The Faulty Logic of Jeb Bush’s Anti-Regulation Argument

September 23, 2015

In today’s Wall Street Journal, Jeb Bush makes the blockbuster claim that “regulations impose a $1.88 trillion silent tax on the U.S. economy each year.” That, he points out, averages out to $15,000 per family.

The startling figure comes from a report from the Competitive Enterprise Institute, which suggests that federal regulations represent a crippling impediment to growth. But before too many readers start picketing the FDA, let’s make sure the math checks out.

Why are we suspicious? Well, for starters, here is a verbatim quote from the report:

WARNING: Estimates herein will exhibit laissez-faire bias, adding of apples and oranges, use of both compliance and economic cost, haphazard distinctions between consumer and employer impacts, consideration of economic transfers as well as compliance and efficiency costs, use of both high-end estimates and best-estimates, old data set syndrome, and a disdain for general equilibrium analysis.

As if that were not enough, a 2013 Washington Post article that listed some key CEI donors can be matched nearly industry-by-industry to the sectors their report finds to be some of the hardest hit by regulation. These are the same sectors that Bush singles out for mention in his op-ed: energy, agriculture, and communications.

In light of this, it should be easy to understand why we suspect that any numbers found in this report are questionable at best. But, for the sake of argument, we will put that concern aside and address a broader problem with Jeb’s analysis:
He seeks to argue, once again, that government intervention only obstructs the free market and general well-being when, in reality, government rules not only serve to protect Americans, but also, in fact, create the market.

The study Bush cites, which elucidates his thinking on these issues, treats all regulations as costs, with no consideration for the enormous benefits they provide.

But, some might ask, what could be positive about costly regulation? Well, as the Roosevelt Institute pointed out in Rewriting the Rules, no economy can function without them. Regulations structure ownership claims, limit harmful financial risk, and ensure that manufacturers don’t make a car with brakes that only last 1,000 miles. Even if they were as costly as Bush believes, it would be money well spent. But, according to the Office of Management and Budget, federal regulation actually results in a substantial net benefit to the economy.
Of course, we do not believe that laws alone prevent American businesses from engaging in harmful practices. Many, if not most, businesses perform enormously useful economic and social functions. But laws and regulations were passed for a reason, so dismissing the cost of enforcement out of hand is intellectually irresponsible. A more honest rubric for judging regulation would be a transparent, qualitative discussion about which statutes are necessary and which are not.

It is clear that neither Bush nor the authors of the CEI study performed any such analysis: Included in this estimate and in Bush’s op-ed are the cost of compliance on gender pay equity laws, anti-insurance discrimination rules, protections from toxic and risky financial products, and environmental standards that limit emissions and ensure safe drinking water. These are protections Americans need to remain physically and economically healthy.

No one likes paperwork, but the alternative can be a lot worse.
Don’t believe us? Here’s a video of a woman with flammable tap water. And here is one about neighborhoods devastated by foreclosure following the 2008 financial crisis, caused by harmful and unregulated Wall Street trading practices.
Bush’s implication that slashing regulations would be good for the common man is plainly cynical; the only beneficiaries of removing “coal-ash standards for power plants” would be corporate managers and wealthy investors.
Many, including the White House, have recognized the burden of unnecessary regulation and suggested that lawmakers should look for ways to streamline and eliminate it. Any sensible person should agree. But before Jeb launches his next attack on regulation in general, he should check his sources and the implications of his arguments.