James Pethokoukis

Politics and policy from inside Washington

Obama finally discovers that bad rules kill jobs

Jan 19, 2011 14:29 UTC

U.S. federal regulations impose nearly $2 trillion in annual costs on American business, according to the Small Business Administration. President Barack Obama thinks that’s probably too much and now wants regulators to strike out needless red tape. Better late than never. Even better, Congress should have more power to do the cleanup itself.

At the very least, Obama’s executive order is another hint to corporate America that the president is eager to mend fences after a fractious 2010. And no doubt business groups will applaud, just as they did last month’s deal on tax rates and Obama’s reconstitution of much of President Bill Clinton’s economic team. Congressional Republicans are likely to approve as well, though some may grumble that the initiative should have preceded last year’s regulatory overhauls of Wall Street and the healthcare industry.

Yet Obama’s timing actually matches up with the onslaught of rule-writing stemming from those reform bills. Financial regulators, for instance, may spend two years or more adding meat to the bones of the Dodd-Frank law that was intended to prevent a repeat of the banking crisis. The president’s move is a reminder to keep an eye on the costs of old rules as well as new ones, even though the directive is more geared toward the former than the latter.

But here is the problem: Expecting regulators to whittle down their own responsibilities much is incredibly optimistic. They are hired to regulate, and broadly speaking the more they perform that function, the more funding and influence come their way. So there’s a case for giving lawmakers greater ability to make changes if regulators can’t bring themselves to do it — presidential order or not.

One idea is a bill introduced last year, and likely to be resubmitted, that would require Congress and the president to sign off on any new rule proposed by federal agencies that would have an annual economic impact of $100 million or more. Some 80 or more rules a year might qualify for such a review. Though it might not always make perfect sense, there’s also some merit behind efforts to force regulators to eliminate one old rule with similar cost for each new one they wish to impose. Initiatives like these would help ensure the ever-encroaching regulatory tangle was regularly pruned.


Congress overseeing the regulators. Sounds good. Just add another level of review. That’s the sort of oversight used in the military to replace a $300 hammer with a $600 hammer.

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Will Washington bail out the MSM with an iPad tax?

Jun 3, 2010 17:48 UTC

This is actually quite astonishing. A “staff discussion draft” from the Federal Trade Commission recommends ways the government can save journalism.  First, it lists a number of ways Washington can subsidize the media (to the tune of $35 billion a year):

– Establish a “journalism” division of AmeriCorps.

– Increase funding for the Corporation for Public Broadcasting.

– Establish a National Fund for Local News.

– Provide a tax credit to news organizations for every journalist they employ.

– Establish Citizenship News Vouchers (lets you direct money from tax return).

And here is where the money would come from, which I will quote directly:

Tax on broadcast spectrum. They argue “commercial radio and television broadcasters are given monopoly rights to extremely lucrative spectrum at no charge,” and this is a massive public subsidy. They therefore suggest the revenues generated by that spectrum be taxed at a rate of 7 percent, which should result in a fund of between $3 and $6 billion. In exchange, commercial broadcasters would be relieved of any obligations to engage in “public-interest programming,” which the broadcasters claim costs them $10 billion annually.

Tax on consumer electronics. A 5 percent tax on consumer electronics would generate approximately $4 billion annually.

Spectrum auction tax. They suggest there be a tax on the auction sales prices for commercial communication spectrum, with the proceeds going to the public-media fund.

Advertising taxes. They note a considerable amount of our broadcast spectrum has been turned over to disseminating commercial advertisements, and a 2 percent sales tax on advertising would generate approximately $5 to $6 billion annually. In addition, they suggest that changing the tax write-off of all advertising as a business expense in a single year to a write-off over a 5-year period would generate an additional $2 billion per year.

ISP-cell phone tax. They suggest consumers could pay a small tax on their monthly ISP-cell phone bills to fund content they access on their digital services. A tax of 3 percent on the monthly fees would generate $6 billion annually. They note, however, this is the least desirable approach because demand for these services is “elastic” and even a slight rise in price could result in people dropping the service.

Me: In this must-read  NYPost article, Jeff Jarvis calls the electronics tax an “iPad tax.” Besides of all the issues this raises concerning government influencing the media, I find it hard to believe voters would be willing to subsidize a broken business model.


An iPad tax. LOL. Well, ATT is doing that by restructuring their wireless data usage fees (starting Monday). Their selling it as a way to reduce costs for most customers. Yeah, right. Until the new gizmos with iChat and cloud music storage require more and more wireless data.

We can see that coming, right?

No doubt about it, this government wants our money. They have lots of big plans. They seem to think that a big, strong government is the key to economic success. (The last bunch of Republicans weren’t so hot, either).

So as we enter this new age of mass-usage of portable web electronics, the government wants to get a piece of the pie.

And hey, it’s another way to increase taxes on the middle class without modifying the marginal tax brackets, and thus not being an official tax hike.

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Net neutrality creates systemic risk for US economy

Oct 23, 2009 18:30 UTC

The Federal Communications Commission decision to begin the process of imposing an Internet neutrality rule — network operators such as AT&T would be barred from charging variable prices for different kinds of traffic from content providers such as Google or Amazon — is curious as well as wrongheaded.

The financial crisis that has convulsed the global economy for the past two years should be a potent reminder to communications regulators that the best of government intentions can create horrible, though unintended, consequences. Easy monetary policy by the Federal Reserve, for instance, intended to counter a recession in 2001, helped create a dangerous housing bubble.

Like physicians and Fed governors, the first goal of regulators should be to do no harm. And that is especially true when they are trying to impose a solution in search of a problem. Broadband prices, for one thing, are on the decline. The average cost of consumer broadband has dropped from to less than $20 a month from $50 a month in 2001. And more people have access. As late of 2004, 70 percent of households still used dial-up modems for web access. Today, just 10 percent do with broadband speeds doubling over that period. Tough to find a market failure here.

Of course, the Internet has hardly reached its potential. But future network upgrades by telecom firms to handle high bandwidth applications will be costly. One way to pay for them would be to charge higher rates to Google, Amazon and other corporate users who generate huge volumes of traffic.

Not surprisingly, content providers are in favor of net neutrality and the de facto government-created subsidy it would create at the expense of telecommunications companies. Net neutrality is merely another form of rent-seeking that seeks to manipulate regulators for private gain. The goal: Use the FCC to turn telecoms into highly-regulated utilities that would absorb the cost of future network buildouts — before passing it along to consumers, of course.

The Washington-based Open Internet Coalition, which represents Google, Amazon and eBay, sees things differently, saying the FCC decision advances a regulatory framework that “promotes innovation and consumer choice on the Internet.”

But not only do more and more consumers have access to ever-faster broadband, they have more choices. In addition to the telecoms, America has four nationwide 3G wireless providers and fifth,Clearwire, readying a nationwide launch of a 4G WiMax service.

But the FCC — with the full encouragement of the Obama administration — nonetheless intends to push forward with seeming little concern about the unintended consequences of intervening into a well-functioning sector vital to the American economy. At the very least, the FCC will likely face years of court battles over the rule that could serve to paralyze the sector. Now there’s your systemic risk.


you keep saying we should make the companies bear (not bare) the cost of upgrading, and not the public. How does that not just come right back at the consumers? The ISP’s will of course raise their rates. I’m not sure where I stand on this issue yet, there are compelling arguments on both sides. I am principally against government regulation, but there are areas where it is necessary. This could be one, I don’t like the corporations to hold all the power, so just saying “no regulation is better for the public” is not a convincing argument either. But restraining those corporations who employ millions and advance technology is not a road to go down without a very good map.

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