The Other Cliff

The cliff we all hear about is the fiscal cliff: the upcoming expiration of the Bush tax cuts and the simultaneous slashing of government spending.  But there is another cliff that Obama has created: the regulatory cliff-the likelihood of a vast expansion of regulations that will throttle growth and slash jobs if Obama wins a second term.

Jim McTague writes in Barron's:

A pending "regulatory cliff" also is contributing to dizzying uncertainty that has put the brakes on major investment decisions and, consequently, hiring...

The CEOs are keeping the other wary eye glued to the Federal Register, where final rules from government departments and agencies are announced and published after passing through the bureaucratic pipeline. Post-election, the Environmental Protection Agency alone could wreak havoc on the economy with a flood of new mandates that will cost businesses hundreds of billions of dollars. According to Bill Kovacs, senior vice president for the environment, technology, and regulatory affairs at the U.S. Chamber of Commerce, there were 620 rules in the EPA pipeline three years into the Obama administration, versus 412 in the pipeline three years into the Bush administration. That's a 50% increase. What's more, some of the rules are "really big," says Kovacs.

"Think of how much of a change these 620 proposals might represent," he says. "It makes it difficult to engage in a planning cycle. What equipment do you use? How exactly do you build it to comply with changing regulations? How do you amortize the cost of using it?"

McTague outlines a few of the more damaging regulations that are tantamount to imposing Cap and Trade by means that circumvent Congress. Vast areas of the economy would be damaged.

That is Obama's modus operandi -- despite his campaign claims regarding transparency. There is a reason he was characterized as Senator Stealth by author Stanley Kurtz, for the secretive tactics he used as an Illinois state senator.

Similar to the Keystone pipeline decision and the promise related to Vladimir Putin regarding future flexibility, Obama has delayed his big regulatory moves until 2013 (i.e., he does not want to suffer politically for the pain he will cause people economically).

One controversial EPA proposal on ozone emissions was stayed by President Obama in September for consideration in 2013. By the EPA's own reckoning, the rule if implemented annually would cost American businesses $90 billion. But a related rule due to be taken up in December similarly would declare large swaths of the U.S. "closed for new business" until emissions are reduced to meet lower caps than exist today, says Anne Kolton, spokeswoman for the American Chemistry Council.

The EPA could end up regulating a huge swath of the economy, and the impact could be enormous. Kovacs points to a 2010 Chamber-financed study of existing EPA rules to see how they affected growth in the electrical-generation industry. The study found that 351 power companies, including 140 biofuel producers, seeking new building permits were turned down because they couldn't comply with local, state, and federal environmental standards. The applicants represented $577 billion in capital. The construction phase of the projects would have created 1.9 million jobs.

New rules will also be imposed regarding the fracking technology that has so enriched America and benefited consumers and companies with massively lower natural gas prices.

McTague points out that the "only" line of defense to save us from the regulatory cliff is the Congressional Review Act by which Congress can overturn regulations with votes in the House and Senate. That would require 51 votes in the Senate-a challenge given likely  continued Democratic dominance.

He forgot to mention one other line of defense: elect Mitt Romney and give him a broom to sweep out the group that Obama has put in charge of our future.

The Augean Stables need to be cleaned out.