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Nonsense: House Bill Conflates Regulatory Uncertainty with Economic Uncertainty

This Tuesday, the House Judiciary Committee held a markup of HR4078, the Regulatory Freeze for Jobs Act. The act would impose a moratorium on all “significant regulatory action” until the national employment rate falls below six percent. As Congressman Jerrold Nadler (D-NY) said in the markup yesterday, the bill is just “nonsense and is based on  nonsense.”

Regulatory actions by the government enforce standards for clean water, safe food, child-safe toys, and privacy protection. Regulations prevent unsafe business practices from jeopardizing the health and rights of all Americans.

But Republicans on the committee say small businesses are being hurt by government regulations, offering soft statistics and ambiguous quotes from small business owners claiming that job loss and lack of economic growth over the past few years has been caused by “regulatory uncertainty” driven by undefined regulatory changes proposed or implemented by President Obama.

This  new “regulation nation,” as Chairman Lamar Smith (R-TX) said, is breaking the backs of small businesses. Experts dispute that claim.

Small business owners’ primary complaint is not regulatory uncertainty, but economic uncertainty;  in other words, a dearth of demand caused by a lack of customers and sales. As Rep. Nadler pointed out Tuesday afternoon, a Wall Street Journal survey of economists concluded that, “The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists.”

Congressman Mel Watt said it best on Tuesday when he stated that uncertainty is major concern, but it’s not the uncertainty caused by over regulation, rather the uncertainty caused by no decisions on and finalizations of any regulation.

“My constituents are saying that we need to get on with adopting and finalizing regulation under Dodd-Frank so we know what the rules of the road are and can move forward," Watt said at the markup. "The problem I have with this bill is that it doesn't add to the level of certainty that business have because whatever those regulation are… will be put on hold, waiting for the unemployment rate to drop below six percent. If it drops below six percent for a little while, maybe they can gear up again and start writing the regulations. But if it happens to go back over six percent during that period then they have to suspend again.” That sounds like uncertainty in a nutshell.

So why all this talk about "regulatory uncertainty?"

This conflation of economic uncertainty and regulatory uncertainty is the only real basis the supporters of HR 4078 have for promoting a bill that would undermine standards and safeguards that both industry and the public rely upon. Regulations being targeted include implementation of the Food Safer Modernization Act, restrictions on oil speculation that could lower gas prices, enactment of pharmaceutical approval standards, and rules keeping our workplaces safe, and the end of pay loss for our veterans as well as ensuring family and medical leave for all military service personnel, just to name a few. All those regulations protect Americans. Suspending "significant regulatory actions" would put those protections in dire jeopardy... and wouldn't even achieve the bill's stated goal of helping small businesses.

After rejections of several amendments to the bill offered by Democrats -- such as excluding nuclear safety regulations from the moratorium -- one couldn’t help but think that perhaps "regulatory uncertainty" for small businesses wasn't the real focus of this bill. More likely, as conservative economist Bruce Bartlett admitted, it's “simply a case of political opportunism, not a serious effort to deal with high employment.”

Or put another way, the bill is nonsense, and is based on nonsense.