Hidden tax of regulation derails federal budget
06/05/2013 5:59 PM
06/05/2013 6:48 PM
Texting while driving is dangerous, especially if you are driving a train. A commuter train engineer was texting on Sept. 12, 2008, near Los Angeles, when he missed a stop signal and crashed into a freight train. Twenty-five people died.
Congress supposedly is incapable of acting quickly, and we are supposed to regret this. In 2008, however, Congress acted with dispatch. We should regret that it did. Herewith another lesson about the costs of the regulatory state, especially when it is excited, eager to make a gesture and propelled by an uninformed consensus.
On Jan. 6, 2005, nine people had been killed in Graniteville, S.C., by chlorine gas leaking from a derailed freight train, but Congress did not spring into action. In 2008, however, California’s 53-person congressional delegation was 12 percent of the House and 24 percent of a House majority. So in less than a month after the commuter train collision, Congress, with scant opposition from railroads, and without meaningful cost-benefit analyses, passed legislation requiring most railroads to implement, by 2015, positive train control (PTC), a technology to stop trains by overriding some human mistakes.
So far, railroads have spent more than $2.7 billion on a system estimated to cost $10 billion to $14 billion — plus perhaps $1 billion in annual maintenance. PTC has not been installed, partly because it is not sufficiently developed. CSX Corp., which includes railroads among its assets, says the railroad industry is the nation’s most capital-intensive — and the $11 billion combined capital investments of all U.S. railroads in 2010 were about equal to the cost of PTC. The 2015 mandate will not be met.
The Federal Railroad Administration estimates that were PTC to be installed on thousands of locomotives and tens of thousands of miles of track, it would prevent perhaps 2 percent of the approximately 2,000 collisions and derailments, preventing seven deaths and 22 injuries annually. But because a dollar spent on X cannot be spent on Y, the PTC mandate must mean the sacrifice of other investments crucial to railroad safety (and efficiency).
Before returning to Harvard Law School, Cass Sunstein was President Barack Obama’s administrator of the Office of Information and Regulatory Affairs, measuring the benefits of regulations against their costs.
Testifying to a House subcommittee on Jan. 26, 2011, Sunstein was asked whether he could identify an administration regulation whose “benefits have not justified the cost.” He replied:
“There is only one big one that comes to mind. It is called Positive Train Control, and it is a statutory requirement, and the Department of Transportation had to issue it as a matter of law even though the monetizable benefits are lower than the monetizable costs. There aren’t a lot like that.”
The cost of regulations ($1.806 trillion) is now more than half the size of the federal budget and 11.6 percent of GDP. This costs $14,768 per U.S. household, equal to 23 percent of the average household income of $63,685.
Regulatory compliance costs exceed the combined sum of income taxes paid by corporations ($237 billion) and individuals ($1.165 trillion). Then add $61 billion in on-budget spending by agencies that administer regulations.
Congress relishes such delegation of lawmaking because responsibility is time-consuming and potentially hazardous politically. Hence the Senate refuses to pass legislation the House passed in 2011 to require Congress to vote approval of any “major” regulation, defined as any with an economic impact of $100 million or more. If Congress were more clearly responsible for burdening the economy with such regulations, it would be less likely to pass them as sincerity gestures.
Internal Revenue Service misbehavior in the regulation of political advocacy, combined with the imminent expansion of the IRS to enable it to administer the coercions that are Obamacare, is sensitizing Americans to some of the costs of the regulatory state. There are many others, hidden but huge.
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