in the larger context that regulations penalize the innocent, and that preventive law is an evil that infringes upon individual rights.

Image: Creative Commons License Mr. T in DC via Compfight


Regulations versus food trucks in New York City

Off The GridOne nice thing about living in Orange County, California, is that food trucks are seemingly everywhere that is convenient. A waffle food truck pulls into my apartment complex, offering a late Saturday breakfast. Different trucks rotate in on Thursday evening, offering a quick dinner. Food trucks visit the corporate park where I work, offering lunch. Food trucks also have a strong presence at local parks and events. And the variety is wide: I have seen food trucks serving lobster, sushi, pizza, Thai, vegetarian, Mexican, monster burgers, etc. If you can think of the food, it is probably served out of a truck in Orange County.

Orange County, California, is surely no free market when it comes to the mobile food industry. But contrast the industry’s presence in O.C. to the dearth of food trucks in New York City, as described in this recent New York Times column:

As I was walking through Prospect Park recently, I wanted to find a healthful snack for my son and something for me. The only options, though, were the same sort of carts that my dad took me to in the ’70s: Good Humor ice cream, overpriced cans of soda and overboiled hot dogs sitting in cloudy water. This seemed ridiculous. In the past few decades, food in New York City has gone through a complete transformation, but the street-vendor market, which should be more nimble, barely budges. Shouldn’t there be four Wafels & Dinges trucks for every hot-dog cart?

Why are food trucks not easy to find in New York City? He blames regulations:

There are numerous (and sometimes conflicting) regulations required by the departments of Health, Sanitation, Transportation and Consumer Affairs. These rules are enforced, with varying consistency, by the New York Police Department. As a result, according to City Councilman Dan Garodnick, it’s nearly impossible (even if you fill out the right paperwork) to operate a truck without breaking some law. Trucks can’t sell food if they’re parked in a metered space . . . or if they’re within 200 feet of a school . . . or within 500 feet of a public market . . . and so on.

Things can get so bad that one food-truck employee spent eight hours in jail for vending falafels without the proper license!

The author concludes by comparing New York City regulations with the Third World:

In Ecuador, for example, it takes about 56 days and 13 separate procedures to get all the legal paperwork done to start a new business. In the United States, it’s an average of six days and six procedures. But if you want to open a mobile-food business in New York, it’s essentially like starting a business in Ecuador — and that’s if you can somehow arrange a permit.

I do not agree with everything the author says, but this whole article is worth reading because it illustrates how regulations can mire and discourage business activity.

Photo Credit: Telstar Logistics via Compfight cc


A glimpse of the red tape that cab drivers deal with

Taxi SignI never cease to be shocked by how people who I meet on a regular basis are held back by regulations. For instance, I was having a nice conversation with a cab driver who was transporting me to my home after a business trip. He recently came to the country from Africa and he was ecstatic to be living here, especially in beautiful Southern California.

Naturally, I was curious to learn about the different kinds of regulations that taxi drivers must comply with. In California, my driver explained, cab drivers who have a local-government-issued permit to pick up passengers in one city are not necessarily permitted to make pickups in a neighboring city.

“How does this impact you?” I asked him.

He indicated that he often picks up passengers from John Wayne Airport in the city of Santa Ana, where he is licensed, and takes them to Disneyland. But since Disneyland is in the neighboring city of Anaheim, he is legally forbidden to pick up passengers there and take them back to the airport. Instead, he is forced to drive back to the airport without a passenger, wasting his time and costing him a potential fare.

Of course, he could try to jump through the regulatory hoops to get a permit from the city of Anaheim as well. But this requires money, time, and a lot of paperwork. And even if he tries, the city of Anaheim might not give him a permit anyway, because they may want to cap the number of cab drivers who are allowed to operate in their city, just as some other cities do.

This is yet another example of the often unseen aspect of the regulatory state: an imbroglio of rules that make it more cumbersome for decent, hardworking people to earn a living.

Image: wpclipart


Hardee’s / Carl’s Jr. CEO on California’s anti-business climate

In a recent brief media appearance, Andy Puzder—the CEO of the parent company of the Hardee’s and Carl’s Jr. fast food chains—discussed how difficult it is to do business in California’s regulatory environment. Here is my summary of a few of the things that he brought up:

  • Due to regulations, it takes on average 240 days to build a restaurant in California compared to the 60 days it takes in Texas, or even the 125-175 days it takes in Russia.
  • Because the state prevents managers from performing too many “non-managerial tasks,” he has to pay his managers in California restaurants as hourly employees so that they can also legally pitch in on things such as food preparation or working the register when an additional hand is needed.
  • And because the state of California has severe restrictions on the working arrangements of hourly employees—mandatory break times, mandatory overtime pay, etc.—he has had to regrettably fire managers who were working too hard. It did not make business sense to pay any one employee that much overtime.

You can watch the whole interview here or by clicking on the embedded video below.

Puzder also indicated that his company is focusing on building new restaurants in states with fewer regulations, such as Texas and Tennessee, rather than in California. I wonder how many other businesses are choosing to not locate in California due to its regulatory environment?


Business and Regulation Roundup

Here are some recent accounts of the government’s involvement in business activity that I found worth reading:

  • Gasoline Regulations. The EPA is ratcheting up regulations on oil refiners, requiring that the average amount of sulfur in gasoline be at most 10 parts per million, instead of 30 parts per million. Refiners indicate that this could raise the price of gasoline by nearly 10 cents per gallon.
  • Dell Buyout. In an effort to turn around their company, Dell is entertaining a buyout offer from a private equity firm. But, like all such deals, the government is heavily involved. This deal required a 274-page report to be filed with the Securities and Exchange Commission as well as a review process that could take five to ten weeks.
  • Airline Merger. The court administering American Airlines’ bankruptcy approved a merger with US Airways, a major milestone on the path to forming the world’s largest commercial airline. Antitrust authorities, however, are still reviewing the planned merger.
  • Big-Box Retailer Discrimination. Washington, D.C., legislators are trying to pass a bill that will force large big-box retailers—Walmart, Costco, Home Depot—to pay at least $11.75 per hour, plus benefits, and this wage would be pegged to increase with a local consumer price index.
  • Nanny State Defenders. The New York Times recently ran an op-ed in which philosopher Sarah Conly defended New York City’s attempted ban on large sugary drinks as well as other such paternalistic interventions in principle. Although I completely reject her view, I find it worth reading because it is a well-articulated argument that any defender of free market capitalism needs to answer to convince others of the virtues of a free society. In particular, note how she quickly goes into one of the fundamental issues in the battle for capitalism: the view of man. Is every man a sovereign individual worthy and able to live his life for his own sake? Or are we a society of imbeciles incapable of taking care of ourselves without the oversight of a few elites?

Government Redirecting Corn Into Your Gas Tank

ethanol2012 saw possibly the worst drought in over fifty years. This has devastated corn yields and driven up the price of corn. In terms of surging costs, this would be bad enough for individuals, especially those in the corn-using businesses such as food and livestock farming. However, on top of this, the government is making things even worse. By forcing gasoline makers to use an increasing amount of ethanol as part of the Renewable Fuel Standard regulations, the government is making corn even more expensive, making it even more scarce for its normal uses, and changing the composition of gasoline to something other than what cars were designed to use.

This ethanol mandate reminds me of the sequence in Atlas Shrugged where regulators inexplicably demand that Taggart Transcontinental rush grapefruits across the country. This forces the cancellation of a coal train and leaves many regions to suffer the consequences of not having a basic source of electricity.

Like the grapefruit mandate, the effects of the government’s ethanol mandate are rippling throughout the economy, and not just in the food and agriculture businesses. Here are some fairly recent reports of effects that are either caused or exacerbated by the ethanol mandate:

How many of these things would be occurring if the government was not diverting corn into gasoline?


Government Seizing the Wheel of Automobile Design

AutoShow_byKarrMannWCThe 2013 North American International Auto Show in Detroit showed how automakers are making vehicles lighter to increase their gas mileage. Automakers are substituting steel, which is what cars are largely made of, for more plastics, aluminum, magnesium, and carbon-fiber composites.

For example, Ford is testing a prototype F-150 pickup truck that features aluminum instead of steel body panels. The newly debuted Chevy Corvette features an underbody made of aluminum and a roof made of carbon-fiber composite instead of steel. Other vehicles are experimenting with aluminum roofs.

Automakers are not focusing on boosting fuel economy by choice. They are doing this because they must comply with the Obama administration’s raising of the Corporate Average Fuel Economy (CAFE) requirements, which makes it illegal for them to sell vehicle fleets that fall below the federally mandated fuel economy standards. At present, the combined vehicle standards that CAFE mandates is at least 29 miles per gallon. But these mandates will increase to 35.5 mpg by 2016 and then to 54.5 mpg by 2025—nearly double the current mandate—as part of the federal government’s campaign to drastically reduce usage of fossil fuels.

The effect of rising CAFE requirements forces automakers to disregard—or subordinate—many of the other considerations that automakers would normally weigh when designing a vehicle, if that is what it takes to double fuel economy.

Can they design a spacious vehicle for drivers who need to transport a lot of stuff? The mandates would steer automakers to engineer smaller vehicles since the larger the vehicle, the lower the fuel economy tends to be.

Can they try to keep vehicle costs down for the budget-conscious purchaser? Automakers are currently trying to satisfy the standards by substituting steel components with fancier—and pricier—materials normally reserved for race cars. That adds to the cost.

Can automakers supply contractors and small business owners with a trusty pickup that can haul heavy loads? Such vehicles require bigger engines, which tend to get lower fuel economy. How would that mesh with CAFE mandates?

Can automakers cater to parents who, above all else, want a vehicle that keeps their children safe? There is good reason to believe that the lighter vehicles that the government is forcing automakers to produce are going to be less safe. Basic Newtonian mechanics teaches us that in the nightmare scenario where someone slams into your car on the highway, the lighter your vehicle, the faster and farther you are going to be flung into other lanes of traffic. And many statistical studies suggest that, in the event of a crash, there is a much greater chance of death or serious injury for those in lighter vehicles than those in heavier vehicles.

We must recognize the CAFE program for what it is: the government forcing automakers to substantially change the course of automobile design in the name of foisting an anti-fossil fuel agenda onto Americans. In a free society, unregulated car companies would offer options designed to attract buyers, and each buyer would decide for himself what value to place on fuel economy. CAFE standards deprive us of this freedom.

image: KarrMann at Wikimedia Commons


Business and Regulation Roundup

Another week, another wave of stories of businesses being held back by regulations. Here are some recent examples of this as well as other business-related articles that I found worth reading:

  • Ethanol Mandate. The Wall Street Journal recently published two good pieces (article and editorial) describing how the federal mandate to mix an increasing amount of ethanol into gasoline is surely causing gasoline prices to rise. The articles also mention how vehicle engines could be damaged by gasoline that contains more than 10 percent ethanol, but that these regulations will soon require gasoline to contain more than this.
  • Employer Mandate. A report released by the Federal Reserve on Wednesday indicated that “employers in several districts cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff.” These are the expected consequences of forcing  employers to provide health insurance.
  • Sugar Bailout. The U.S. Department of Agriculture is considering purchasing 400,000 tons of sugar at taxpayer expense as a way to give the sugar industry a huge bailout.  This action is intended to bid up declining sugar prices. It is worth knowing that as of mid-2012 U.S. sugar prices were almost double those of the world due to a combination of government-imposed restrictions on imported sugar and  other protections for domestic sugar.
  • Soda Ban. A state judge recently ruled against New York City Mayor Michael Bloomberg’s impending ban on large sugary drinks. The Wall Street Journal had another article describing how this ban required costly adjustments for many establishments.

Sunshine or sunburn?

A while back, I wrote about the Physician Payments Sunshine Act, a small part of Obamacare that may nonetheless have a large impact. Essentially, the law requires companies in the medical field to report in detail on every item of value they convey to doctors.

What’s the alleged justification for this new reporting burden? Basically this: Since some doctors might allow conflicts of interest to undermine patient care, every doctor’s financial transactions with industry have to be scrutinized in minute detail.

If you want a taste of what the new law will require in practice, check out this article on the “Top 50 Things to Know” about the law. Here’s a sample, elaborating on the basic reporting requirement for meals supplied to doctors (boldface and underlining are from the “Top 50″ article):

5. The per person value of the meal must be reported as a payment or other transfer of value only for covered recipients who actually partook in the food or beverage.  Applicable manufacturers are not required to report or track buffet meals, snacks, soft drinks, or coffee made generally available to all participants of a conference or similar events where it is difficult to identify the identity of those who partook in the offering.

The premise there is that you can trust your doctor to cut your chest open and remove a tumor from your lung, but you can’t trust him to be objective about prescribing drugs made by the manufacturer that offers him a free Coca-Cola.

Now, here’s an item that elaborates on the requirement that each valuable item be linked up with some product of the company that’s providing the item:

46. If a “payment or other transfer of value is not related to at least one covered product, then applicable manufacturers should report “none.”  Conversely, “if the payment or other transfer of value is related to a specific product, which is not a covered product, then applicable manufacturers are to report “non-covered product.”  Finally, if the payment or other transfer of value is related to at least one covered product, as well as at least one non-covered product, then applicable manufacturers must report the covered products by name (as required), and may include non-covered products in one of the fields for reporting associated product.”

Confused? Just think about the number of man-hours that will be diverted away from medical research and into the task of figuring these regulations out.

Finally, put yourself in the position of a pharmaceutical company that has made a payment to a practice group of multiple doctors. How do you allocate the value among them?

49. “. . . payments provided to a group or practice (or multiple covered recipients generally) should be attributed to the individual physician covered recipients who requested the paymenton whose behalf the payment was made, or who are intended to benefit from the payment or other transfer of value. “This means that the payment or other transfer of value does not necessarily need to be reported in the name of all members of a practice.” For example, many payments or other transfers of value may need to be divided evenly, whereas others may need to be divided in a different manner to represent who requested the payment, on whose behalf the payment was made, or who was intended to benefit from the payment or other transfer of value.

If you’re in a business or profession other than medicine, just try to imagine how a “sunshine law” would impact the way you do business.

Meanwhile, what’s most important is to condemn laws that authorize government coercion—even in the superficially innocuous pursuit of “transparency”—before there’s any evidence of particular wrongdoing.


Mother may I? Antitrust and the Disney/Star Wars deal

The buyout announcement was big news: Disney would acquire the assets of Lucasfilm. Jokes abounded on the Internet about changes Disney might make to the iconic Star Wars universe: Would one of the three planned movie sequels feature a song like “When You Wish Upon a Death Star”?

By contrast, the merger approval was small news: a short item in the Washington Post, indicating that the Federal Trade Commission had okayed the transaction. It goes to show just how many of antitrust’s coercive practices operate off-screen, as it were, taken for granted by all concerned and hardly deemed newsworthy.

Antitrust law requires notification to the FTC of every contemplated transaction that exceeds a certain dollar amount. Of course, this means that only relatively successful companies fall under FTC scrutiny. And it’s not just a matter of notification—there’s a mandatory waiting period (30 days, subject to extension), while the FTC decides if it’s going to allow the transaction to go forward.

Oh, yes—you can ask the FTC to give its go-ahead without waiting 30 days. But a so-called early termination only happens when both the FTC and the Antitrust Division of the Justice Department have completed their reviews and decided not to take enforcement action. There’s even a website where companies can check every day for grants of permission.

Remember when you had to ask your mother for permission to cross the street? Today, America’s most successful businessmen and shareholders find themselves stuck in a similar position, forced to beg for Uncle Sam’s permission before consummating merger transactions that advance their financial self-interest.

It’s a “Mother may I?” economy, fueled by the basic premise behind antitrust—the idea that the more market success a company achieves, the greater threat it poses to consumers and the economy. After all, when federal law regards every businessman as an incipient criminal who must be tethered and tamed by government coercion, notifications and waiting periods make perfect sense, right?