Ryan is right to tackle federal regulations, but we must look at state and local, too

Greg Nash

Earlier this month, Speaker Paul Ryan (R-Wis.) and House Republicans announced a series of policy proposals to create “a confident America, where everyone has the chance to go out and succeed no matter where they start in life.” The goals of this initiative, “A Better Way,” are certainly admirable. A major focus of the proposals released so far concern removing barriers to opportunity and upward mobility through reforming federal regulations and increasing congressional oversight of federal agencies. However, while this a good place to start, the barriers that exist at a federal level are only a small piece of the puzzle.

{mosads}In fact, the most pervasive barriers to opportunity are not a product of federal regulations or agencies. Instead, state and local governments are responsible for most of what stands in the way of individuals finding meaningful work in today’s economy. This, like the issues that Ryan has highlighted so far, is something that Congress has the power to combat in a significant way.

Disregarding the role of state and local governments will leave much of the problem unchanged. Only when Washington takes fundamental reform at a state-level seriously will everyone have a genuine chance to go out and succeed in the manner that Ryan has suggested.

Take, for example, occupational licensing and other regulatory barriers — such as certificate-of-need laws — that obstruct competition and impede the entry to markets. Almost exclusively carried out at a state and local level, these barriers act to protect those already in an industry from increased competition. Often, they are enforced long after their initial justifications have evaporated (if they ever really existed in the first place). All of this is done at the expense of the opportunity for those seeking to practice their chosen profession. As a recent report from the Institute for Justice finds, these burdens fall particularly on minorities, those of lesser means and those with less education.

As if it wasn’t bad enough that the growth in occupational licensing has gone unchecked for nearly five decades — approximately 5 percent of the workforce needed a license to work in 1950, while more than 25 percent requires a license today — Congress is directly responsible for some other state-level barriers that act to compound these problems. It was Congress that initially required states to pass certificate-of-need laws in the mid-1970s, which require doctors and other providers to receive permission from the state before they may open, expand or invest in their practice. Although Congress no longer requires states to enforce these laws (and hasn’t since the mid-1980s), nearly two-thirds of states continue to use these laws to limit both the opportunities for those seeking to work in healthcare and increase the costs for those seeking care.

Breaking down these barriers would go a long way toward helping those in poverty and creating opportunities for those looking for work. In fact, by focusing on these impediments to competition, a twofold benefit could be achieved: opportunity becomes realized easier and life becomes more affordable.

But what can Congress do about state-level barriers? The principles of federalism certainly require a lighter touch when it comes to federal influence over state and local governments. However, this does not mean that Congress is powerless. Reinvigorating federal competition policy via the Federal Trade Commission (FTC) could go a long way toward fighting anticompetitive state-level policies, which has been a focus of the FTC’s advocacy and litigation for decades. Moreover, while the most recent installment of the policy proposals discusses exercising the power of purse over state agencies, the same could be said for using federal funds to influence pro-competitive reforms at a state level. After all, in the case of certificate-of-need laws, this was how Congress got states to pass them in the first place.

Besides, expanding these efforts in this way may actually bridge partisan divides. The proposals have been criticized by Democrats as failing to tackle the real issues at hand, but it does not have to be a partisan effort. Reforming barriers to work and opportunity is an issue that the Obama administration has taken up over the past year. In the White House’s most recent report on occupational licensing, in which the administration explains the damaging effects of occupational licensing, it concludes that “[t]he stakes involved are high, and to help our economy grow to its full potential we need to create a 21st century regulatory system — one that protects public health and welfare while promoting economic growth, innovation, competition, and job creation.” This statement could have very easily been included in any of the policy reports released so far by Ryan.

There seems to be little disagreement that our current regulatory approach is standing in the way. And the push for reform should be a bipartisan effort. However, the focus should be on not only returning balance and accountability between the separate branches of the federal government. It should also ensure that every level of government is held accountable. Working toward that end is a good first step toward finding a better way.

Koopman is a research fellow on the Project for the Study of American Capitalism with the Mercatus Center at George Mason University.

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