A Deregulation Agenda to Spark Economic Growth

Click here to listen to Andy discuss his plan with radio host Kevin Wall.

Among the many misguided policies enacted during the Obama years has been a massive increase in the regulatory burden on America’s economy and individuals.

According to the Heritage Foundation, the number of new major rules enacted during the first six years of Barack Obama’s presidency was 184, with a cost totaling $78.9 billion annually. That cost is more than twice the amount of the new regulations imposed during the equivalent timeframe of George W. Bush’s presidency.

This excessive regulation — which stifles job creation and economic growth — is a chief reason why we continue to suffer under the worst economic recovery since the Great Depression.

Cutting back regulations reduces unnecessary costs for both producers and consumers, increasing the rewards for — and eliminating barriers to — increased production.

Nobody is calling for eliminating all regulations. The government still needs to maintain the rules of the road, to enforce rules against fraud and theft, and to ensure a level of consumer protection. It also needs to protect us against activities that poison the air or water, and against those who would sell harmful products.

But where regulatory burdens or barriers can be removed or relaxed without causing significant harm, policymakers should do so. This would lead to increased economic growth and job creation, and higher wages.

Deregulation was one of the four major components of President Ronald Reagan’s economic program, which produced a historic, 25-year economic boom. President Reagan’s deregulation agenda saved consumers an estimated $100 billion per year in lower prices. His first executive order, in fact, eliminated price controls on oil and natural gas. Production soared, and the price of oil declined by more than 50 percent.

As a pillar of my campaign for U.S. Congress, I have outlined a modernized agenda for deregulation that will lead to increases in personal freedom, job creation, wages and economic growth. There are many areas where federal regulations are excessive, but I will concentrate my efforts primarily on four priorities:

• Rolling back the regulations on energy production in the U.S., and unleashing our enormous potential to be a world energy leader.

• Removing misguided and highly destructive financial regulations, including the Dodd-Frank Act.

• Repealing the so-called Affordable Care Act entirely, thereby eliminating the vast array of regulations that disastrous law implemented.

• Supporting the REINS Act, which would shift regulatory power away from the executive branch and back to Congress, where it belongs.

Reenergizing America

The most important and urgent deregulatory action America needs is to unleash the private sector to produce a plentiful supply of low-cost energy. This would provide a lower-cost foundation for the entire economy, effectively equivalent to another major tax cut for hard-working Americans.

The United States today possesses the resources to be the world’s No. 1 oil producer, the world’s No. 1 natural gas producer, and the world’s No. 1 coal producer. Indeed, we could even be the world’s No. 1 producer of nuclear energy, if we could ever find enough to do with all of that energy.

Steve Moore, the chief economist at the Heritage Foundation, has published a new study estimating the economic value of proven American oil and gas reserves still in the ground at $50 trillion. But left-wing activists and environmental extremists insist that we leave it in the ground.

These extremists and their allies in the Democratic Party are imposing an enormous opportunity cost on our country. Our own government continues to stand in the way, preventing America from using its own resources to produce a reliable supply of low-cost energy. Throughout history, nations have gone to war to ensure their access to essential energy supplies. By keeping America from accessing its own energy supplies, the federal government is effectively waging a war against the American people.

The potential benefits to having the world’s leading industries in oil, coal, natural gas and nuclear power are nearly unimaginable. Tapping into those resources would create thousands upon thousands of high-paying jobs in those industries alone. It would produce billions, and eventually trillions, of dollars in revenue to federal, state and local governments over the years. Indeed, maximizing that production would produce enough new revenue just from energy industries (including lease payments, royalty charges and severance fees) to pay off our $20 trillion national debt in a generation.

But the benefits wouldn’t end there. The reliable, low-cost energy produced would create millions and millions of new jobs throughout the entire economy, and ultimately trillions in new revenues due to the overall economic boom that reliable low-cost energy would support. For example, low-cost energy is particularly critical to manufacturing, which requires extensive energy inputs. This would create a surge in quality jobs for blue-collar workers.

To achieve this goal, federal and state governments must remove onerous restrictions on offshore and onshore oil and natural gas drilling. Federal legislation should enable coastal states to share in the revenues from that offshore oil and gas production, which would give them a powerful incentive to support such production.

Federal and state governments should also remove the excessive regulations that have prevented the construction of new oil refineries and nuclear power plants for decades. They should allow the development of the boundless new supplies of natural gas that recent discoveries and technological breakthroughs such as fracking have made possible. And they should allow the construction of new power plants, including modern, clean coal plants.

This can and should be done while maintaining all essential environmental standards and requirements. Despite the 2011 Gulf oil spill, modern drilling maintains a strong safety and environmental record, causing less spill damage than importing oil through tankers and, indeed, less than natural seepage from the environment. Modern energy production technology can afford to bear all necessary costs of maintaining sound environmental standards.

None of this is to say that we as a society must forget about alternative energy such as wind and solar power. Any unnecessary restrictions on their production should be removed as well. But we cannot restore economic prosperity through a corporate-welfare approach to producing high-cost energy that will kill, rather than create, jobs and growth.

On March 27, 2015, U.S. Sen. Ted Cruz introduced the American Energy Renaissance Act, providing for comprehensive liberation of energy producers to maximize energy production, job creation and prosperity for America. A companion bill was introduced in the House by Rep. Jim Bridenstine, R-Okla. This Cruz-Bridenstine effort provides for the comprehensive liberation of American energy production, and I will support that effort as a member of Congress.

Today, government barriers serve to deny us access to our wealth of energy resources. The Congressional Research Service recently reported that the portion of total natural gas production from federally controlled lands and offshore declined by 40 percent from Fiscal Year 2009 to Fiscal Year 2013. The portion of total oil production from such federally controlled areas declined by 32 percent over that same period.

This resulted from slowing permits for exploration and development of oil and gas in federally controlled areas, imposing moratoria on already granted permits (a move held to be illegal in federal court), and even withdrawing already-granted permits. These policies have decreased federal revenues from oil and gas royalties and from taxes that would have been paid by oil and gas producers.

Fortunately, at the same time, the explosion of oil and gas production on private and state-owned lands, outside of federal reach, has more than made up for the losses of possible production in federally controlled areas. That explosion of private oil and gas production has resulted from advances in the process of hydraulic fracking.

The practice of fracking has been in use in oil and gas production for nearly 70 years. Though the practice often elicits hysteria from the environmentalist Left, no negative effects of fracking have been documented in all those years.

In addition, recent technological advances have led to a burgeoning supply of less expensive natural gas in the U.S., which has already sparked a revival of American manufacturing (for which President Obama has disingenuously attempted to take credit).

Unfortunately, the Obama administration has repeatedly threatened private and state land oil and gas exploration and production with potentially crippling new federal regulation that could shut down this boom. But federal regulation in this area is unnecessary, as state governments have regulated fracking effectively to protect the public through the years. The Cruz-Bridenstine bill that I will support would continue that state-approach to regulation, and would prevent federal authorities from interfering with fracking.

The Cruz-Bridenstine bill would also approve the Keystone Pipeline, freeing the private sector to build it entirely with private funds. That would directly create 42,000 well-paying, private-sector jobs, according to Obama’s own State Department, and support many times that number of jobs through the reliable, low-cost energy it would provide to the American economy.

Additionally, the Cruz-Bridenstine bill would remove all authority for the Environmental Protection Agency to regulate greenhouse gases unless Congress acts to expressly authorize such regulation. Regulations under development by the EPA (to address the supposed problem of global warming) would be prohibitively expensive for the economy, causing skyrocketing energy costs for everybody and threatening massive job losses. Such costly regulations should not be forced upon us by unelected bureaucrats shielded from democratic accountability without express authority from Congress. This is especially so given the emerging evidence that climate change does not pose the threat that environmental extremists have long promised.

President Obama, campaigning in 2008, famously said that he would bankrupt the coal industry. He is already well down that road, as 288 coal-fired power plants in 32 states either had closed or were planning to close as of June 2013 thanks to newly adopted EPA regulations. Those closures have already eliminated 50,000 well-paying jobs in the coal, utility and rail industries directly, and another quarter-million jobs indirectly. Sen. Cruz’s bill would terminate the EPA regulations that are shutting down America’s coal industry and destroying good jobs.

Sen. Cruz’s bill would also grant states the power to lease, approve permits for, and regulate oil and gas exploration and development on federal lands within their borders, and adjacent offshore areas. Federally controlled onshore and offshore areas hold 43 percent of America’s proven oil reserves, and 28 percent of natural gas reserves. Reversing President Obama’s perverse policies and leasing and producing oil and gas in these federally controlled areas could create more than 1 million well-paying jobs. The states would then gain their share of those lease royalties and payments, and other increased revenues from the resulting economic growth. The bottom line is that the states are best positioned to represent the interests of their own people in balancing economic growth and environmental protections.

The bill would also authorize further exploration and development of oil and gas production in the National Petroleum Reserve, by Indian tribes on tribal lands, on the coastal plain of Alaska (ANWR), and offshore on the Outer Continental Shelf. The National Petroleum Reserve is estimated to hold close to a trillion barrels of oil, and 53 trillion cubic feet of natural gas. This reserve is set aside for oil and gas production, yet the Obama administration refuses to allow further exploration and development even there.

West of the Mississippi River alone, Indian reservations hold 30 percent of the nation’s coal reserves, 50 percent of its potential uranium reserves, and 20 percent of known oil and gas reserves. Sen. Cruz’s bill would empower the tribes to develop and generate revenue from these energy riches.

While President Obama has held press conferences announcing expanded offshore drilling, in reality he has effectively prohibited exploration and development off the Atlantic and Pacific coasts. Sen. Cruz’s bill would streamline the regulatory process for offshore oil and gas exploration and development by requiring lease auctions of federally controlled offshore areas within six months of enactment of the legislation, and every nine months after that, and drilling permit applications to be approved or disapproved within 20 days after they are submitted. The bill would similarly streamline regulatory approvals for new refineries (not a single new one has been built in the past 30 years).

Finally, the Cruz-Bridenstine bill would phase out the federal Renewable Fuel Standard (RFS) requirements over five years. The RFS, a federal folly adopted during the Bush years by a Democrat-controlled Congress, requires increasing percentages of so-called “renewable” biofuels to be blended into gasoline and diesel every year, increasing costs. For these costs, the RFS provides essentially no actual benefits.

Collectively, the above steps would lead to an American energy boom with positive results across the board. Citizens all across our country would have greater access to low-cost energy, job creation would soar, and the truly necessary environmental protections would remain in place. We would finally be on the path to a strong, smart and safe energy future.

Liberating American Finance

Despite the passage of President Obama’s financial regulatory reform bill (commonly known as the Dodd-Frank Act), none of the problems that contributed to the financial crisis have been corrected. Providing the foundation for another economic boom — while ensuring financial stability — will require properly understanding those problems and addressing them the right way. Repealing Dodd-Frank is an important first step.

Dodd-Frank was advertised as an end to the concept of the “Too Big to Fail” doctrine, under which certain corporations are considered so important to our economic system that they must be rescued from potential failure by the government.

But in reality, Dodd-Frank didn’t end Too Big to Fail. It institutionalized it.

The problem with Too Big to Fail is that it increases the likelihood that large institutions will head down the path to failure, because their owners and managers will take bigger risks (and capital markets will be more willing to finance those risks) when they can be confident that they’ll be bailed out if things go wrong. Dodd-Frank institutionalized this practice by providing the federal government with the permanent power and the permanent funding to bail out and take over any institution the administration thinks it should.

This policy is based on the same fallacy that inspired the TARP bailouts executed in the fall of 2008. As long as the fundamentals of economic prosperity are maintained — the rule of law, property rights, freedom of contract, low marginal tax rates, minimum regulation, sound monetary policy and a stable dollar — the failure of no institution, nor even a group of institutions, can bring down the entire economy. Financial institutions that fail will quickly be replaced by others that will perform the essential functions of lending and finance.

The periodic Too Big to Fail raids on taxpayers can and should be stopped by reforming the bankruptcy code to provide for rapid bankruptcy — the unwinding and dissolution of failed financial institutions — preferably in 30 days or less. What money and value is still there in the institution can be rapidly used to pay off creditors and claimants. Parts or even all of the institution still functional can be sold off. But whatever losses have been incurred are gone, and can’t be brought back, no matter how hard our politicians try. The losses can only be spread, in the form of a bailout, to innocent taxpayers — rather than borne by those who took the risks in order to pursue the potential rewards they usually get in return.

It is true that in the case of widespread failures, the ensuing panic would create some short-term economic fallout through the economy. But just as the average recession since World War II has lasted less than a year, so, too, would any new downturn be relatively short, with prosperity quickly restored. In contrast, haphazard and ill-conceived bailouts, as we saw in 2008, only serve to prolong and deepen the crisis. Long historical experience with the business cycle confirms this, and we’re learning that painful lesson today.

But once this policy of rapid bankruptcy replaces Too Big to Fail, the periodic panics will occur with much less frequency. That’s because all market players will know they are on their own, and must take precautions to protect themselves from the potentially negative consequences of risk-taking.

Dodd-Frank authorizes hundreds of additional regulations of the financial industry, which are driving hundreds of small and even regional banks out of business. The result is fewer loans for small-business creation and expansion, which historically has been the chief engine of job creation. It has also led to a reduction in consumer finance, which is necessary to maintain consumer demand for products and services, thus promoting economic recovery. Repealing Dodd-Frank would remove all of these unnecessary and counterproductive regulations.

Other steps should be taken to ensure both a thriving economy and financial stability. Sound monetary policy would help prevent artificial, government-created bubbles and the inevitable busts that result. And Congress should repeal the Community Reinvestment Act, which President Clinton used to browbeat bankers into making what turned out to be bad subprime mortgage loans. Bankers need to be free to restrict their lending to demonstrably creditworthy borrowers (which will become even more important when we end the Too Big to Fail policy). This also means that lending discrimination lawsuits against banks must be limited to cases involving actual discrimination, as opposed to the simple refusal to fund bad credit risks — a very painful lesson of the financial crisis.

Another necessary deregulatory step is to repeal mark-to-market requirements, which forces all financial institutions to write down their assets when some of them are threatened by failure and have to engage in panic sales. The effect of this is to spread the panic (and failure) unnecessarily. Traditional accounting based on expected payment streams from assets is sufficient.

Unfortunately, the widespread public panic created by the financial crisis led to a series of misguided policies that did nothing to address the underlying problems that made the crisis possible. In fact, many of the steps the federal government took have only exacerbated the problems.

Responsible financial reform doesn’t merely look for convenient scapegoats to blame when things go wrong. Nor does it seek to discard the basic principles of free-market capitalism, which remains history’s greatest generator of wealth and economic opportunity.

Responsible financial reform creates and preserves a genuine framework in which well-run institutions thrive, poorly run institutions fail, those who work hard can get ahead — and America’s vast resources can be directed in ways that will best ensure prosperity for all.

Health Care Freedom

I have already outlined a detailed plan to repeal the Affordable Care Act, popularly known as Obamacare, and to replace it with market-based, patient-centered health care reform. That plan can be read in full here.

Among the many ills of President Obama’s health care law is its costly increase in the regulation of our health care and health insurance systems. The negative effects are widespread throughout the economy. Exhibit A is the employer mandate, which requires all employers with 50 or more full-time workers to buy health insurance for each employee. As a result of this regulation, millions of Americans have seen their hours cut back to part-time work.

In addition, the individual mandate serves as an effective tax increase on working people and the middle class, because it requires people to buy insurance that meets all of Obamacare’s costly regulatory requirements, as opposed to the insurance they prefer.

Repealing and replacing Obamacare would also eliminate costly regulations requiring guaranteed issue and community rating. Guaranteed issue requires health insurers to sell their insurance to everyone — regardless of health status when they seek to buy it. Community rating requires health insurers to insure those who are sick at the same cost charged to everyone else. It’s a lot like requiring fire insurers to sell insurance to those whose houses are already on fire, for the same price as for anyone else. Insurers would be forced to raise their prices for everyone to make sure they can cover their costs, and many individuals would simply forego insurance until after they needed it.

My plan to repeal and replace Obamacare would create far more cost-effective ways to provide health insurance for those who are already ill, and would thereby sharply reduce health insurance costs. And by eliminating the law’s numerous other regulatory requirements, it would help create a genuinely free health care market that would ensure that all Americans have access to quality care when they need it.

The REINS Act: Returning Power to the People

The problems with the United States’ federal regulatory framework are not limited to its size and scope. The way our regulations are created needs reforming as well.

One fundamental problem is that under current law, Congress has delegated far too much of its legislating power to executive-branch agencies, which have become empowered to write far-reaching and costly regulations.

Under our system of government, the people elect their members of Congress, and it is Congress, composed of the people’s representatives, that our Constitution entrusts with the power to write the laws that govern the people. If the people disagree with the laws being written, they can vote their representatives out of office.

But as regulatory powers have increasingly shifted from the legislative to the executive branch, more and more of our rules are being written not by our elected representatives, but by executive-branch agencies composed of unaccountable, unelected bureaucrats. We can’t vote these people out of office, because their names never appear on any ballot. In theory, these executive-branch agencies are answerable to the president, who is answerable to voters. But in reality, voters don’t have an effective means to hold the president accountable for individual regulations.

The proposed Regulations of the Executive In Need of Scrutiny (REINS) Act would address this fundamental problem. It would require both houses of Congress to approve any regulation from the executive branch with an annual impact on the private sector of $100 million or more in order for the regulation to take effect.

This would corral, for example, the EPA and its runaway regulations, subjecting the agency to democratic accountability. It would rein in other executive-branch agencies that have usurped far too much power as well — power that is increasingly being used to trample on our liberties.

But most importantly, it would restore a principle that is fundamental to our system of government — that it is the legislative branch, not the executive branch, that writes our laws.

Conclusion

This modern deregulatory agenda would usher in enormous and widespread benefits for the American economy.

It would help us realize our potential to be a world leader in energy production. It would reduce the cost of doing business, leading to more jobs and higher wages. And it would give individuals more control over the most personal aspects of their lives, such as health care.

Our goal as policymakers must be to create an environment that maximizes opportunities for all Americans to enjoy freedom and prosperity. Instead, the federal government today serves as a barrier to those opportunities. That needs to change, and the agenda I’ve outlined offers a great start.