Bideno „Blogio“ modernizavimo reglamento atnaujinimas

Peter Thiel, the Silicon Valley tech tycoon, has a fond aphorism he employs that he apparently borrowed from the late conservative journalist M. Stanton Evans. It goes something like this: “Democrats are the evil party and Republicans are the stupid party.” It’s a blunt and uncharitable way to classify the two parties, but in the realm of federal regulation, the saying has a grain of truth.

Government regulations cost money and that makes businesses less competitive and increases prices for consumers. However, regulations also have benefits. That’s why for decades, federal regulators have been required to prepare an economic analysis for their largest and most significant regulations. That includes a cost-benefit analysis tallying up positive and negative outcomes expected from the action. Because these benefits and costs occur across different time intervals, they are “discounted,” i.e., an interest rate is used to ascertain the “present value” of benefits and costs accruing in the future.

For the last 20 years, federal regulators have employed two distinct discount rates for this purpose. A 3 percent rate was primarily used to mollify Democrats, while a more substantial 7 percent rate existed primarily for Republicans. The Biden Administration is now in the process of “modernizing” the government’s 20-year old regulatory analysis guidance, including by discarding the 7 percent rate. The decision highlights how disagreements about discounting really stem from divergences in the ideologies of the two parties.

Republicans prefer discounting because of the “opportunity cost of capital,” essentially because money left uninvested will still be deposited in a financial institution where it accumulates interest over time. However, while this perspective makes sense in the context of cash flows, it is flawed with respect to regulatory analysis. Cost-benefit analysis isn’t analogous to cash flow analysis because the former incorporates a much wider assemblage of benefits and costs than just money. Health improvements, wellbeing, and even life extension are all accounted for in cost-benefit analysis, and none of these things can be invested or earn interest. Ergo, Republicans, in Thiel’s terminology, are “stupid.” They are discounting for the wrong reason.

Democrats, on the other hand, think about discounting in an altogether different manner. They begin with an economic model in which there exists a central planner: an omniscient, omnipotent dictator, whose welfare the regulator is striving to enhance. Perhaps they believe this dictator is well-intentioned and strives to maximize wellbeing across society. Whatever the reason, cost-benefit analysis, according to this approach, tells the regulator whether particular policies improve the welfare of this theoretical planner/dictator, and under this approach the discount rate is merely the rate at which the dictator discounts the future due to time preference. It is easy to see, therefore, how this undemocratic approach is “evil,” according to the Thiel model.

As should be clear at this point, the disputes over discounting approaches are not really about what interest rate to use but, rather, about what cost-benefit analysis itself should measure. Republicans are intent on measuring wealth, occasionally referred to by economists as “efficiency.” However, cost-benefit analysis measures no such thing, because Republicans don’t apply the discount rate correctly.

On the other hand, Democrats want cost-benefit analysis to measure the welfare of an omniscient dictator. This approach, while theoretically coherent, is morally dubious to say the least. It presumes a central authority with absolute power, one whose desires dictate the course of policy, reducing citizens to mere playthings of this all-powerful entity.

Now, the Biden Administration is not only casting aside the 7 percent rate but also contemplating a reduction in the rate that aligns with the “dictator’s” preferences. The outcome is an administrative approach steeped in a singular, undemocratic perspective. There is no longer even an illusion that cost-benefit analysis measures efficiency.

One would imagine that economists would rise up in protest against such an approach. But many economists, who lean Democrat, seem to welcome the changes. The absence of robust opposition from economists emboldens the administration and is a chilling reminder of the dangers posed by an intellectual elite that seeks unchecked power for itself.

Thiel’s quip that “Democrats are evil and Republicans are stupid” is mostly hyperbole. But maybe there’s a little something to it when it comes to regulation.