John Ransom

History may give Obama a few different monikers, but according to a well-known report by the Heritage Foundation, he may be best known as the Red Tape President. Facing an increasingly disenchanted electorate, the president who campaigned on hope seems to be fashioning a political noose created by his own red tape.     

Last year Obama chief of staff Bill Daley faced an angry crowd of manufacturers who complained that the red tape imposed by Obama’s regulatory policies was killing business and jobs, especially in manufacturing. Daley called the regulatory policies “indefensible,” and implied that relief was on the way.

Several weeks later Obama promised in his 2011 economic report to Congress to take a “commonsense approach to regulation that is pragmatic.” But thus far his administration has displayed little commonsense and even less pragmatism in imposing regulations on an economy struggling to regain its footing.   

At the end of July the Heritage Foundation detailed in Red Tape Rising the mounds of red tape that the Obama administration had subjected the country to from 2009 when he was inaugurated to mid-year 2011, not including pending Obamacare and Dodd-Frank regulations, which will tower over all other government tape bales. “Overall, the Obama Administration imposed 75 new major regulations from January 2009 to mid-FY 2011, with annual costs of $38 billion,” reports Heritage.  In contrast, there were only six deregulatory actions by the Obama administration saving $1.5 billion says the Heritage report.  And those costs were just the cost by the government to implement the regulations.   

In terms of the overall impact on the economic health of the country, the figure is much higher.  “More specifically, the total cost of federal regulations has increased to $1.75 trillion,” writes the federal government’s own Small Business Administration. Heritage reports that that’s nearly twice the amount that the government collects annually in individual income taxes, calling it a hidden tax, not just on the rich, but on everyone equally.

Because it prevents the creation of more jobs, however, it hits the poor and middle class particularly hard, “while the updated cost per employee for firms with fewer than 20 employees is now $10,585 (a 36 percent differ­ence between the costs incurred by small firms when compared with their larger counterparts),” says the SBA  In other words, small employers take it on the chin even harder than the big guys. While Obama’s rhetoric panders to the little guys, his actions seemed geared to favor the big guys instead. Maybe that’s what the president meant when he said his administration was only into doing “big” things.     

It’s not hard to figure why the Obama administration is creating jobs at a post-war low.

The SBA report details five different sectors of the economy: manufacturing, trade (wholesale and retail), services, health care, and all other. “The sector-specific findings reveal that the disproportionate cost burden on small firms is particularly stark for the manufacturing sector,” says the SBA. That’s of particular concern because the country has been banking on a revival of manufacturing to compete globally in the coming decades.

To no one’s surprise environmental regulations seem to be the “main cost drivers in determining the severity of the disproportionate impact on small firms,” says the SBA, with tax compliance coming in number two. “Compliance with environmental regulations costs 364 percent more in small firms than in large firms. The cost of tax compliance is 206 percent higher in small firms than the cost in large firms.”

The register Code of Federal Regulations hit a record 163,000 pages in 2009 and the number of pending regulations costing more than $100 million has more than doubled according to Heritage. And once on the books, regulations are almost impossible to get rid of. One regulation that’s been requested for elimination for over four years, says Heritage, is one that treats “milk as an ‘oil,’ thus requiring dairy spills to be treated as hazardous. According to the agency, exempting milk from the regulation will save dairies around $1.4 billion over the next 10 years.” And yet this regulation still sits on the books four years later, even with the support of the Obama administration in getting rid of it. 

Now, according to the Center for Fiscal Accountability, when we add in the costs of implantation of just Obamacare over the next ten years the costs soar another $230 billion per year.

If you thought the current total of regulatory costs was hurting the economy, wait until healthcare is “free.” And the CFA’s estimate doesn’t account for the increases in health insurance premiums that consumers are already facing in the wake of Obamacare being passed.

When Obama promised to transform America in the fall of 2008, few thought he’d accomplish it by binding it up in a socialist red tape. But expect the binding of our economy to continue until the fall of 2012, when another candidate promises to reclaim America by cutting red tape and finally, really consigning socialism to the dust bin of history.

Perhaps then Obama can instead be known as the Last Socialist in America.


John Ransom

John Ransom is the Finance Editor for Townhall Finance.