Monday, December 19, 2016

Doomed To Stagnate?

Eight years ago it took 40 days to get a construction permit. Now it’s 81.


By Bret Stephens
The Wall Street Journal
December 20, 2016

The World Bank, which does many things poorly, does one thing exceptionally well: It publishes an annual survey that scores and ranks countries according to the ease of doing business. Want to better understand the mess Greece is in? In 2006 it took an average of 151 days to enforce a contract in the Hellenic Republic. Today it takes 1,580. Want to measure Israel’s progress? A decade ago, starting a business in the startup nation took about 34 days. Now it takes 12.

What about the United States? When President Obama took office in 2009, the U.S. ranked third in the overall index, just behind Singapore and New Zealand. It has since fallen to eighth place. Eight years ago, 40 days were needed to get a construction permit. Now it’s 81. When President Bush left office, it took 300 days to enforce a contract. Today: 420. As for registering property, the cost has nearly quintupled since 2009, to 2.4% of property value from 0.5%.

Not all the numbers have moved in the wrong direction under Mr. Obama. It takes somewhat less time to pay taxes today, for instance. But the broader trend is clear, and it goes to the heart of the most important debate in—and about—America today. Are we doomed to the long-term economic stagnation that afflicts Japan and Europe, regardless of who’s president? Or can we grow again as we did in the 1980s and ’90s?

The case for stagnation is macro. The labor force is no longer growing the way it used to. Innovation isn’t giving us the same productivity gains as it did in the past. There’s too much saving, not enough investment. Look at all the broad indicators, say the pessimists, and they all point south.

By contrast, the case for growth is micro. There’s nothing “secular” about our low rate of growth, goes the argument: It’s just the result of the never-ending accretion of ever more costly and time-consuming regulations, all of which could, in theory, be overturned at a stroke. These regulations go largely unnoticed by coastal elites because we’re mostly in the business of producing and manipulating words—as politicians, lawyers, bureaucrats, academics, consultants, pundits and so on. But regulations (and those who profit from them) are the bane of anyone who produces or delivers things: jet engines, burgers, pool supplies, you name it.

Words-makers have the benefit of the First Amendment, that great guard against speech regulation, to keep the government at arm’s-length from their work. Things-makers do not. It’s one of the reasons our worlds seem politically so far apart.

In recent months I’ve tried to get a better sense of the things-making world by asking executives in different industries to share their sense of what it’s like to do business in America today. They talk about Sarbanes-Oxley—its punishing auditing requirements. Or Dodd-Frank—the Compliance Blob it has created within banks. Or the Affordable Care Act—the employer mandate, the increased age of dependent “children,” the obscure little taxes for things like the “Patient Centered Outcomes Research Institute.”

Then there’s the rest of the iceberg.

Did you know that a company that is a contractor or subcontractor with the government must, according to recent Labor Department regulations, establish a goal of having 7% of its workforce be disabled? Did you know that, to achieve this goal, “Contractors must conduct an annual utilization analysis and assessment of problem areas, and establish specific action-oriented programs to address any identified problems.” (My emphases.)

Did you know that the Occupational Safety and Health Administration recently banned blanket policies on post-accident drug testing because they may be discriminatory? Did you know that OSHA’s decision to adopt the U.N.’s 2003 Globally Harmonized System of Classification and Labeling of Chemicals required a relabeling and reclassification effort that cost affected companies an estimated $2.1 billion in compliance?

Did you know that a driver who makes a delivery within Seattle’s city limits must earn a minimum of $15 an hour, irrespective of whether his company has a branch in the city? Did you know that San Francisco’s Fair Chance Ordinance forbids employers from asking about convictions or arrests on a job application?

The list goes on endlessly. When those of us in the words-making world use the term “overregulation,” we are mostly putting a name to a concept we rarely experience consciously. On the things-making of life, regulations are experienced every day as a mix of tedium and torment—a drag on profits, time and what used to be the joy of making money in America.

The Mercatus Center at George Mason University recently estimated that regulations have knocked 0.8% off of annual GDP growth since 1980, for a cumulative total of $4 trillion in lost domestic product. Economists trying to explain the puzzle of faltering growth might begin with that estimate. So, too, might those of us in the words-making world, puzzled by the anger out there, seeking to better understand what just happened in American politics.


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