Poor Regulations

Paul Ryan shines a light on the biggest victims of federal bureaucracy.

red-tape_2810803b“Paul Ryan is moving to reframe the debate on regulations,” notes The Hill, “arguing that the nation’s poor are the real victims of the red tape spewing from Washington.” The Wisconsin Republican’s “Expanding Opportunity in America” initiative intends to address what the Obama administration calls “income equality,” which persists despite massive federal efforts.

According to the House Budget Committee majority staff, at least 92 federal programs purport to help lower-income Americans. These include dozens of education and job-training programs, 17 food-aid programs, and more than 20 housing programs. In fiscal year 2012, the federal government spent $799 billion on these programs. Ryan is hardly alone in charging that some of these programs hurt the poor. He cites Creighton University economics professor Diana Thomas, who says that Department of Transportation regulations requiring rear-view cameras will impact low-income car buyers, who prefer to spend their money elsewhere.

Those in the lowest fifth of income spend the greatest share of their incomes on energy. Earners in the lowest income quintile spend 24 percent of their pre-tax income on energy, as opposed to 4 percent in the highest quintile. Therefore, as this analysis from the Manhattan Institute notes, “America’s poorest citizens will be hurt most by the new EPA regulations” on emissions and “it is the poor who will have their budgets squeezed as they struggle to pay for gas and electricity.”

Sofie E. Miller, senior policy analyst at the George Washington University Regulatory Studies Center, writes that federal regulations “often leave low-income Americans paying a heavier price than their neighbors.” Energy standards for appliances “cause prices to increase and push some low-income consumers out of the market.” Likewise, Diana Thomas says “regulation has a regressive effect: It redistributes wealth from lower-income households to higher-income households by causing lower-income households to pay for risk reduction worth more to the wealthy.”

Diana Furchtgott-Roth, former chief economist for the Department of Labor argues that new “cap and trade” environmental regulations “will reduce opportunities for the poorest Americans.” The regulations “impose real costs on the economy,” and deprive workers of  “the security of employment that comes from industrial activity.” Citing rent control, Stephanie Slade charges that “it’s liberals who continue to support laws that, whatever their intentions, have turned out to be disproportionately harmful to the poorest members of society.”

As Patrick Fagan and Robert Rector observed nearly 20 years ago, it’s not exactly news that War on Poverty programs such as Aid to Families With Dependent Children have been a bust. Welfare dependency “has a negative effect on the earnings and employment capacity of young men.” The more welfare income received in childhood, the lower the earnings as an adult, the very “income inequality” lamented by the Obama administration.

Beyond the consequences of those laws and regulations stands the regulatory establishment and its enormous cost. As the late William F. Buckley observed, a tax dollar cannot travel to Washington DC, go out on the town, and return intact to the needy in the form of benefits. Even low-income workers must support the vast bureaucratic establishment churning out regulations that Paul Ryan charges are detrimental to the poor.

His plan would require agencies to conduct a “distributional analysis” on proposed regulations to see if they would have a disproportionate economic effect on low-income households or low-wage workers.  He wants block grants to replace federal welfare programs, expand the Earned-Income Tax Credit and make it work better. Ryan wants to get rid of regressive regulation and emphasize “evidence-based policy-making.”

Some Democrats welcome Ryan’s initiative but Chris Van Hollen, ranking Democrat on the budget committee, told reporters it was “nothing more than a block grant gussied up with some bells and whistles” and “would dramatically slash the resources available to help struggling families.”

Advocates of limited government might note that Ryan did not announce plans to eliminate any federal agencies, not even the federal Department of Education, which dates from 1980 and was a payoff to the National Education Association for endorsing Jimmy Carter. Ryan wants to fix federal education funding and make it more flexible, so even if given the chance, his plan might not deliver. But as it gets the hearing it deserves, Americans might recall the back story, the 50-year federal War on Poverty whose strategic weapons were federal spending and federal regulation.

On January 8, 1964, President Lyndon Johnson, famously declared a “War on Poverty.”  In his State of the Union address, LBJ said, “Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it.” Fifty years later, those curious about how the war came out should consult Sasha Abramsky, leftist author of The American Way of Poverty and who also writes for the Nation. Abramsky concedes that LBJ’s war “failed,” and “not since the Great Depression have so many people been beaten down by vast, destructive forces.”

He wants Obama to do it all again, only more so, a War on Poverty Mark II.  The enemy is the anti-tax, anti-government movement that has managed to convince people “that taxes are a mugging rather than an investment.” In this vision, government regulations and government spending are always the solution, and Big Brother always knows best.