A dozen government policies cost the typical American family $4,440 per year. These costly policies include the ethanol mandate for fuel, vehicle mileage standards, and sugar import quotas at the federal level. At the state and local levels, it includes occupational licensing rules, auto dealership monopolies, renewable energy mandates, and land-use regulation.
Austin consumers pay $5,750 more for a car, 50 cents more for a gallon of milk, and 31 cents more for a gallon of gas because of 12 policy mistakes.
Compared to California or New York, however, Texas has a light regulatory burden. This has helped to push Texas to the front of the pack in economic growth for a generation. In fact, Southern cities, led by the great metropolises of Texas, were responsible for almost half of U.S. income growth from 1964 to 2009. Texas has resources — but so does every place. What was crucial was that state and local policies allowed those resources to be used.
By “resources,” we mean much more than just oil. Relative to cities in other states, Texas municipalities have allowed landowners to build housing, keeping costs low for the millions who have moved to Texas for work. Texas was one of the first states to adopt a right-to-work law, back in 1947, expanding economic freedom for employees.
But there’s plenty of room for improvement. For instance, as recently as 2012, the Institute for Justice ranked Texas as having the 17th-most-burdensome low-income occupational licensing requirements in the nation. The institute found 34 low-wage occupations licensed in Texas at an average license fee cost of $304, requiring an average of 326 days of training and two exams before gaining the government’s permission to work. By contrast, the U.S. Army takes 116 days to train new military intelligence officers, and the Federal Aviation Administration requires 1,500 hours of flight time, equivalent to 188 days of work, before licensing pilots to fly commercial jets.
Fortunately, in June, the Texas Supreme Court struck down one particularly silly licensing requirement — for eyebrow threaders, which required 750 hours of cosmetology training, none of which dealt with eyebrow threading. A few months earlier, a federal judge threw out state licensing requirements that forced hair braiders to meet the same high licensing standards as barbers — 1,500 hours of training, the same as that required to fly a 747.
Two fewer occupations licensed is progress, but one in three Texans still needs government permission to work, increasing barriers to entry for employment while inflating costs to consumers.
Even the city of Austin isn’t immune to requiring pointless permission slips. A year ago, in the closing days of the lame duck city council, a new ordinance was passed requiring a city license to haul sticks from residential back yards. It sets an aspiring entrepreneur back $100 to obtain a “Hauler for Hire” license — that and a city inspection, along with higher insurance premiums, before anyone with an old pickup truck and a thirst for honest hard work can clean up a backyard and take the debris to the local landfill. What’s worse: If a person does clean up a yard for pay and hauls off the waste and gets caught, he or she is liable for a fine and court fees. Can’t pay? Then an arrest warrant can be issued.
For a typical Austin household, just 12 state and federal policy reforms can save $2,732 a year by using economic freedom and competition to lower prices. Of course, Austin’s state and local policymakers in the Capitol and in City Hall don’t have to wait on Washington; they can enact the lion’s share of savings for their constituents as soon as they can muster up a majority to do so.
Chuck DeVore is a vice president with the Texas Public Policy Foundation and served in the California State Assembly from 2004 to 2010; Salim Furth, Ph.D, is a research fellow with the Heritage Foundation and author of new report, “Costly Mistakes: How Bad Policies Raise the Cost of Living.”