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Why do we regulate?
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Why do we regulate?

BY Richard W. Rahn

Should government regulate business? I expect most people would answer "yes" to that question, but if you ask them why, I expect these same people will have a harder time giving an answer that makes sense. Some may say, "in order to prevent businesses from engaging in fraud or misrepresentation." But we do not need regulation to do that; there are already many federal, state and local statutes against fraud and misrepresentation, and businesses that behave badly can be dealt with through normal civil and criminal legal means. Others who are a bit more sophisticated might argue that we need to regulate business in order to protect people from "market failures." However, the empirical evidence is that there are far fewer "market failures" than commonly imagined, and many of these so-called market failures are actually a result of misguided government policy or regulation. For a minute, try to imagine a world without government regulation, but where all of the standard laws against theft, fraud, misrepresentation and bodily injury still exist. Under such a scenario, what do you think would happen if we had no food and drug administration to tell us what was safe to consume? No financial regulators to protect us from bank failures and financial scams? No health and safety regulators to protect us from unsafe products? Would we all die? Not likely, because the judicial system, coupled with private standard setting associations, would likely give us an equal, if not a higher, level of protection than we have now. More than a century ago, when electrical appliances were first being developed and sold, there was a problem in that many of the new products shocked their customers and/or started fires. The electric appliance industry quickly understood this situation was dangerous and not good for business and thus started an industry sponsored organization to test products to make sure they were safe and reliable. The organization was called Underwriters Laboratories. It still exists today to ensure that electrical products bearing the UL seal are safe, and its mark has become the standard. In the absence of regulation, virtually every industry would do the same thing, because legitimate enterprises know that being known for selling faulty products would ruin their reputation and put them out of business. Unfortunately, as a result of ceaseless propaganda from pro-government interest groups, most Americans have been brainwashed into thinking they need regulatory agencies to protect them. A most provocative paper has just been published by the American Enterprise Institute, written by former U.S. Treasury General Counsel Peter Wallison, entitled "Why Do We Regulate Banks?" Mr. Wallison argues that "it is difficult to identify a sound policy reason for regulating banks. Most of the conventional explanations -- inherent bank instability, deposit insurance, the Federal Reserve's role as lender of last resort, or the Fed's role in the large-dollar payment system -- turn out on examination to be either unfounded or based on risks that the government need not take in order to foster growth of the economy." Mr. Wallison goes on to detail "the huge costs to the taxpayers and the economy" caused by bank and S&L failures that have been due to regulation. Finally, Mr. Wallison, who has had major regulatory responsibility, concludes as to the question, "Why do we regulate banks? That we do so because we want to, not because we must." In an excellent paper dealing with the telecom industry by Stephan B. Pociask, titled "Wireless Substitution and Competition," published by the Competitive Enterprise Institute, the author finds "convincing evidence that wireless services are strong substitutes for wireline services." His analysis concludes that "the nature of competition has changed, and it also means that price and service regulation is largely unneeded, since market forces are sufficient to hold prices in check." The point of these above examples is that we have more and more evidence that much of government regulation is not only not needed but is non-productive and destructive. It is now estimated that this year our total regulatory burden will be $913 billion, or roughly eight percent of the U.S. gross domestic product. Unneeded and harmful regulation has very real costs to people that shows up in fewer jobs, less international competitiveness, less freedom, and a lower standard of living for most people. It is time for us to fundamentally rethink the regulatory state. Your local supermarket does not need the government to tell it to sell only safe food, because if it doesn't its customers will go elsewhere, and it will also be sued. A free market system with few barriers to entry for new competitors, coupled with a strong legal system that penalizes neglect and misbehavior, is more likely to protect the citizen with lower costs than whatever number of regulatory agencies can be developed by the government class.

08/11/2005
Hope for Europe?
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Hope for Europe?

BY Richard W. Rahn

Europe is in crisis. It is depopulating because of birthrates well below replacement. Weighted down by oppressive taxes and onerous regulations, the economies of the major European nations are barely growing. Pessimism reigns. Yet there are the little flickers of light in the form of bright and energetic young people pushing constructive change, and increasing public recognition from some European leaders that the present course is unsustainable.

08/05/2005
Veto the Highway Bill
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Press Release

Veto the Highway Bill

Click here to download a .pdf version. July 26, 2005 The President The White House Washington, DC 20500 Dear President Bush: Congress is nearing completion of a Highway Bill that will surely rank as one of the worst examples of pork-barrel spending of all time. If, as expected, it exceeds the spending limits you proposed, we’re counting on you to stand up for conservative economic principles by vetoing the bill.

08/02/2005
FreedomWorks, Allies Urge Discipline on Transportation Spending
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Press Release

FreedomWorks, Allies Urge Discipline on Transportation Spending

View Letter to the White House View Letter to Congress Dear Mr. President: On behalf of the millions of members represented by our respective organizations, we ask that you hold steadfast to your threat to veto H.R. 3, the Transportation Equity Act: A Legacy for Users, the six-year transportation reauthorization legislation if Congress is unable to meet the $284 billion threshold.

06/19/2005
Support the Base Realignment and Closure (BRAC) Process
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Press Release

Support the Base Realignment and Closure (BRAC) Process

Download a .pdf version of the actual letter here. June 2, 2005 The Honorable Donald H. Rumsfeld Secretary of Defense 1000 Defense Pentagon Washington, DC 20301-1000 Dear Secretary Rumsfeld,Download a .pdf version of the actual letter here. June 2, 2005 The Honorable Donald H. Rumsfeld Secretary of Defense 1000 Defense Pentagon Washington, DC 20301-1000

06/04/2005
State spending continues to grow
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State spending continues to grow

BY JOE FOLLICK

The Republican mantra of "less government" has won over voters, helping the party establish dominance in state politics and leaving Democrats virtually powerless. But the $63.1 billion budget awaiting the signature of Gov. Jeb Bush is not only the state's largest ever, it reverses a trend of cutting the budget for most of Bush's seven years in office. Last month, Bush said the $5 billion in additional spending this year made him "twitch." "I think (Republicans) should be careful," Bush said last week. "We should be the conservative party."

05/22/2005
GOP Eyes Congressional Fiscal Reform
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GOP Eyes Congressional Fiscal Reform

BY Steve Jordahl

This is also a national radio hit on the Dobson Focus on the Family network. A group of House Republicans is highlighting the progress in reining in the budget and asking their colleagues to continue tightening their belts. The message from members of the Waste, Fraud and Abuse Public Affairs team in the House is that government bureaucracy has woven a web of redundant and ineffective programs.

05/20/2005
Bloated Senate Transportation Bill Breaks the Budget
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Press Release

Bloated Senate Transportation Bill Breaks the Budget

Earlier this year, President Bush and Congress took a step in the right direction when they passed a budget that begins to restrain the runaway growth in spending. Unfortunately, yesterday the Senate passed a massive $295 billion transportation bill that breaks that budget agreement. The bill, H.R. 3, is more than $11 billion larger than the agreed upon allotment for transportation. FreedomWorks urges the President and Congress to reject this extra spending in conference.

05/19/2005
Fixing the U.S. Budget Process
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Press Release

Fixing the U.S. Budget Process

At what point do we admit that federal spending is out of control? The amount government spends annually per household has risen from $18,000 in 2000 to $20,500 in 2004 - an increase of 13% and the largest five-year expansion of the government since the Vietnam era. This marks only the fourth time in U.S. history that federal spending has exceeded $20,000 per household.

05/12/2005
FreedomWorks Cheers Re-Introduction of the Family Budget Protection Act
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Press Release

FreedomWorks Cheers Re-Introduction of the Family Budget Protection Act

FreedomWorks President Matt Kibbe today joined other taxpayer groups to salute Representatives Mike Pence (R-Ind.), Rep. Jeb Hensarling (R.-Texas), Rep. Paul Ryan (R.- Wis.), Rep. Chris Chocola (R.-Ind.), and Rep. Christopher Cox (R.-Calif.) for reintroducing the Family Budget Protection Act. FreedomWorks President Matt Kibbe commented:

05/11/2005

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