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More Regulations!

Some people have removed themselves from the regulatory environment by dropping out of the rat race altogether, all thanks to the same government that is regulating the rest of us to death.

Dec 21, 2012

The Central Valley Water Board has adopted new waste discharge requirements to protect ground and surface water from irrigated agricultural discharges. According to their website "farmers will be required to report their water quality protection practices to their respective coalition. And, growers who have not already implemented practices that protect water quality will be required to improve their practices...All growers will be required to prepare nitrogen management plans...The coalition will prepare technical reports, conduct required studies and monitoring, and submit reports to the water board on behalf of the growers." The regulatory burden for farmers grows and grows, faster than they can grow their crops. But, regulations aren't just a farm problem. Regulations are everywhere. Regulations suck the life out of our economy.

Some people have removed themselves from the regulatory environment by dropping out of the rat race altogether, all thanks to the same government that is regulating the rest of us to death. Bill Bonner of The Daily Reckoning writes in the article below that "Over the last 4 years the number of people on disability has risen more than 7 times faster than the number of people with jobs. The number of people on food stamps has increased by 17 million during Obama’s term in office. From the beginning of Obama’s first term to the end of it, approximately 4.6 million jobs disappeared. But the number of additions to food-stamp and disability roles jumped 21.2 million." All this while they say things are getting better. I guess it's better if you like disability checks and food stamps.

We have written here before about how farmers are having trouble finding workers. Why would anyone want to work hard when the government makes it so easy to do nothing?

 

 

The Daily Reckoning Presents
The Entitlement Cliff
 
Author Image for Bill Bonner
Bill Bonner
The Welfare States of the Developed World are “long growth.” Without it, their finances are doomed.

First, a little background...

Generally, investors will pay more for a dollar’s worth of earnings from a stock than from a bond. Stocks are riskier than bonds, in the sense that share prices tend to go up and down more, depending on company results. But investors believe this ‘risk premium’ is worth it, because there is more ‘upside’ in stocks; they will grow with the economy. Over the long run, therefore, the rate of return on stock market investing should more or less reflect the stream of dividends received, plus the rate of growth in the economy. If the economy doesn’t grow, however, the risk premium becomes a costly artifact of an earlier age.

Pension and insurance funds, too, count on growth. They collect money. They invest it and make projections based on what they consider a likely rate of return. The difference between what they collect in premiums...and what they need to invest to cover their costs and payouts...is profit. As of 2012, the typical pension fund — such as those operated by state and local governments — was banking on a rate of investment return as much as four times higher than the GDP growth rate. If growth does not pick up, these funds will go broke.

Private households, pension and insurance funds all are on one side of the trade, betting that growth rates will recover to those of the ’80s or ’90s. If so, disaster might be averted. Higher growth rates will permit governments to keep the rate of debt growth in line with revenue increases. But if growth doesn’t recover, public finances all over the planet are doomed.

Over the last 4 years the number of people on disability has risen more than 7 times faster than the number of people with jobs. The number of people on food stamps has increased by 17 million during Obama’s term in office. From the beginning of Obama’s first term to the end of it, approximately 4.6 million jobs disappeared. But the number of additions to food-stamp and disability roles jumped 21.2 million.

Why were so many more people suddenly disabled? Was there a plague that struck the nation? Were millions crippled in a nationwide auto pile-up? Of course not. Instead, in a low-growth economy, $1,000-a- month without working had begun to look pretty good.

“You get what you pay for,” said Milton Friedman. You pay people to be disabled. You get plenty of them.

Everybody’s worried about the fiscal cliff. But there’s a much bigger cliff coming up, and it’s the “Entitlement Cliff.” In the four years since Obama took office, entitlement participants have grown exponentially.

Driving through East Baltimore recently, I saw slews of billboards with ads by shyster lawyers encouraging poor people to get in on disability payments or to sue their employers or their landlords. Here’s one of the billboard ads:
DENIED DISABILITY? Call THE FIRM. The Cochran Firm.
Johnnie Cochran was the lawyer who successfully defended O.J. Simpson. Now his firm has 30 offices around the country helping people get on disability. Apparently, he’s been pretty successful at this too.

Change in Social Security Disabilty vs. Change in Employment

More and more people are finding ways to get paid without contributing to useful output. This is just another part of the reason that growth slows: much of the society’s energy is diverted to unproductive uses.

I had not gone to East Baltimore for pleasure. I was going there to waste energy. Specifically, the state of Maryland required me to have my auto emissions checked. Practically everyone with an automobile is now required to drive where he doesn’t really want to go...wait in a line he doesn’t really want to be in...and pay $14 to have his auto emissions checked.

As Bastiat reminds us, there are always unseen consequences as well as those that are obvious. For every ‘bad’ auto the test uncovers — whose emissions are unnecessarily noxious — many more good autos are forced to drive miles and miles they didn’t otherwise have to drive, just to take the test. At the test station I used there were six lines of traffic...about six cars in each line...and each idling its motor while waiting to move forward.

“It’s worse than that,” my secretary volunteered.

“The test doesn’t work on newer cars, or at least some models of them. So, you get there...they take your $14 and they just waive you through.”

But emissions testing is now a part of the complex economy. Entire industries are devoted to it. Employees are trained to do it. And lobbyists work hard to keep the whole thing going, whether it really makes any sense or not. Once again, it was Milton Friedman who pointed that “there is nothing as permanent as a temporary government program.”

And so, a part of the nation’s energy — time, money, fuel, capital, engineering ability — is now taken up by emissions testing. Little of this shows up as government spending. It is the private sector that spends the money. You may think of the security checks in airports if you want to find a parallel. Millions of people spend millions of hours per year — an immense ‘investment’ of energy — merely keeping people who had no intention of blowing up airplanes from doing so. Or, think of filling out your tax forms. It is a cost imposed by government, but not included in the federal budget.

How much of the economy’s energy is sapped by these unproductive activities?

Nobody knows. But it must be a lot. Every business now has its own overseers and regulators. Every one spends time and money complying with complex regulations — many of which did not exist a few years ago.

According to the latest estimate, Americans spend 6.1 billion hours just complying with tax legislation. And think of the new paperwork blizzard Obamacare has imposed. Think of the law firms and accountants who work full time trying to figure out how to comply with Fatca, Dodd-Frank and other financial regulations.

Google Dodd-Frank and you get 5,460,000 hits. Each one is an attempt to understand, influence, implement or comment on this legislation. And most of this activity occurs in the private sector of the economy, where it is recorded as positive increments to the GDP! But it is a huge diversion of resources, taking them away from what might otherwise be useful and productive activity.

An article in Cato Institute’s “Regulation” magazine, Fall 2012, shows the cost of the 10 Top Regulations Affecting Small Businesses. These are: Energy Conservation Standards, Affordable Care Act Menu Labels, Transportation’s Hours of Service Rule, Affordable Care Act Vending Machine Labels, NLRB’s Union Notification Standards, Education’s Gainful Employment Rule, EPA’s Fracking Regulations, Dodd-Frank Regulation Z, Affordable Care Act Physician Fee Schedule, Dodd-Frank Regulation E. Together these cost small businesses $3.5 billion annually, according to the study. And they add 28.7 million hours of paperwork.

We don’t have to decide whether Dodd-Frank or emissions testing or airport screening is good or bad...necessary or unnecessary...we only have to recognize that much of our energy is now spent on things that reduce output. As another measure of how much time and energy is wasted, data from the Mercatus and Weidenbaum centers show that budgets for the main federal regulatory agencies multiplied 14 times between 1960 and 2007, in constant dollars. The payoff from all this extra investment is hard to measure; most likely it is starkly negative.

Nor do we have to single out the US as particularly wasteful. France is worse, with more than 50% of the nation’s GDP spent by the government. But all mature economies drift towards unproductive activity like old elephants heading for the burial ground. Either they don’t know what happens there. Or they feel compelled to go in that direction anyway.

Regards,

Bill Bonner
for The Daily Reckoning
 

 


 

 

Water board adopts pollutant rules

 

Efforts targeting fertilizer nitrates

 

The Modesto Bee

 

A board has given final approval to rules aimed at protecting groundwater from farm-based pollutants in part of the San Joaquin Valley.

The Central Valley Regional Water Quality Control Board voted unanimously to adopt the rules, which apply to the parts of Stanislaus, Merced and Madera counties east of the San Joaquin River.

The board also agreed, to the approval of agricultural interests, to have the effort carried out by the same farmer-funded coalition that has handled surface water issues for almost a decade.

The group, the East San Joaquin Water Quality Coalition, pays for water testing and educates growers about farming practices that reduce pollution, all under state supervision.

The coalition has reported a decline in detections of pesticides and other pollutants in rivers, creeks and drainage canals.

The groundwater effort is aimed mainly at nitrates from fertilizer and other sources. A recent study by the University of California at Davis says nitrates are a health threat in rural drinking water systems in the Tulare Lake Basin and Salinas Valley.

The coalition has about 2,300 members farming about half of the 1.1 million irrigated acres east of the San Joaquin. Growers who do not take part must get individual permits from the regional board at a much greater cost.

Growers to plan ahead

Parry Klassen, the coalition's executive director, said the new groundwater rules require growers to have plans to manage nitrogen fertilizer on hand. Those found to be in "high vulnerability areas" for nitrates will have to file the plan with the coalition, he said.

Experts urge farmers to keep track of their nitrogen fertilizer -- in part because it could produce nitrates, in part because they save money by reducing the amount spread on the soil.

"Not all that nitrogen is going into the plant," said Michael Johnson, a consultant to the coalition, during a fertilizer conference in Modesto in October. "Where does the rest of it go?"

This group was the first of several coalitions around the Central Valley to be governed by the new groundwater rules. Others could follow next year, including those serving San Joaquin County and the West Side.
 

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