Regulation Reform Can Boost Economic Growth

The U.S. economy is slowing down. Trends for the major components of growth are now unfavorable: labor participation is falling, the pace of human capital accumulation is slackening, the rate of investment is in long-term decline and growth in total factor productivity is low. Sadly, there are strong reasons to believe U.S. economic growth will fall well short of the long-term historical trend.

Progressives, conservatives and libertarians have a common interest in reversing this growth slowdown. Agreement on ends, however, need not translate into agreement on means.

Despite today’s polarized political atmosphere, it is possible to construct an ambitious and highly promising agenda of pro-growth policy reform that can command support across the ideological spectrum. Such an agenda would focus on policies whose primary effect is to inflate the incomes and wealth of the rich, the powerful, and the well-established by shielding them from market competition, policies usually called “regressive regulation.”

Below are four major examples of regressive regulation:

– Excessive monopoly privileges granted under copyright and patent law;
– Restrictions on high-skilled immigration;
– Protection of incumbent service providers under occupational licensing; and
– Artificial scarcity created by land-use regulation.

For those interested in better long-term economic performance, rolling back regressive regulation is the low-hanging fruit. Reforming these policies will make a positive difference. Unfortunately, though, this low-hanging fruit is guarded by “dragons” — the powerful interest groups that benefit from the status quo.

Although opposition to progress would be formidable, pursuing an agenda of curbing regressive regulation would open up a new front in the policy fight. Instead of another left-right conflict, the contest is a choice between the public interest and vested interests. With an unprecedented deterioration in long-term growth outlooks, this approach is well worth trying.

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