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Reason Foundation

Confronting Washington's Job Killers

How costly and unnecessary regulations cripple the American economy

Jon Basil Utley
August 13, 2010

The news that the Environmental Protection Agency prevented early clean-up of floating oil in the Gulf by refusing to waive its “clean water” limit of 15 parts per million should make us all focus on the job killing structure in Washington, D.C. Just three days after the BP spill, the Dutch government offered their oil-skimming ships and ocean oil-cleansing technology, but were rejected because the cleaned ocean water would not reach the EPA’s limits of being 99.9985 percent pure. Imagine if even half the oil had been skimmed off; the rest probably would not have even reached shore because oil degrades quickly in warm ocean water. But because oil did reach the shore, Washington ordered a moratorium on all deep water drilling over 500 feet in the Gulf, and a moratorium on all offshore drilling in Alaska and off the Atlantic and Pacific coasts. In Louisiana, the order is causing an estimated loss of tens of thousands of jobs and billions of dollars of oil production over the next two years. Blue-collar jobs on Gulf oil rigs earn an average of $60,000 per year.

An economic crisis with high unemployment is the best time to confront and even possibly reform Washington’s job-killing laws. Most Americans are either uninformed about the quantity and consequences of these laws or they regard them as normal. So now is the time to recognize, enumerate, and challenge the worst of them. But to reform bad laws, first you need to get them debated in public.

All too often we hear that cheap Chinese labor is wrecking havoc with our industries. In reality, it is a host of costly, job-killing burdens from Washington that are responsible. How many investments and job creations are not made because of compliance costs associated with excessively strict regulations (and the lawsuits they generate)? It’s no wonder that our great achievements nowadays are in fields such as electronics, movies, and games, where entrepreneurs and innovators face less government obstructions, lawsuits, and labor costs. Compare this to an investor trying to build new factories or mines.

For example, in a remote area of Alaska, efforts to start up one of the world’s richest copper and gold mines is stymied by unending Kafkaesque regulations and lawsuits. In Utah, Interior Secretary Ken Salazar arbitrarily cancelled 77 previously issued oil/gas leases because the smell produced by the drilling might affect air quality in the desert near national parks. New mining ventures today have mostly moved to Canada to avoid such unnecessary hassles.

Another prime example is nuclear electric power, which could be cheap and abundant. China is building 60 new nuclear plants over the next 10 years, while in Washington it takes 10 years to build even a single plant. Both the Chinese and the French build them in a bit over 3 years. President Barack Obama said he favored such plants and proposed billions of dollars in subsidies, but he made no mention of the obstructive permitting process that makes nuclear power so uneconomical. Remember also that nuclear energy plants are an established technology. Why does each plant have to go through such a bureaucratic rigmarole?

The EPA’s extremism and vicious fines and penalties are a primary reason why America is falling behind much of the world. Yet we hear complaints from the usual suspects that the only jobs America produces are service ones. The consequence of that view is growing trade protectionism, since we blame foreigners for “unfair” competition. This causes even more job losses: Witness the inability of Congress to ratify new trade agreements with Korea and Colombia.

Government created jobs appear to cost an average $200,000 each according to various studies. Many are for non-economic, artificially-created jobs such as those in alternative energy, which is extraordinarily expensive. Washington does all that it can to obfuscate the costs of its subsidies and tax favors.

Fortunately we still have breakthroughs, such as with the new discovery of horizontal oil drilling and rock fracturing. America has such dynamism that economic growth still occurs despite the government’s many efforts to hinder it.  

Herewith is a list of immediate ways to create more jobs.

• Review EPA limits to identify and modify excessive and job-destroying regulations. As the oil cleansing limits discussed above indicate, many EPA restrictions are not based on realistic threats, but rather seem based upon the limits of its measuring abilities. They are often irrational and punitive and do nothing to secure health, safety, or prosperity.

• Revise depreciation schedules. American real estate companies, for example, must depreciate new roofs or new boilers over 27 years. Lowering that rate to 5 years would instigate enormous new activity for the building trades, providing tens or hundreds of thousands of sold blue-collar jobs.

• Reform the public sector. Billions in state funds could be directed towards hiring and construction if the money wasn’t committed to exorbitant pension and health benefit packages for public sector workers. Possible solutions include court challenges, firings, sub-contracting, and laws preventing public sector unions from going on strike. Louisiana and New Jersey are leading the way.

• Stop fighting endless foreign wars. Just think if the trillion dollars spent on Iraq had been used to rebuild our infrastructure. China, for example, is using its money to build massive new highways and high-speed rail between every major city. Meanwhile, it costs us 250,000 bullets for each dead guerrilla, half a million dollars to place each soldier (and his back-up) overseas, and $45 per gallon of fuel landed in Afghanistan. Little of this spending creates jobs in America.

• Stop passing vague laws. The new bank reform act, for instance, is expected to make small business loans harder to get and put new burdens on small banks. Among other restrictions, it requires bankers to verify that a loan is “suitable” for a given customer. That sort of vague language will inspire lawsuits, which in turn will result in the banks denying future loans.

• Make cheap electricity accessible. Government regulations (and regulation-inspired lawsuits) now prohibit or delay the building of new coal-generated plants as well as nuclear plants. Freeing up access to this cheap electricity would allow firms to prosper and hire more workers.

• Lift the ban on deep water offshore drilling. Tens if not hundreds of thousands of blue-collar jobs are in peril—or are simply not initiated—because of investors’ fears of arbitrary government regulations. Real estate magnate Steve Wynn relates his dealings with Washington here.

• Reform health care by promoting price competition and curtailing spurious lawsuits. Wasteful and expensive health care is a tremendous burden on American business, pushing up labor costs beyond the rates of even Western Europe, where withholding taxes include health insurance. It used to cost General Motors 8,000 dollars per worker for health insurance, compared to $800 in Canada. Reforms, blocked in many states, include Minute Clinics and Wal-Mart’s similar program where skilled nurses—backed-up by databases and by doctors on call—see patients for about $69 and dispense $4 generic medicines. This cuts out the money wasted on unnecessary tests and operations. These simple reforms would promote competition and save billions in health insurance costs.

• Stop subsidizing Ethanol, solar, and wind power. The billions wasted here could be used for real investments to expand America’s economy and re-build our decaying infrastructure.

The above are just a few ways in which millions of new jobs could be created. Sparking debate on these issues is the way to create real jobs, reduce government deficits, and bring prosperity back to America.

Jon Basil Utley is associate publisher of The American Conservative. He was a foreign correspondent for Knight Ridder newspapers and former associate editor of The Times of the Americas. For 17 years, he was a commentator for the Voice of America. In the 1980s, he owned and operated a small oil drilling partnership in Pennsylvania. This column first appeared at Reason.com.



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