John Locke Update / Research Newsletter (Archive)

Cutting red tape would overwhelm any Bathroom Bill impacts

posted on in Law & Regulation

Local media and leftist blogs are drenched in outrage over House Bill 2, which was known as “the Bathroom Bill” until they figured out they needed to focus attention about it somewhere else. They settled on the economy.

So they took a hiatus from complaining about Fox, Big Oil, and the Koch brothers to insist state policy should absolutely be set according to what a few outside multinational companies and multimillionaires say.

Are there legitimate concerns about HB2’s provisions? Yes. The section prohibiting lawsuits from those who believe they were fired for discriminatory purposes seems to be tacked on and doesn’t address the Charlotte City Council action that prompted the legislation.

For that matter, a lawsuit over the city council’s diktat would have been preferable to legislation. But since the council’s move also targeted private businesses’ shower, locker room, and bathroom facilities, a response was warranted.

The section removing an ability of local governments to force higher minimum wages on companies they contract with also seems beside the point. Even though it is eminently sensible from an economic and freedom-minded point of view.

(But good grief. The minimum wage was founded by racist Progressives expressly to keep jobs from minorities, the poor, and society’s “undesirables.” Why would anyone demand a huge hike in the minimum wage? Let alone those who browbeat others with “morality” and purport to advocate for minorities, the poor, and “the least of these.” It’s perplexing.)

For whatever reason, though, these issues aren’t at the forefront of discussion. Instead, it’s a daily tally of economic harm supposedly created by some companies not relocating, some concerts not happening, some tourists supposedly not touring.

Let’s assume these aren’t put-on hysterics geared toward November. Let’s treat them as voicings of real worry over the state’s economy.

That way we won’t have to ask why the same voices have been quiet (or opposed) as the state’s economy grew following historic tax reforms and regulatory reforms in 2013 and other reforms. Consider:

  • North Carolina’s GDP growth is fastest in the nation in current dollars since 2013, and in dollars adjusted for purchasing power is first in the region and ninth overall
  • North Carolina’s growth rate in per-person incomes (3.6 percent) also bested national and regional averages
  • North Carolina progressed from 44th on the Tax Foundation’s business tax climate rankings (better than only six other states) in 2013 up to 16th in 2015

So North Carolina’s economy is growing at a lively rate, which is good, however unremarked upon it has been by the state’s new economic growth protectorate.

But what if retaining the status quo ante regarding locker rooms, showers, and restrooms really does result in a slowing down of the state’s economy?

It takes a host of unconventional economic assumptions to make that case to media satisfaction. But consider, for argument’s sake: if the Bathroom Bill is slowing the economy down, are there other ways to speed up the state’s economy elsewhere. 

Yes, of course.

Red tape is holding us all back

Consider red tape, for example.

Oh, don’t make that face. If you can foresee economic impacts from not changing who gets to disrobe in which dressing room, which is out-Bastiating Bastiat, you can certainly grasp the idea that cutting unnecessary costs of getting into and doing business here can produce significant economic benefits.

On just the state level, red tape and regulation costs the North Carolina economy annually as much as $25 billion. That is every year. Those losses accumulate, leaving an economy markedly lower over time than what it could be without the unnecessary red tape.

So push the governor and General Assembly to focus on red tape reduction, which would boost the state’s economy by making it quicker and easier for people of all descriptions to do business here.

On the federal level, it’s much the same if not worse. New research by professors from Duke University finds that if federal red tape and regulation had been held constant at 1980 levels, then the U.S. economy would be 25 percent larger than it actually is. Growth in red tape and regulation resulted in an economy $4 trillion smaller than it would have been — that’s a $13,000 per person loss on average.

That’s according to research published in April by Pietro Peretto, professor in Duke’s economics department; Bentley Coffey, a visiting assistant professor at Duke from the University of South Carolina; and Patrick A. McLaughlin of the Mercatus Center at George Mason University.

Imagine if every North Carolinian had an extra 13 grand a year to spend!

The losses from accumulating red tape continue to pile up. Go back to 1949 instead of 1980, as economists John W. Dawson of Appalachian State University and John J. Seater of North Carolina State University did. They found all the subsequent red tape and regulations had limited the U.S. economy to about one-fourth the size it potentially could be.

Imagine if every North Carolina household had an extra $277,100 per year to spend!

Then realize this absence, this unseen cost to every household, accumulates and grows each year as federal red tape does. So for a faster growing economy to help North Carolinians of all persuasions, also petition the president and Congress to come together over red tape reduction. The issue has long had bipartisan appeal, after all.

Speaking of red tape reduction that could boost the state’s economy and has bipartisan support, look especially at expanding labor freedom in North Carolina. Getting rid of unnecessary occupational licensing is an issue that unites the Obama administration with libertarian and conservative policy groups nationally, and locally unites policy thinkers on the right and left.

New research from Heritage Foundation economist Salim Furth characterizes licensing as a “hidden tax” on households. According to Furth, the size of this hidden tax varies by state according to the scope of its licensing regime. At the low end of the scale, the cost of occupational licensing for households in South Carolina is only $473 per year. At the other extreme, however, households in Washington bear an annual cost of licensing of $1,550. For households in North Carolina, Furth estimated that their annual cost of occupational licensing to be $923.

Imagine if every North Carolina household had an extra $923 per year to spend!

Red tape is bad on the individual level as well. The more red tape in a society, the more income inequality there is. Licensing also shields lower-income communities from benefiting from a “double dividend” of local entrepreneurial activity as well as new jobs, goods, and services.

Encouraging state leaders to sunset unnecessary licensing would open new avenues to economic growth, job creation, and opportunities to all North Carolinians. It would have the added benefit of helping its low-income workers the most

Conclusion

More people getting interested in removing limits on the state’s economy is very welcome. Marshaling this additional energy can foster pro-growth economic policies that benefit all North Carolinians, overwhelming whatever costs the Bathroom Bill actually produces.

These are worthy reforms to pursue regardless of whether HB2 is repealed or its forecast economic impacts turn out to be fallacious.

Jon Sanders is an economist studying state regulations, that spreading kudzu of invasive government and unintended consequences. As director of regulatory studies and research editor at the John Locke Foundation, Jon gets in the weeds of all kinds of policy… ...

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