I recently chatted with a friend that has done well as a financial planner for the past couple of decades. Needless to say, work life is pretty difficult for him right now. He hopes that the market has bottomed out, since phone calls requesting to cash out of investments have gone from about 30 per day to one per day.
Incidentally, he has been dumbfounded by the number of people that have come to him saying that they must get out of their investments now, but that they will get back in after the market improves. He asks, “So, you’re telling me that you want to sell low and then buy again when the price goes up?” The fact is that the average investor is an emotionally based creature that sells low and buys high.
During our chat, my wife asked our friend why we continue to get paper prospectuses for the funds in which we are invested. We have, after all, signed documents verifying that we wish to receive these materials electronically. He explained that this is actually a problem industry wide. They want to get to a more electronic system overall, but fund companies are still required to kowtow to government regulations that were instituted prior to Internet usage becoming ubiquitous.
This is far from a singular instance. Since the days of Ronald Reagan, we have been adding about 4,000 new federal regulations every year. No policy maker makes any serious effort to coordinate newly proposed regulations with the existing tangled mess. Why would they? The effort would be nearly impossible.
With few exceptions, existing regulations are rarely revisited or revised to address evolving life realities, such as new technologies and demographic shifts. Thus, it becomes the dour duty of regulators to ensure that long obsolete rules are strictly applied. Their jobs depend on it. And those jobs are part of the reason that elected officials do little to rein in runaway regulations.
Make no mistake; the regulatory regime imposes hidden costs on each of us in the price of each product or service we buy. It is a hidden tax. The Competitive Enterprise Institute reports in its annual Ten Thousand Commandments study that this hidden tax hit $1.157 trillion in 2007. By comparison, total individual income taxes in 2007 were $1.17 trillion.
To put that into a personal perspective, look at the total amount of federal income taxes you paid last year. Then realize that the federal government in essence took double that amount to cover the cost of regulations, many of which are patently useless.
In this WSJ op-ed, Philip K. Howard of Common Good calls for “a dramatic spring cleaning of the law of the land -- all 100 million words of binding requirements, most of which exist only because someone once took the trouble to write them.”
That would be great. We should push to make that happen. But we also need to stop new regulations dead in their tracks. The current financial crisis has caused many (very many) to call for more federal regulations. There is almost no appreciation for the massive failure of our expansive regulatory bureaucracy, except to suggest that it didn’t do enough.
I am not suggesting that new regulations are never appropriate. But Howard is correct to cite historian Henry Steele Commanger’s lament that our nation now has “an almost lawless passion for lawmaking.” Thus, I believe it is necessary to impose significant burdens on the creation of new public policies — a burden at least as great as those that are placed on the private citizens and businesses that are tasked with complying with these policies.
Every single policy or regulation, whether great or small, whether imposed by elected officials or unelected bureaucrats, should require a coordination and impact study that explores the precise interaction with every other federal policy or regulation, and publicly states the cost of compliance.
Yes, this would actually grow the bureaucracy to begin with. But it would turn the bureaucratic beast upon itself, helping to increase liberty by causing the regulators to regulate each other. I must admit that this is a somewhat diabolical scheme. But harsh problems sometimes require harsh solutions.
More regulation is rarely the answer. But when regulation is the answer, it is effective regulation that is needed; not just more regulation. Forcing elected and unelected policy makers to bow to the gods that they themselves create would perhaps impose enough humility to keep illiberal forces at bay for a while.
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