Anyone in business knows that the heavy regulatory hand of government prevents job creation, slows investment and hurts the economy. That’s why when Gov. Jan Brewer took office in January 2009, one of her first actions was to place a moratorium on new state government regulations.
The governor’s move was cheered by the business community that found itself in the depths of the Great Recession and looking for relief from the bureaucratic meddling that results in more hoops to jump through and more red tape to cut. When a business is trying to keep its head above water, throw it a life preserver, not a brick.
But a new report from the Grand Canyon Institute – the same folks who argued last year that Arizona’s tax policy hasn’t resulted in a more competitive state – attempts to put a sunny face on burdensome regulations under the premise that the governor’s moratorium was unnecessary and leaves the state insufficiently nimble when new rules are needed.
With all due respect to the report’s authors, they’re wrong.
Even President Obama’s regulatory chief recently acknowledged that all regulation comes at a cost. In this way, regulations operate like hidden taxes by increasing the cost of doing business. At the federal level, nearly 200 regulations making their way through the pipeline are considered “economically significant” rules, which are defined as having costs of at least $100 million a year. A Small Business Administration study back in 2010 used several different sources to estimate a $1.75 trillion cost to the economy, which is disproportionately borne by small business.
Arizona smartly took out the regulatory hedge clippers when the state leaders were faced with devising a pro-growth strategy to win back the 300,000 jobs lost during the economic downturn.
After the governor instituted her moratorium, the Legislature embarked on several efforts to make Arizona the most regulatory friendly state in the country.
Back in 2010, the Legislature passed and the governor signed into law a sweeping regulatory reform bill shepherded by then-Majority Leader Andy Tobin. Included in the package was the ability for agencies to repeal obsolete rules, to grant general permits whenever possible, to require a cost-benefit analysis of the impact of rules on Arizonans and to prohibit the adoption of a rule unless the benefits of a rule clearly outweighed its costs.
This was and is a big deal. Back in 2010 I called the state’s efforts to cut red tape the most under-reported story of the year. Businesses consider a host of issues when deciding where and when to invest, but a state’s regulatory environment weighs heavily in that decision.
After all, does anyone think that companies would be announcing that they’re setting up shop in Arizona if they faced bureaucratic roadblocks at every turn?
The Legislature and Gov. Brewer continued their reform efforts in 2012 by passing a bill that provided for true deregulation through an expedited rulemaking process to remove confusing or outdated provisions in rules, granted additional authority for the Governor’s Regulatory Review Council to eliminate unnecessary rules and allowed the validity of scientific studies to be questioned when they are used to justify rules.
Another bill that year encouraged self-audits by businesses to discover and correct environmental problems by providing limited administrative and civil evidentiary protections. That was followed up by a similar audit privilege bill in the health and safety arena.
I’m not suggesting a world without any regulation; certainly some regulations have their place in ensuring the health and safety of Arizona’s citizens. Gov. Brewer’s office has made clear that agencies can apply for exceptions to the moratorium, and agencies are typically granted one-year exemptions when implementing new laws.
However, a government in a regulation frenzy can quickly become hostile to business. California’s regulatory environment has hit absurd levels, with the state attorney general there suing grocery stores over their failure to mark candy with warning labels. Meanwhile, Arizona has been ranked a top-10 state for business, and our lead economic development agency has two outposts in California to woo overregulated companies here.
Arizona’s comeback has proven that Gov. Brewer was smart to push the pause button and cause her agencies to think about the serious economic impact that overregulation has on Arizona’s economy.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry.