Government Regulations

Issues concerning government regulations tend to bring out a wide range of opinions and emotions.  The fact is, there are regulations that affect most aspects of our daily lives.  The government regulates food, transportation, banking, pollution, labor laws, consumer products, health care, telecommunications, education, courts, infrastructure, shipping, international trade, monopolies, and much, much more.

 

There are many opponents to regulation, including various conservative and libertarian groups.  The CATO Institute states, “Today, there is no greater impediment to American prosperity than the immense body of regulations chronicled in the Federal Register, and academic analysis has documented the economic inefficiencies engendered by the regulatory state.”  Opponents are constantly looking to roll back regulations, believing that free-market solutions are almost always preferable to government-forced solutions.  It is also said that virtually everything we buy is more expensive than it needs to be because of costly regulations that companies pass onto the consumers.  You might be surprised to learn that Republican administrations are just as likely as Democratic administrations to impose record numbers of new regulations, according to the CATO Institute.

 

A regulation is a rule put into place in order to affect what can and cannot done, often with a fine as punishment for non-compliance.  They are created by the government in order to create a fair environment for individuals and businesses to prosper, while protecting consumers from fraud and safety concerns.  They do not always turn out that way, of course.  Each regulation has a cost associated with it, in money, time, and/or effort.  If the benefit to society from the regulation does not outweigh the cost it imposes upon citizens and businesses, then it might be considered a bad regulation.

 

There are thousands upon thousands of regulations on the books in the United States, with new ones proposed all the time.  You can actually go to a government web site (http://www.regulations.gov) to peruse and post your comments about these newly proposed regulations.  For example, on March 31, 2017, this one was posted:

 

Federal Register Number:  2017-06098

Title: Airworthiness Directives: Airbus Airplanes

Summary: We are adopting a new airworthiness directive (AD) for all Airbus Model A330-243, -243F, -341, -342, and -343 airplanes. This AD requires an inspection to determine if affected hydraulic pressure tube assemblies are installed, and replacement with serviceable hydraulic pressure tube assemblies if necessary. This AD also requires repetitive replacements of serviceable hydraulic pressure tube assemblies. This AD was prompted by a determination that cracks can develop on the ripple damper of the hydraulic pressure tube assembly and reports of failure of the ripple damper of the hydraulic pressure tube assembly. We are issuing this AD to address the unsafe condition on these products.

 

I think it is helpful to think of regulations as being neither inherently good nor inherently bad.  For each specific regulation, we can ask the questions, “Is it helpful, is it worth the cost, and is there a better way to accomplish the same result?”  Let us begin the discussion with regulations that have had a positive impact on our lives.

 

The 13th Amendment to the Constitution, which abolished slavery and “involuntary servitude,” was passed in 1865 at the conclusion of the Civil War.  Think now of the 13th Amendment in the context of a labor law regulation.  Prior to its passage, slavery existed throughout the colonies and then settled in the American South.  Plantation owners utilized their slave labor force to fuel their economy.  There were no market forces driving slave owners to free their slaves and start paying them fair wages.  Not only did they believe that they had the right to own other human beings as property, but they would then have been at a serious economic disadvantage relative to their competitors.  A plantation that paid their workers would soon be bankrupt, given that every other plantation had the benefit of free labor.  A pure free market proponent might argue that eventually attitudes towards slavery would have changed, causing plantation owners to free their slaves as a result of public outrage and boycotts of their products.  But, considering it took a hundred years until the U.S. government forced the end of Jim Crow laws throughout the South, it seems quite unlikely that attitudes would have shifted enough to put an end to slavery in that time period.  So it took a kind of regulation (enforced by a war) to establish rules that abolished slave labor.  More labor-related regulations were to follow in the ensuing decades, putting an end to child labor, sweat-shop conditions, and other horrific practices that had been routinely endured by the workers of this country.

 

Ending slavery might be considered an extreme example, so let’s explore other regulations.  The government regulates the safety of elevators.  When you enter a tall building and take the elevator up to the 25th floor, how much time do you spend wondering if the elevator is safe?  Perhaps the manufacturer was having a cash flow problem and was forced to cut some corners in the construction of this elevator.  Or maybe the elevator was in tip-top shape when it was installed 10 years ago, but has since fallen into disrepair.  We do not spend our time worrying about such things (there might be other phobias associated with elevators) because the government regulates how the elevators are constructed and then ensures that they are inspected for safety on a regular basis.  So we push that 25 button with confidence that we are not going to die.

 

A foe of regulations might then counter that if there were no regulations, a bad elevator manufacturer would be forced out of the market by bad press.  That may or may not be true.  Suppose it is an elevator company with a good track record but, as in the example above, cuts corners every once in a while because of cash flow.  Odds are that nothing bad will happen, but it is a risk.  Or maybe that manufacturer is cheaper, so a construction company goes with them because the budget for the new building leaves no room for higher priced elevators.  Or perhaps the elevator company holds a monopoly on the market and there simply are no other options.  Now suppose there were no mandated safety inspections.  How often would building managers spend the money to inspect the elevators?  If there is an accident in a building, would people stop going into that building?  Imagine the lost productivity if everyone who wanted to use an elevator had to stop and ask the building manager about the safety record, or simply decided to always walk the 25 floors.  If elevator safety were left up to the free market, would you hesitate before taking an elevator?

 

It can also be argued that we do not need regulations for elevators for two reasons.  One is that competition would allow a buyer to choose from a better manufacturer, thus forcing the bad manufacturer to improve in order to stay competitive.  But without regulations, there is nothing to stop one company from monopolizing the elevator industry, thus eliminating any choice.  The second reason is because we already have the court system.  If I die in an elevator accident, my family can sue the manufacturer and/or the building owner, which will prompt these entities to mend their ways.  But many of the same people who want to do away with most regulations also want to limit our ability to sue in court through stringent tort reform.  And do we really want more litigation as the answer, anyway?

 

In 1906, Upton Sinclair published his most famous novel, The Jungle.  In the book, Sinclair described atrociously unsanitary conditions in a meat packing plant, including workers falling into meat processing tanks and being ground up and sold with the meat.  Many of his descriptions turned out to be exaggerations, but the book caused an uproar.  Foreign purchases of American meat fell by 50%.  Meat packers went to Congress and asked for help, which came in the form of the Meat Inspection Act of 1906 and the Pure Food and Drug Act.  The latter piece of legislation established the Food and Drug Administration.

 

Today the food we purchase in stores and prepared for us at restaurants is regulated.  Federal inspectors check the sanitary conditions of restaurant kitchens and food processing plants.  They check the quality and freshness of our fish, meat, vegetables, beverages, snack foods, poultry, etc.  When we eat in a restaurant, we expect that the food quality is acceptable and we will not get sick.  And we certainly do not want to find out that the meat we just ate came from a country where mad cow disease is rampant.

 

If we removed these regulations, one could argue that a restaurant would close down if the food made people ill.  But suppose they buy crappy meat to save money, and it makes people sick every once in a while – not enough to cause a sensation.  Perhaps it is a restaurant that preys upon tourists, so that it does not need regular, returning customers.  Restaurants open and close all the time for all sorts of reasons – even good eateries.  So who is to say that someone will not open a café with horrible sanitary conditions and low quality food, figuring their low prices will always attract customers?  Maybe they will go out of business, and maybe they won’t.

 

Now think about shopping at a supermarket.  If the food for sale were not regulated, how much time would you have to spend trying to figure out which products were safe enough to buy?  Eventually you would settle on certain trustworthy brands, but is that how we want to live our lives – hoping that the companies that produce our food are honest enough to do things right?

 

The supermarket itself is inspected by government regulators to ensure abidance of the regulations.  Inspectors check the temperature of bins to make sure cold foods are kept cold enough and hot foods are kept hot enough.  They check for the quality of the produce, evidence of pests in the stockroom, general cleanliness of the store, and more.  Violations that could potential make someone ill are classified as critical violations. 


Here is an old State Department travel advisory from 1998:


Thurs, 19 Mar 1998 12:21:05
STATE DEPARTMENT TRAVEL INFORMATION – Mexico

Para-sailing:
Para-sailing should be avoided since cases have recently been reported of tourists being dragged through palm trees or slammed into hotel walls while para-sailing.


In the United States, activities such as para-sailing are regulated by the government.  You never see warnings like this for para-sailing in America.  It can be argued that many activities in the United States are over-regulated, taking out some of the fun and adventure.  But I would prefer to go para-sailing or ride a roller coaster here in the United States, where I know that regulations are in place.


The government regulates the use of our airspace, so that two different jet planes do not both fly at the same altitude in the same exact place.  Libertarians might argue that without government, the airline industry would come up with their own plan to make our skies safe, since it is in their best interest as well.  That might be true, but do I really want to take that chance when we have a government agency in place that is doing a good job?  Even if the industry were capable of an effective system, do I want to fly during their learning stages, when they are working out the kinks?


When we purchase a new car, we can look up how the vehicle faired in government crash tests.  If automakers were not forced to make their cars safe and provide us the details, there would be a large gap between what wealthy Americans could afford versus less affluent citizens.  A well-off person could buy a Volvo, expecting it to be safe.  A lower wage earner might by a car with virtually no safety features whatsoever, because it is all he can afford.  Then poor people will be dying in car crashes that would not have been fatal had safety regulations been in place.


Our cars are inspected for safety, proper maintenance, and emissions.  If I can afford a Volvo to keep safe but some guy is driving at night towards me in a car with no working headlights and barely functional brakes, I might still die.  Without regulations against drunk driving, there would also be a much likelier chance that the other driver would be intoxicated.  Remember that my tax dollars pay for the roads, so shouldn’t I be entitled to know that the other cars on that road are safe?

We purchase bicycle helmets for our children.  Regulations force the manufacturers of those helmets to meet certain safety standards, so that consumers can be confident that their children are adequately protected.  Does the forced meeting of safety standards put an extra burden on the manufacturer that costs them some money?  Sure.  But so what?  It is something that an honest company would have done anyway, but now they don’t have to be concerned that their prices are too high compared to helmet manufacturers that don’t care about safe, quality products and are therefore able to sell theirs for less money. 


In January, 2006, 14 coal miners lost their lives in two separate accidents in West Virginia.  Tragedies often lead to new regulations, or at least calls to better enforce existing regulations.  Two ideas being proposed are to mandate reserve oxygen stations throughout the mines and to use electronic tracking devises on the miners themselves so that they can be located in an emergency.


When Americans return from visiting cities around the world, even small ones, they often tell stories of how amazed they are at the levels of smog and soot in the air there.  Since the EPA passed air pollution regulations in this country, the air has been remarkably cleaner.  There is a marked difference between the air we breathe here and the air in most cities around the globe.  We can compare for ourselves what our air was like before the regulations, and we can see what the air is like today outside the United States, where similar regulations do not exist.  The evidence is crystal clear that when companies are free to pollute as much as they want, they do.  American businesses used to dump raw sewage into our rivers, bury contaminated chemicals in our soil, and pump ton after ton after ton of disgusting filth into our air.  Market forces did not solve those problems, just as they don’t in other countries today.


The banking and insurance industries are also tightly regulated.  If they were not, think about how it would affect a small business trying to grow.  The business owner needs money to grow her business, but if she can’t trust the banks, then she is at risk for losing everything.  A non-regulated insurance industry would be of little help, and economic growth is stifled.


So we have just discussed several examples of how regulations can improve our lives here in America.  Some regulations, however, do not provide such a positive impact on our society.  The main reasons to classify a regulation as a bad regulation are:


  • it does not actually achieve the desired effects (protecting consumers from fraud, pollution, health risks, etc.)

  • there are unintentional, negative consequences

  • the burden/cost it places upon the affected parties is greater than the benefit it provides

  • conflicts with another regulation so that both cannot be complied with

  • there is a better way to achieve the same goals

  • it is simply not fair.


One of the most popular examples of over-regulation deals with Swiss cheese.  Our government regulates what products can be called Grade A cheese, Grade B, etc., based on the average size of the holes in the Swiss cheese.  Due to difficulties with processing machinery, the regulations were loosened in 2000 to state that the holes in Grade A Swiss cheese must be between 3/8 and 13/16 inches on average.  The USDA employs a team of officials who evaluate the holes using 22 categories for classification.  Swiss cheese holes have been regulated since 1953 so that cheese manufacturers can label their products as Grade A only when the holes warrant such a distinction.  It is understandable that a company that puts out a superior product would want be able to label it as such without having their reputation sullied by lower quality cheese also labeled as Grade A.  But it begs the question, do we need a taxpayer-funded agency to make this happen?  Perhaps this is a case where the cheese industry could form an independent organization for the purpose of fairly grading each company’s products.  Or perhaps one company is much larger than all the others and would be able to violate such a system with impunity, thus putting all of the smaller competitors at a serious disadvantage.


Environmental regulations protecting wetlands often engender bad feelings between homeowners and the government.  There are many rules in place to prevent landowners from building on or filling-in wetlands.  The reason for these regulations is that we now are beginning to understand just how valuable wetlands are to us as a society.  Wetlands are transitional zones that are neither completely dry nor completely liquid.  Some reasons that we need them are that they:


  • soak up excess water, such as floodwaters, like a sponge, and releasing it slowly

  • trap sediments that would otherwise enter other bodies of water, causing problems

  • naturally filter out contaminants before they enter other bodies of water

  • are needed by certain fish that depend on them to spawn

  • they harbor many endangered species

  • are used by migratory birds

  • support fishing, hunting, birding, and other recreational activities


Consider the flooding argument.  During 1993, the Mississippi river overflowed in perhaps the largest flooding disaster in U.S. history.  More than 50,000 homes were destroyed or damaged.  17 million acres of wetlands had been destroyed in the Mississippi and Missouri river basins in the years leading up the great flood.  These wetlands would not have prevented the all of the flooding, but it most certainly would have mitigated the destruction.


Thousands of homeowners have wetlands on their property.  Most bought their land without knowing of the wetlands themselves or of the regulations prohibiting development on them.  This is because local building permits are often granted without knowledge of (or in defiance of) the state of federal regulations.  Some unscrupulous builders have even been known to sell building lots during the dry season of a seasonal wetland, leaving the new owners in bad shape.  One example of an injustice based on the regulations is a homeowner who is prevented from developing his acreage that consists of wetlands while he is taxed on all of his acreage anyway, as if it could be used.  When part of someone’s property is declared wetlands and therefore off-limits to development, the value of the property can decrease dramatically.  If the owner did now know that he was purchasing a property that was partially unusable, then this is not fair.


Think of a “car trouble” example, where you have to decide if some minor engine trouble or worn out brakes really warrant throwing out the entire automobile.  The better solution is usually to fix the problem.  In the case of wetland regulation, it is in the best interest of our entire society to preserve wetlands.  Therefore, it does not seem fair that an individual homeowner should have to bear the full burden of the cost involved in maintaining these critical wetlands.  And rather than letting the landowner go ahead and destroy the wetlands, it would make more sense if the homeowner that had unwittingly purchased the overvalued land be compensated for the lost value.  Thus it would be society purchasing something important to the benefit of all.