Everett, Wash.
Published: Wednesday, May 7, 2008

For economy's sake, rein in government regulations

 So the nation has thus far escaped recession, according to last week's report of miniscule economic growth. Of course, we're still shedding jobs, consumer confidence remains down, and discretionary spending shrinks as gas and grocery prices rise.

"It could be worse," lacks something as a political rallying cry. Even sunny optimists struggle with the audacity of hope. May's promise of spring has yet to lighten the spirits of working people and the somber solons who represent us.

Yet economic insecurity provides a welcome wedge for populists peddling income redistribution, class envy, and corporate antipathy. In prosperous times, such divisive appeals fall on deaf ears.

As JFK famously observed, a rising tide lifts all boats. Now, however, the tide has gone out. And those left behind by the receding waters of recession are eagerly courted.

Here's one example. Our state legislature recently passed something called the Working Family Credit, essentially a way to get cash to lower-income people. Despite being billed as a sales tax rebate, the legislation requires no evidence of sales taxes paid. What looks like a gift, though, is just a gaudily-wrapped empty package. There's no money for it in the budget and legislative leaders haven't promised to fund it next year.

While the credit may be worth only a couple hundred dollars to qualifying families, it could cost the treasury more than $100 million -- not small change in a budget facing a $2.5 billion shortfall. Still, lawmakers showed their compassion with a feel-good symbolic vote, as they did with the still-unfunded paid family leave program.

The Washington State Budget and Policy Center, a liberal think tank in Seattle, proposed the credit last winter. Recently, they publicized research showing a widening income gap, both here and nationally. The divide has clear political implications.

Although the candidate who most loudly decried "two Americas," John Edwards, faded rapidly, his mantle will surely be borne by the national Democratic presidential nominee and a host of like-minded state and local politicians.

They should temper their rhetoric. A Rasmussen Reports survey in January found that 40 percent of Americans see the economy as the most important voting issue this year. Significantly, though, we disagree on what that means, with 53 percent of us saying it's most important to create economic growth, while 40 percent want to reduce the income gap between rich and poor. Republicans favor growth, Democrats favor reducing the gap, and Independents favor growth.

More importantly, 50 percent of those polled believe the best thing government can do is to "get out of the way by reducing taxes and regulation." The results parallel other polling I've seen, nationally and here.

A recent piece in National Review magazine by Kevin A. Hassett takes a look at why the U.S. has not developed a European-style large welfare state, the ideal of some American populists. Boiling down some recent academic research, Hassett suggests that the determining factor is that, in America, people believe wealth is the result of hard work. In Europe, wealth is seen as a matter of luck.

The research, he writes, shows that "large welfare states emerge in countries where citizens generally believe that luck determines income." When wealth is earned -- and seen as earned -- people resist statist redistribution. If they believe individual effort has nothing to do with it, the resistance wanes.

We know that life isn't always fair. But it's important that we believe that it is fair most of the time. Clear connections between cause and effect, between behavior and consequence, make sense of the world. We cling, as the candidate of hope might say, to the ideal of an America of opportunity and merit.

As Hassett suggests, that ideal becomes harder to sustain when we see politicians channel billions of dollars in earmarks to their business cronies. Or when wealthy CEOs continue to pull down large bonuses as shareholder value plummets.

High profile abuses notwithstanding, our economy justly rewards risk-taking and hard work. These are tough times. Controlling taxes and regulation will help. Most Washingtonians understand that. Instead, we got new paid leave programs, the spurious working family credit, sweeping new climate change regulations, and a deep budget hole.

We deserve better.



Richard S. Davis, vice president-communications of the Association of Washington Business, writes every other Wednesday. His columns do not necessarily reflect the views of AWB. His e-mail address is richardsdavis@gmail.com.
© 2009The Daily Herald Co., Everett, WA