State and local regulations choke economic growth, too

 

The highest-profile economic policy battles are fought inside Washington, D.C.’s Beltway. But some of the most consequential decisions — from a dollars-and-cents standpoint — are made in state legislatures and city halls across the country.

Those who stand firm against Washington for free markets and mild regulation must also apply those principles at the local level.

A new research report shows that just 12 policy mistakes at all levels of government add $546 billion a year in consumer costs.

Fixing those mistakes would save the average household $4,440 a year. Most of the 12 policies examined are federal, but the two costliest are the province of state and local governments.

Heavy restrictions on property rights impose the greatest costs on consumers.

Rather than leave landowners the right to build, many municipalities severely restrict construction. Costly land use regulation takes many forms: Parking minimums, zoning laws, height restrictions, and bureaucratic delays. And all of these artificially inflate the cost of housing.

These differences matter: Developers who work in the two largest states report that a project that would be approved within five months in Texas takes five years in California.

If a coastal metropolitan area like Miami or San Francisco adopted land use laws like those of the typical non-coastal area (Austin, Texas, or Dayton, Ohio, for examples), rent would fall 10% and home prices 20%.

That’s enough to significantly increase the standard of living for low-income families in those cities and bring homeownership within reach of millions of Americans — without market-distorting government mandates or subsidies.

As it is, it took the San Francisco Giants eight years (and two World Series wins) just to get permission to build a mixed-use urban development on land near their new stadium. And that was only after the California state legislature passed two bills specifically exempting the project from the state’s arcane environmental regulations.

When policymakers make it that arduous to build apartments, it’s no wonder the rent’s too damn high!

For state governments, occupational licensure is the most promising area for reform. Occupational licensure is a requirement that people get government permission before they may work in a specific field.

In a few professions — doctors and pilots, for example — abundant caution makes sense. But in most cases, the licenses make no contribution to public safety. Instead, they serve to protect insiders and hurt prospective workers and consumers.

Sadly, many otherwise conservative states have a poor record on occupational licensure, often strictly limiting which professionals are allowed to perform a service.

For example, nurse practitioners are allowed to prescribe medications in states as diverse as Utah and New York, but not one Southeastern state permits nurse practitioners to prescribe.

The result is that the price of a standard medical service is 3% to 16% higher in those states than it would otherwise be, with no measurable difference in health outcomes.

Dental hygienists are similarly denied permission to perform simple services in most states unless they are under the supervision of a licensed dentist. The restriction increases the price of the service and decreases access to dental cleanings.

Meanwhile, 830,000 people visited the emergency room in a recent year due to dental issues that could have been prevented with low-cost dental care that dental hygienists are excellent at providing wherever government allows them to.

Reform is possible but not easy. Deep-pocketed insiders work vigilantly to keep the costly-for-consumers, profitable-for-them status quo. A revival of economic freedom requires citizens who are active, vocal and understand that economic freedom is good for society and good for their own budgets.

One of us had the privilege of fighting for economic freedom alongside some of the smallest businesses in Southern California: family-run daycares.

Meddlesome bureaucrats in several cities had decided to drive family daycares out of business by charging fees of up to $4,000 just for an application (which might be rejected, no money back).

A bipartisan group of legislators amended the relevant state law to end the bureaucratic abuse.

Instead of responding by creating an expensive network of government-run daycares, as some suggested at the time, we allowed hardworking residents to earn a living in their own communities by providing an affordable service to their neighbors.

America’s ever-thickening web of federal and state regulations and mandates likely cost the economy more than federal and state personal income taxes and corporate taxes combined.

Reversing a dozen costly policy mistakes would be a great start for a long-overdue house-cleaning.

DeVore is a vice president with the Texas Public Policy Foundation and served in the California State Assembly from 2004 to 2010. Furth is a research fellow with the Heritage Foundation and author of a new report, “Costly Mistakes: How Bad Policies Raise the Cost of Living.”