Governor Gets Down to Business Quickly

While the Indiana General Assembly began its work on January 7, new Gov. Mike Pence had to wait a week for his January 14 inauguration. He quickly went to work, however, with significant positive actions on his first two days on the job.

A series of executive orders that Pence signed following his official ascension into office included a moratorium on new rules and regulations (with obvious emergency exceptions) that were not proposed before January 14, as well as a cost-benefit analysis of existing administrative rules. Priority will be given to review of those rules with the most negative effect on job creation and economic development.

Candidate Pence promised this action leading up to the election. While federal regulatory challenges are often at the forefront today, this step will help ensure that state government is not unnecessarily limiting job and economic growth.

On day two, the Pence team delivered a two-year, $29 billion spending plan to the State Budget Committee. The first six pages of this extensive document provide an overview of the key elements.

This is a very good starting point for legislators. It is a fiscally sound proposal, with a focus on meeting key state priorities and providing the 10% individual income tax relief (which also encompasses 90% of Hoosier businesses) that Pence proposed in his campaign. As we’ve indicated previously, lawmakers have questioned whether the income tax cut should take precedence over other budget desires. That will be worked out in the legislative process and could be determined by the updated revenue forecast that will be presented in early April.

A few highlights:

  • A 1% increase in each of the next two years for K-12 and higher education. The second year for K-12 would have that 1% be divided among the state’s highest performing schools. Combined, the education funding totals 65% of the budget.
  • While the administration did not include money to specifically expand the Medicaid program as outlined under federal health care reform, it does significantly increase funding for health insurance for the poor – from $1.65 billion this year to $2.1 billion in 2015.
  • The budget calls for a change in projected excess revenues. After 12.5% of annual spending is set aside in reserves, the remainder would be divided between the automatic income tax credits that were enacted during the Daniels administration and a new fund to help maintain roads, bridges and other infrastructure critical to economic growth.
  • Spending is kept in line in this proposal. A structural surplus is maintained and reserves are allocated effectively, with the infrastructure fund a good start to the larger question of financing future transportation needs. The Chamber will be working with the governor’s team and legislators to help ensure that as many pro-job, pro-economy priorities as possible are achieved in a responsible manner.

Worst of the Worst in 2012 Regulations

There’s room for one last "Bottom 10" list of 2012. With thousands of new government regulations each year, it’s difficult to select the worst new rules put into place. Two Heritage Foundation experts give it a try, starting with 1,099 pages of new mortgage disclosure rules that have the stated goal of simplifying home loans.

(10) Mortgaging the Future: New mortgage disclosure rules were released in July by the newly created Consumer Financial Protection Bureau, with a stated goal of simplifying home loans. The rules run an astonishing 1,099 pages. The net result of this and similar rules? Fewer consumer mortgage lending options and increased costs.

(9) Tracking Your Travels: In December, the Department of Transportation proposed that electronic data recorders, popularly known as "black boxes," be required in most cars starting in 2014. The stated goal is to collect more information about car accidents. But this spooks privacy advocates, who warn that federal bureaucrats could misuse this information.

(8) Essential Choice Cutbacks: Under the Obamacare "essential benefits" rule, health insurers will be forced to cover health care services that the government deems essential, whether you want to buy them or not. The net result will be to increase health care costs, increasing the burden on consumers, employers and taxpayers.

(7) Instant Union: In April, the National Labor Relations Board issued new rules that shortened the time allowed for union-organizing elections to between 10 and 21 days. This leaves little time for employees to make a fully informed choice on unionizing, threatening to leave workers and management alike under unwanted union regimes.

(6) Don’t Let Them Eat Cake: The Department of Agriculture in January published detailed new nutrition standards for school lunch and breakfast programs. More than 98,000 elementary and secondary schools are affected – at a cost exceeding $3.4 billion over the next four years. The new rules sparked protests, and even a few hunger strikes, from students nationwide.

(5) Cleaned Out: Regulators admit that the new Energy Department rules governing dishwashers will do little to improve the environment. Rather, proponents claim they will save consumers money. But they will also increase the price of dishwashers, and only about one in six consumers will keep their dishwasher long enough to recoup the cost.

(4) Soda Socialism: On Sept. 13, at the behest of Mayor Michael Bloomberg, the New York Board of Health banned the sale of soda and other sweetened drinks in containers larger than 16 ounces. New Yorkers apparently are still allowed refills, at least for now. No word on how many NYC cops will be moved from crime prevention to monitor the city’s soda fountains.

(3) Sticker Shock: Adopted in August, these new automobile mileage rules require a whopping average fuel economy of 54.5 miles per gallon by 2025. Sticker prices will jump by hundreds of dollars. Regulators argue that the fuel savings will make up these costs. Whether consumers want to make such a tradeoff doesn’t matter. The government has decided for them.

(2) Increasing Energy Costs: The Environmental Protection Agency in February finalized strict new emissions standards for coal- and oil-fired electric utilities. The benefits are highly questionable, with the vast majority being unrelated to the emissions targeted by the regulation. The costs, unfortunately, are certain: estimated to be $9.6 billion annually. The regulations are likely to undermine energy reliability and raise energy costs across the entire economy.

(1) Conscience Denial: The Department of Health and Human Services on Feb. 15 finalized its mandate that all health insurance plans include coverage for abortion-inducing drugs, sterilization procedures, and contraceptives. The mandate allows no exception for church-affiliated schools, hospitals and charities whose religious principles conflict with the mandate. To date, 42 lawsuits representing more than 110 plaintiffs have been filed challenging this restriction on religious liberty as a violation of First Amendment.

Striving to Shrink the Red Tape for Companies

The Indiana Chamber hosted Congressman Todd Rokita (4th District) on Monday for the one-year anniversary of the Red Tape Rollback program. Rokita and the Chamber teamed together in the spring of 2011 to strive to identify and do something about unnecessary and overly burdensome federal regulations that kill jobs and negatively impact the economy.

In the initial 12 months, 71 Hoosier companies and individuals contacted the congressman’s office about 41 different regulatory issues. The work of Rokita and his staff has yielded 18 Red Tape Rollback victories thus far, with efforts continuing on other issues.

An annual report outlines the concerns and the accomplishments. It’s not too late for you to let us know about federal regulations and their impact on your business.

In case you’re not convinced there is a problem, consider that the most recent edition of the Code of Federal Regulations consists of more than 101 million words. That compares to just over 4,500 words in the U.S. Constitution.

IRS Decision Good News for Small Businesses

You don’t hear this often: Kudos to the IRS. They’ve stopped plans that would have been a nightmare for small business recordkeeping. The Phoenix Business Journal reports:

The Internal Revenue Service has dropped plans to require businesses to reconcile their receipts from credit card transactions with reports filed with the IRS by third-party payment entities.

Legislation enacted in 2008 requires these third parties to report how much every merchant is paid each year through credit cards, debit cards or services like PayPal. For the 2012 tax year, the IRS planned to require businesses to reconcile their records with these third-party reports when they file their tax returns.

The IRS decided to drop this requirement after complaints from small-business owners, who said it would pose a significant burden on them. They noted that the amount recorded on credit or debit card purchases often does not equal the revenue a business receives from the transaction. For example, customers often get cash back on debit card purchases or receive cash when they return merchandise purchased with credit cards.

Legislation to overturn the requirement recently was introduced in the House. On Feb. 9, however, the IRS told small-business groups it would not impose the reconciliation requirement for 2012 tax returns, “nor do we intend to require reconciliation going forward.”

“We appreciate your work with us in this and other areas as we continually seek to improve our processes and to minimize compliance burden on taxpayers,” wrote Steven Miller, the IRS’ deputy commissioner for services and enforcement.

Business groups praised the agency’s decision.

“The IRS did the right thing, and they should be applauded for listening to the concerns of the small-business community,” said Giovanni Coratolo, vice president of small-business policy at the U.S. Chamber of Commerce.

“We were very pleased that the IRS took time to listen and work with us to resolve this matter in a satisfactory manner,” said Bill Hughes, senior vice president for government affairs at the Retail Industry Leaders Association. “This will relieve retailers of an unnecessary burden while still providing the IRS with the tools it needs to ensure tax compliance.”

Dan Danner, CEO of the National Federation of Independent Business, called the IRS reversal on the reconciliation requirement “a small, but important victory for small business."

FCC Report: Media Needs to Serve Somebody

There was big news in the world of journalism yesterday (for those who follow such things and/or care what the Federal Communications Commission has to say) when the FCC released a 470-page report on the state of the U.S. media. In summary, their conclusion wasn’t exactly a positive one, with the overall finding seeming to be that American media isn’t serving the public. What’s most interesting — or perhaps most telling — is that the Democratic and Republican commissioners seemed to have two entirely different takes on the report. Imagine that. National Journal reports

Federal regulations designed to ensure that broadcasters serve the public interest are broken, allowing stations to dump local-news reporting and lowering standards for news ranging from international developments to government scandals, the Federal Communications Commission said on Thursday.

"Over time, court rulings, constitutional concerns, and FCC decisions have left a system that is unclear and ineffective,” the agency said in a long-awaited report on the U.S. media. “The current system operates neither as a free market nor as an effectively regulated one; and it does not achieve the public-interest goals set out by Congress or the FCC.”

The 470-page study turns the tables, with the FCC reporting on media outlets that usually are the ones doing the reporting.

To promote public-interest programming on public airwaves, the report recommends more disclosure from broadcasters. It also calls for C-SPAN-like public-affairs networks in each state.

Too often, the report asserts, the FCC rubber-stamps broadcast licenses without ensuring that the outlets involved cover the local community.

Further, the proliferation of Internet-based news outlets has not improved the quality of journalism, the researchers found.

“It turns out you can have an abundance of media outlets and a shortage of real news,” said the report’s lead author, former journalist Steven Waldman. At the root of the growing dearth of quality reporting, he concluded, is the fact that advertising is increasingly disconnected from content.

“If ad rates were the same online as they are in print, we wouldn’t be having this conversation,” Waldman said. In a first for the agency, the report urges lawmakers to consider the “positive benefits” of online tracking when drafting privacy legislation. Such tracking, the report states, offers a possible way for news websites to attract more ad revenue.

To help strengthen the public service potential of media, the report makes six broad recommendations: emphasize online disclosure as a pillar of FCC media policy; make it easier for citizens to monitor government by putting more information online; consider directing more existing government spending to local media; foster an environment for nonprofit media outlets to succeed; promote broadband access; and ensure that media policy helps historically underserved communities.

The highly anticipated report didn’t go far enough for Democratic FCC Commissioner Michael Copps, who has long called for tighter public-interest regulations.

“Enlightened policy that promotes the public interest is basically glossed over by the staff report as having been tried and failed,” Copps said at Thursday’s commission meeting, where the findings were presented.

He took the report’s authors to task for “tinkering around the edges” by not calling for major overhauls. “In the recommendations, there is some hedging about whether all that consolidation we are living with today—all these local, independent stations bought up by mega-media interests—has been good or bad,” Copps said.

But Republican Commissioner Robert McDowell said that the report highlights the competitive and innovative nature of the media market. Regulations and policies will only hurt, he argued. “The government should keep its heavy hands off of journalism,” McDowell said.

McDowell stressed that the report is only the beginning of a debate over potential solutions.

The findings contained few surprises in their evaluation of the media market, noting that many traditional news outlets have been decimated by economic challenges and shifting technology.

So what’s your take?

Regulatory Relief or Justification?

A serious effort to reach out to job-creating businesses and stimulate economic growth or a political move now that the road to change in Congress is much less friendly? Reactions to President Obama’s call for reviewing federal health and safety regulations that might be too burdensome on business vary from those two camps to a few areas in between.

Two different perspectives, first from the Competitive Enterprise Institute, which has its doubts; second a CNBC analysis, which indicates the results might be surprising. As always, we’re interested in your take.

This executive order is hardly a war on red tape, and no affected businesses or consumers are going to be able to sue anybody to force compliance — it’s just an “order” to agencies to behave, says CEI’s Wayne Crews. 

Actually confronting regulation, the crippling extent of which remains unappreciated by both parties, requires going far beyond the words of an executive order. Some options include:

  • Implement a bi-partisan “Regulatory Reduction Commission” to vote up or down annually on a package of rules to eliminate.
  • Institute a moratorium or freeze on regulatory rulemaking now.
  • Hold hearings on Sen. Mark Warner’s (D-VA) “one-in, one-out” requirement for any new rule.
  • Rediscover federalism, that is, circumscribe the federal regulatory role regarding health and safety matters best left to states.
  • Enlarge regulatory flexibility and exemptions for small business.
  • Establish an annual Presidential address or statement on the state of regulation and its impact on productivity and GDP.
  • Sunset regulations after fixed period unless explicit reauthorization is made.
  • Implement a supermajority requirement for extraordinarily costly mandates.

As for CNBC.com, Senior Editor John Carney writes:

NBC news reports that the efforts will be run out of Cass Sunstein’s office inside the Office of Management and Budget. That’s hardly surprising. The entire op-ed reads as if Sunstein had a large role in authoring it. He’s long been an advocate of cost-benefit analysis of government regulation.

It’s important to note that in Sunstein’s interpretation, cost-benefit analysis does not have the implicitly libertarian outcomes that the leftist critics and some free market types expect. Indeed, it could be that both the critics and friends of this new executive order will be surprised.

Sunstein’s cost-benefit analysis, for instance, could well be used to support greater regulation of hedge funds or a stronger version of the Volcker Rule by pointing to the relatively modest costs involved and the potential costs of possible systemic risks. In advance of actually doing the cost-benefit analysis, we cannot know if any particular regulation will pass muster.

I suspect that in actual operation, we’ll discover that Sunstein-ian cost-benefit analysis is modestly pro-regulation. Especially when regulators are allowed to include vague things such as how a regulation impacts on equity, this kind of “watch the consequences” analysis is pretty open-ended and far more subjective than it might seem. 

Unions Have a Powerful Friend

Congress receives plenty of attention — and rightfully so as its decisions carry far-reaching impacts. But many in the business world are more concerned about what is taking place in regulatory agencies in Washington — and rightfully so.

One can only draw that conclusion when Labor Secretary Hilda Solis is reported as saying her agency seeks to enact as many as 90 rules and regulation intended to "give more power to workers and unions." Included in that lengthy list is greater disclosure on how employers deal with unions.

Advice from consultants to employers is currently not required to be reported. The Labor Department, however, has said this exception should be narrowed and an official is quoted as saying, "Our goal is that through greater openness and transparency, we increase compliance without having to send an investigator into the workplace."

So the government wants businesses to report consulting advice under the guise of "transparency," not an attempt to increase the withering number of private sector union workplaces? It might be a new year, but sounds like the same old story out of Washington. 

Trip to the Pump Not Quite as Painful, Still There is Work to be Done

When you have a 17-year-old daughter who must pay for her own gasoline, each time the pump price comes down is a cause for celebration. I even received a call Wednesday afternoon asking if she should fill up (despite still having half a tank) when she saw the $1.98 a gallon price.

For someone burned by far too many of those hard-to-explain Thursday increases, I went out on a limb and said "No, you can wait." Oil prices are supposed to decrease even further and the down economy (reality and fears) that is contributing to the pump relief unfortunately isn’t going to change overnight.

The Heritage Foundation’s Ben Lieberman offers some deeper perspective, warning that Congress must not go back on its easing of drilling restrictions. It also should reduce the red tape and avoid costly oil and gas regulations. Short-term gain will be replaced by long-term pain if we don’t act wisely.

Read Lieberman’s analysis.