Regulation

Yes, Romney and Obama, Government Regulation Encourages Outsourcing

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Foxconn workers

Yesterday, after Mitt Romney and Barack Obama expressed mock horror that any business would want to leave the good, old U.S. of A., I wrote about how politicians' games with the money supply breed sticker shock for consumers, which drives manufacturers to other countries in search of lower costs so they can hold the line on prices. But there are more straightforward ways politicians push manufacturers out the door, such as with burdensome regulations. The federal government has been minting new rules for businesses to follow at an accelerating rate in recent years. It should come as a surprise to exactly nobody that the rising cost of complying with those rules is a great incentive to move operations to jurisdictions where they don't apply.

The Competitive Enterprise Institute tells us that the federal government has been churning out "a new regulation at the rate of one every hour and 55 minutes." Last month, CEI's Wayne Crews told the House Judiciary Committee:

For the broader "significant" category of rules (economically significant rules plus rules considered officially significant for other reasons noted in E.O. 12866), Obama has issued 22 percent more final rules in his first four years than President Bush did. That's startling, considering 2012 isn't finished and considering the costly rules being held back by the administration.

Those regulations carry a price tag in terms of compliance. That price tag grows as the regulations accumulate into a hard-to-navigate web of red tape. How much does it grow? A report from the Manufacturers Alliance for Productivity and Innovation says:

Since OMB began compiling data on the cost of regulations in 1981, about 40,000 proposed and final regulations have been issued. Based on the data of cost and number of regulations, we estimate the current direct cost of compliance with "major" regulations (those with an estimated cost greater than $100 million) issued between 1993 and 2011 to be between $265 billion and $726 billion (in constant 2010 dollars) a year for the economy as a whole.

The graph below plots compliance costs in constant 2001 dollars. The Matterhorn-like growth is as important as the numbers, since it portrays a nearly unbroken escalation in regulatory costs in the U.S. — especially for business people planning their future efforts.

Regulatory costs

What are the biggest offenders in terms of expensive regulations? MAPI, again:

  • The Environmental Protection Agency (EPA) imposes the largest number of regulations on the manufacturing sector with respect to number of regulations (972 regulations in total, including 122 major regulations), followed by the Departments of Transportation (880 regulations in total, including 69 major regulations), Labor (214 regulations in total, including 27 major regulations), and Energy (106 regulations in total, including 17 major regulations).
  • The EPA also imposes the largest regulatory burden on the manufacturing sector with respect to cost of major regulations ($117 billion in constant 2010 dollars), followed by the Departments of Transportation ($25 billion in constant 2010 dollars), Health and Human Services ($10 billion in constant 2010 dollars), and Homeland Security ($7 billion in constant 2010 dollars).

I should add that it doesn't matter whether you think any specific regulation is good or bad in terms of the deterrent effect the cumulative costs pose to anybody considering future investments. Compliance costs are enormous, and they make it attractive to look elsewhere when a company considers where to locate a factory.

China isn't stealing jobs and industries from the U.S.; American politicians are pushing them out the door.

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  1. What is worse is that is just the Federal laws, now throw in all the state and local laws they have to deal with, which for a large employer could mean needing Lawyers and HR representatives versed in hundreds of different sets of laws, one for the fed, one for each state, and one for each municipality where they have a facility, or they could just move to China where you just have to bribe 2 or 3 officials to keep your facility running.

  2. But it’s TEH EVUL KKKKKKORPORASHUNS and thier EVUL PROFIT that are to blame. Regulations are thought of by those who care about PEEPUL!

  3. BUT WE’RE JUST ONE REGULATION AWAY FROM A PERFECT WORLD!

    1. To the progressive, we’re ALWAYS just 1 regulation away from utopia.

    2. “Chasing the dragon” — not just for horse addicts.

  4. What jobs did Foxconn “steal” from the US? iPhones, etc. have never been assembled in the US.

    1. By ‘never being assembled in the US’, that is the theft right there. But for correct-thinking corporations who put the interests of the nation before their portfolios, these jobs would have been Union, prevailing wage, high paid manufacturing affairs affording picket fences and above-ground pools for the hoi poloi.

      1. There are two Ls in “polloi” just as there are two Ts in “Otto.”

        1. Mother effer. I typed it with two Ls, then erased one thinking “that don’t look right”. I was all thinking, “It’s not Arroz con Pollo! this is Latin… LATIN! So one L.

          I guess I really hurt you with the whole Kevin Kline diss?

          1. Only the Otto part offends me.

            Say, arroz con polloi is people!

            1. I like the Otto scenes with Jamie Lee Curtis! Does that make the owie go away?

              1. There’s something wrong with you.

            2. My first cat was named Otto.

              /dispensing useless information

              1. Which, spelled backwards, is Otto. Clever.

                1. Racecar spelled backward is racecaR.

                  Also clever.

                  1. Was your cat Otto a big fat, personable, yellow Tabby? I had a cat named Otis who was like that. His name so matched his personality.

            3. People with rice. Yum.

  5. Look at all that deregulation in the Bush era!

    1. I had my own Trident missile with nuclear warhead back then. Good times.

      1. I had 17 and a tropical island.

        1. See, I thought I had time. Little did I know that re-regulation was coming.

          1. You need to make them give you time. Where do you think #18 went?

  6. Regarding the regulatory agencies (which I have a lot to say about in general, but won’t) I find it interesting that the people who supposedly love democracy demand that some of the most powerful regulatory agencies be shielded from democracy. These institutions are so important, they need to be unaccountable. How fucked up is that?

    1. One you get your cronies in charge you don’t want anyone looking too closely.

    2. Proggies only love democracy when they’re the ones winning elections. Otherwise, it’s “OMG, STOLEN ELEKCHUN!!!11!!” Democracy, like anything else to them, is just a means to an end whose value is only proportional to the extent that it furthers their agenda.

    3. Top. Men. They can’t be questioned.

    4. They also do not have to follow any due process.

    5. Every single government function should be limited, strictly defined, power-wise, be checked by any means available, and be as transparent as possible. Every single one.

      1. What, you don’t like a roving agency tasked with “doing good works”?

        1. Any good that comes out of government was accidental and cost a whole lot more than if someone not the government had done it.

  7. Lol, latest Gallup tracking poll has Romney +7.

    1. Yet still behind in the EC. Wonder how pissed off all those “Selected, not elected” people will be if Obama wins the election but loses the popular vote.

      1. Actually, RCP just moved NC to “leans Romney” so he’s at 206-201. Unless the polls start moving back towards Obama, whoever wins Ohio is President, unless NOVa’s poll is indicative. In which case, Romney needs either OH or Penn. (Right now RCP has Obama ahead in Virginia, but Obama has lost the 3 latest, and the swing is +4-6, which is huge.)

        1. Or, you know, Gary Johnson wins a couple states and throws the whole thing into turmoil. Because I’m not really rooting for Romney. But Obama isn’t even my second to last choice.

        2. I think Obama packing it in in VA. Kaine is running ads saying he worked well with George Bush. WTF.

          and in PA .. obama is bad on coal, fracking, guns and he’s tried to stick to the Catholics. ancedotally, my extended family is involved in 3 out 4 of those (nobody working in fracking … yet)

          1. Surprisingly, this may be a landslide for Romney. I thought he would win by a few points, but this seems to be spiraling out of control for Obama.

            1. It’s finally turning into what I thought it should have been, given the shitty state of the economy. I couldn’t believe it was ever close.

    2. poll out of PA — Susquehanna has Romney +4, 49-45

      1. There are a surprising amount of Romney signs in Montgomery County, though of course none in Cheltenham.

        One of my neighbors has a “CHANGE WE NEED” Obama sign in their window, which I am not sure what to make of.

        1. see — that’s a problem for Obama. in 2008 it was

          Montgomery
          60.0% total votes 249,493
          39.0% total votes 163,030

          He needs to run up the score in those suburban blue counties to win.

        2. Leftover from 2008?

  8. Which would everyone say is the bigger drag on the United States economy? The regulatory environment or the Tax Code?

    If you were given the power to toss out let’s say 90% of one or the other, which would you choose?

    1. Tough choices.

      getting rid of one but not the other will only serve to ratchet up the means by which pols and their cronies have left available to them to fleece the economy.

      If we lose regulation, they’ll double down on using the tax code to get their ends. If we get rid of the tax code, they’ll double down on using the regulatory code to get their ends.

      Though I’m sure you know this, both need radical adjustments.

      1. BUZZ! Too late, now you don’t get to pare down either. Happy, Captain Waffles?

        1. I know . . .

          A typical statist I am. Life is completely black and white, and there are only 2 choices in every situation.

    2. Taxes. Regulators can be lobbied.

      1. You might be on to something there.

      2. Not to mention “captured” via the use of drugs and prostitutes.

      3. Cuz rent-seeking is libertarian.

    3. Which would everyone say is the bigger drag on the United States economy? The regulatory environment or the Tax Code?

      yes.

    4. I think regulations are worse because at least taxes tend to be objective, while regulations usually rely on discretionary decisions from the regulators.

      1. AAAAAA!!! Don’t give them ideas. Before you know it the IRS will start making political decisions about which credits and deductions you’re allowed to claim.

    5. Which would everyone say is the bigger drag on the United States economy? The regulatory environment or the Tax Code?

      There’s a difference?
      We regulate using the tax code now. John Roberts thinks it’s cool.

  9. But Obama promised to bring back manufacturing! You guys don’t believe?

  10. Labor costs are a not insignificant aspect to this. And you can analogize to (intelligent) regulations. China has more than a billion people and very low wages. We will never be able to compete with them on cost cutting and maintain a country worth living in.

  11. The federal government has been minting new rules for businesses to follow at an accelerating rate in recent years. It should come as a surprise to exactly nobody that the rising cost of complying with those rules is a great incentive to move operations to jurisdictions where they don’t apply.

    But- Cowboy Capitalism!

    Laissez faire!

  12. What happened in 1996?

    1. You noticed the same thing. Something involving a fight between Clinton and the Republicans I’d imagine.

      1. It was Clinton with a Democratic Congress from ’93 thru ’96. Was there just a lag of Dem laws and Clinton rules making it into regulations?

        1. ‘Pubs came in in 94.

          1. Oh yeah. Still could be the Dem / Clinton lag.

    2. Americans with Disability Act, I think.

      1. ADA was 1990 by H.W. Bush.

        HIPAA passed in 96 and the DMCA in 98…those are two large regulatory nightmares.

    3. Combination of things. The ADA of 1990 started really picking up steam in the mid 1990’s
      And “Global Warming” was just getting really cool (no pun intended) and there were a boatload of laws passed in the 1990’s about greenhouse gasses.
      Anyone remember who the VP was in 1996?

  13. Both Mitt and Barry are worried about outsourcing, but their approach is different:

    Romney says that taxes and regulations should be lowered to encourage businesses to come to America

    Obama says that corporations that outsource should be punished and their taxes raised. Apparently he wants to tax a company that has left the US, I dont know under what authorithy.

    Who has it right?

    1. Neither, they’re both mercantilist dipshits.

      1. Check.

        1. Romney says that taxes and regulations should be lowered to encourage businesses to come to America

          That makes him a “mercantilist”?

          1. Re: PapayaSF,

            That makes him [Romney] a “mercantilist”?

            “China is a currency manipulatoooooooooor!!!!!!!!”

            That. You’re welcome.

    2. Who has it right?

      Almanian – 2012

      More Freedom, Less Gummint, Party Hearty!”

      Como estas, bitches?!

      1. Why do you keep shilling for your presumably good twin?

    3. I’d say Romney. I’ve been in outsourcing projects. American workers are generally much better – they just cost a lot more, particularly when you look at loaded salary cost.

      Penalize the company for outsourcing and they’ll just move the headquarters as well. Which might be the right idea given our highest in the world corporate tax rates.

      1. What Drake said.

    4. Let’s see…

      Romney = less tax and regulation
      Obama = more tax and regulation

      You have to ask which is better?

  14. I love you guys, but cumulative costs?
    Really?

    Come on. give us a more informative infographic.
    Maybe cost of regulation per market-valued dollar of goods produced.
    That would be nice.
    Maybe even a nice breakdown by industry sector.
    How much of the costs of an automobile is made up of regulatory compliance costs, for instance? Or How much of the cost of a television would be due to regulatoy compliance costs, if anyone still made televisions in the US.

    1. you asked for it you get a small sample.
      In my truck all three back seats have attachments points for baby carriers at roughly $800 cost I don’t have kids.

    2. Regulations on what can be SOLD in the US can’t be contributory to outsourcing, because these regulations affect both domestic production and imports.

      1. But regulations on HOW you make something definitely do.
        Which includes all sorts of things like OHSA, FDA, FCC, ITAR, etc. I remember back in college, my then-boyfriend’s dad who ran a small eletronics company that made cable boxes, complaining about the insane number of detailed regulations he had to comply with for any products he produced and sold, and how he wouldn’t hire more than 8 employees because if he did there would be a whole slew of additional regulation. He wasn’t evne talking about OSHA. He was talking about FCC regulations on stupid stuff like requrements for how much EM radiation your box emits.

    3. I agree. It’s getting into How to Lie with Statistics territory.

  15. “I wrote about how politicians’ games with the money supply breed sticker shock for consumers, which drives manufacturers to other countries in search of lower costs so they can hold the line on prices.”

    Again, manufacturers should be searching for ways to lower cost constantly in a free market. Outsourcing is inevitable when there are low barriers to trade and a wage differential. Suggesting that there needs to be another explanation for outsourcing than profit maximization is just dense.

    1. How is reducing overhead from regulations by “outsourcing” not part of maximizing profit?

      1. It is, I agree.

        1. So your argument is, what? Get businesses to locate in the US by stopping them from maximizing their profits?

          Good luck with that.

  16. Re: the Derider,

    Regulations on what can be SOLD in the US

    It’s regulations on what is being manufactured.

    can’t be contributory to outsourcing, because these regulations affect both domestic production and imports.

    You totally misunderstood the issue.

    Outsourcing is inevitable when there are low barriers to trade and a wage differential.

    Not always. There’s also logistics to consider.

    Suggesting that there needs to be another explanation for outsourcing than profit maximization is just dense.

    Suggesting that is not gets you a chance at winning the Head-In-Sand Award.

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