Editorial: Choking productivity

In a recent interview with The New York Times Magazine, Barack Obama shaped his economic legacy as one of unappreciated achievement. Unfortunately for the president, reality keeps banging on the door.

On Friday, the government announced that the economy grew at a meager 0.5 percent during the first quarter of 2016. Analysts blamed the feeble performance on a number of factors, including depressed worldwide demand for resources and a pullback in business investment.

In fact, this has been par for the course for more than a decade. Between 1950 and 2000, U.S. economic growth averaged 3.5 percent a year. That number has dropped to 1.76 percent in the years since.

Nor is this just some far-flung abstraction of pointy headed academics. Economic growth — the value of goods and services produced — is the engine of prosperity. Improvements in living standards and employment are directly tied to healthy growth. A 1 percentage point annual reduction in growth is akin to sucking $150 billion out of the U.S. economy.

While there are some bright spots — U.S. payrolls have grown significantly over the past year, the housing market appears robust and consumer spending is up slightly — the moribund growth rate remains troublesome. The Fed’s free money experiment has done little to goose investment — yet one constant remains: The ever-expanding federal regulatory apparatus.

A 2013 study by the Journal of Economic Growth concluded that the explosion in federal regulations in recent years has slowed U.S. economic advancement by about 2 percentage points annually. Consider that in 1949, the Federal Register consisted of 19,335 pages. That number was more than 169,000 in 2011. The Competitive Enterprise Institute estimates that it costs Americans $1.8 trillion to comply with federal edicts.

No doubt many worthwhile regulations serve to advance public safety, protect the environment and promote the general welfare. But a significant number of mandates do little but empower faceless bureaucracies, appease special pleaders, erode property rights or protect existing and powerful interests at the expense of potential competitors.

Indeed, the American economy, argues John M. Cochrane in a Wall Street Journal commentary this week, “is simply overrun by an out-of-control and increasingly politicized regulatory state.” Mr. Cochrane, a senior fellow at Stanford’s Hoover Institution, believes this has choked initiative and discouraged entrepreneurship, thus inhibiting growth. “If it takes years to get the permits to start projects and mountains of paper to hire people, if every step risks a new criminal investigation, people don’t invest, hire or innovate,” he writes.

We are now told by some economists that 2 percent growth “is the new normal.” Maybe. But perhaps we could mitigate the problem by taking a lesson from the proverbial straw and camel.