Roberts and Regulation: The Ever Present Achilles Heel

We've briefly mentioned the cost and impact of regulations here on the Liberty Blog. It's a subject we're going to be discussing quite a bit, but I wanted to talk about regulation in the context of Judge Roberts' nomination to the High Court.

Regulations (or "regs", in the common parlance) are the little-understood but singularly important component of our American system. They're like that not-distant-enough relative that each of us has in our family: you know he's there, you try not to think about him, but he shows up at every family gathering and has the potential to ruin each one. You'd rather he didn't swing by, but he has to.

Regs are that essential component of our system of checks and balances: Congress passes the laws, and the regulations are the manifestation of the executive branch's interpretation of the law. In future writings, I'll give a primer on what comprises sound regulatory policy (essential elements like comparitive risk assessment and sound benefit-cost analysis). Today, however, is a discussion of regs in the context of the High Court, and the importance of a having a sound regulatory mind sitting in review there.

We know, from a soon-to-be-updated SBA study, that regs cost small businesses (those with fewer than 20 employees), roughly $7,000 per employee per year ($6,975) to be exact. That means that for a small business with ten employees, there's roughly a $70,000 regulatory compliance cost each year. If you're trying to hire full-time workers, that could be the equivalent of three new employees, at a decent wage and with benefits.

For firms with more than 20 employees, that number drops by about a third. This study, called the "Crain and Hopkins Report" (available at the SBA's Office of Advocacy: http://www.sba.gov/advo ), is currently being updated and is under peer review. Hopefully, we'll have a new figure this fall.

There's a cost in paperwork, too. NFIB's Research Foundation has studied the costs of paperwork, and their research indicates a direct cost for businesses of roughly $50 per hour, generally, for paperwork. That number changes depending on the type of paperwork. Tax paperwork, for instance, which constitutes roughly 80% of the paperwork burden, costs nearly $75 per hour.

And this is when folks can figure out what they actually need to do.

That's why it's foolhardy to talk about "regulation without costs" - there are real world implications to what Washington does, and we've seen this impact in places like Ohio and Michigan, where the cost of regulation has meant tremendous losses in jobs.

People got this during the last election. John Micklethwait from "The Economist" considered small business John Kerry's Achilles Heel, in no small part because of the impact regulations on small business, and the fact that John Kerry not only had no plan for limiting that impact (no plan, at least, that he was articulating at that time), but also that there was every indication that the cost of regulation would rise tremendously under a Kerry presidency. That's why I think small business really was the deciding factor in this election - and one of the criteria was this regulatory burden that they face each and every day.

Which is why a nomination like Roberts to the Supreme Court _IS_ so important - it's another indication that this administration does (for the most part) understand this burden. Litmus test issues aside, having a nominee who understands that there are limits to government and that the default position of governing is not more regulation (or that it ought not to be) should be a defining characteristic of a nominee from this President. This is part and parcel of the balancing of the High Court.

Roberts, a thoughtful and deliberative jurist, has demonstrated an ample understanding of the importance of a sensible regulatory state - and that government power ought to be constrained to the limits initially envisioned when this nation was founded. Rancho Viejo v. Norton is a prime example of this: Roberts wanted to enforce the Constitution's limits on federal power (the interstate commerce clause) as applying to an endangered toad (that was not in interstate commerce) found on land where someone wanted to build houses.

Roberts gets, for instance, that the housing sector is one of the sectors of the economy firing on all cylinders, and that when push comes to shove, it's important to make sure that federal policy that moves towards overstepping its Constitutional bounds isn't allowed to wantonly squash that sector. As a practicing attorney, Roberts was on the right side of a number of regulatory cases dealing with employment and environmental regulatory law (as one would expect).

From the perspective of sound regulatory policy, Roberts is a good pick. He understands the impact, and, what's more, understands the philosophies that, when ignored, exacerbate this impact considerably. And in the face of such ignorance, he's willing to step up and make a stand to protect America's entrepreneurial spirit.

Courage like that is precisely what the High Court needs.