Mises Wire

Some State Governments Are Actually Trying to Scale Back Their Regulatory Bureaucracy

When discussing policy proposals that could improve people’s economic livelihoods, the options appear to be quite narrow. On one side, you have those who wish to expand public administration, a process that usually involves inordinate amounts of spending, increased taxation, and the inevitable expansion of the regulatory state.

In a normal political climate, the proper response to the government encroachment du jour—be it the Green New Deal or Medicare for All—would be a categorical rejection of these policies. However, free market proponents should not stop there. The next step is to call for a wholesale reduction of the unconstitutional bureaucratic apparatus that has been foisted on Americans during the last century. This growth in public administration has effectively criminalized many forms of peaceful activity while Washington, DC, continues to amass more power at the rest of the nation’s expense. Spending cuts to agencies and their eventual abolition should be implemented in short order.

Alas, we don’t live in a normal era of politics. Instead, the opposition forces to the progressive project don’t even bother to think outside the box and end up reverting to generic talking points about “job creators” or marginal tax cuts that are never followed up with durable spending cuts.

Consequently, Americans are left with an ever growing government, a deteriorated capital stock, and higher tax bills that future generations will have to assume. Most “free marketers” on Fox or other mainstream outlets view free markets in a manner that conforms to the increasingly narrow window of acceptable opinion. This is why political debates remain so stale.

Some State Governments Embrace Limits on the Regulators

But there are some signs of progress outside Washington, DC.

Take Idaho, for example. The state got the ball rolling in 2019 when it decided to repeal its entire regulatory code. Although this did not completely abolish regulatory functions, the legislature can now decide which of the repealed regulations should be scrapped and which ones will be renewed. This is a more proactive approach to regulation that other states can emulate. Idaho’s deregulation experiment somewhat models Texas’s Sunset provision, which allows for certain state agencies to be abolished after a given date unless legislation is approved to prolong their existence.

Another key reform that a select few state governments have caught on to is occupational licensing reform. Although it has been marketed as a “commonsense” policy, occupational licensing, like many of its regulatory cousins, has been abused in a way that protects established businesses while lining the pockets of unelected bureaucrats.

Florida recently demonstrated a whole new level of regulatory insanity when undercover cops posed as homeowners attempting to entrap unlicensed contractors. Law enforcement boasted about arresting 118 people after months of conducting sting operations. One can only wonder how much manpower and hours were wasted trying to catch people who committed the grievous crime of not filling out the right paperwork while countless violent criminals are running loose. Cooler heads seem to be prevailing now that Governor Ron DeSantis has made occupational licensing reform a legislative priority for 2020.

Arizona took an unprecedented step in this direction last year by becoming the first state to recognize out-of-state occupational licenses. For decades occupational licensing policies have been a mainstay of state governments. In Arizona itself 22.3 percent of workers must possess a license to carry out their work.

Matthew D. Mitchell of the Mercatus Center emphasizes that “many of these licensing laws regulate low-risk, low- to moderate-income occupations.” So, we’re not talking about doctors or lawyers here, but rather everyday working-class people, who have much less wiggle room when it comes to real income and time.

According to Mitchell, “workers spend an average of $612 in fees and 765 days in training before receiving a license.” For everyday workers, such costs in time and money can be taxing and in fact prohibitive. The problem is more pronounced for those who have to move from state to state. Once they are settled in, they usually have to start the whole licensing process from square one. Arizona’s reform at least smooths this transition. It’s a relief to know that while the federal administrative blob stays plump, states are at least rocking the boat by rolling back their red tape.

Why The War Against the Regulatory State Must Continue

When talking about economic freedom we should not limit ourselves to conversations about bland tax policy. It’s no exaggeration to say that the regulatory state is a voracious beast that becomes less tame each passing year.

The Competitive Enterprise Institute estimated that “Each U.S. household’s estimated regulatory burden is at least $14,615 annually on average.” In their view, regulation is a “hidden tax” that costs Americans approximately $1.9 trillion per year. There are also intangible costs associated with regulation that are hard to quantify, such as the businesses that don’t exist thanks to regulatory impediments that price budding competitors out of the market.

Economist Gary North characterized the extension of administrative law as the “The #1 Threat to Our Freedom.” North asserts that the pervasiveness of administrative law has allowed trials conducted by tenured bureaucrats to replace the long-established common law tradition of trial by jury. Simply not complying with some arbitrary federal regulation could get an individual dragged into a federal court presided over by soulless bureaucrats. Given the high cost of federal cases, legal representation that would adequately defend the accused is usually a pipe dream.

The aforementioned transition toward rule via public administration has fundamentally transformed the nature of US governance. With high taxation, politicians can at least be linked to bad votes on tax bills or limited by voter referenda. Regulatory growth, on the other hand, is tolerated and no one even notices as bureaucrats formulate their policies in the secluded halls of some DC agency. The regulatory state is a hydra in the background that is slowly gnashing away at the productive capacities of millions of Americans. Good luck trying to vote a bureaucrat out of office.

Waging war against the regulatory state is a worthwhile endeavor. By venturing outside of their Conservatism, Inc. straitjackets, individuals disillusioned by today’s politics can find a plethora of opportunities to keep their state and local governments’ regulatory policies in check. It’s only a question of deviating from prior strategies that no longer yield results.

At this point we might as well stir the pot with policies like bureaucratic deregulation. The traditional way of doing politics is simply not working. We owe it to America’s most humble business owners and aspiring entrepreneurs to find a way to knock down the regulation maze that they are trapped in.

Image Source: Christian Schnettelker
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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