When the Mercatus Center last compiled its Snapshots of State Regulations, California was far ahead, or actually far behind, the next closest state, burdening residents with a combined 420,000 regulations, compared with about 300,000 for New York.
Idaho, the least regulated state, imposed around 31,000 on residents.
“Jurisdictions that allow regulations to consistently pile up over the years experience slower economic growth,” say the report’s authors, though the “effect can be reversed when policymakers actively cut red tape.” An ever-growing regulatory climate is also “correlated with increased poverty rates, lost jobs, and higher inflation, among other effects.”
The most-regulated sector in California is, to no one’s amazement, insurance. An ongoing government-created crisis in the industry has forced a number of companies to pull out of the state. An effort earlier this year to reverse the damage simply did not do enough to provided needed relief.
Utilities are next on the list, and, again, in a state with extraordinarily steep energy costs, there is no astonishment. PRI senior fellow Wayne Winegarden has noted that placing utilities under a heavy regulation-and-tax structure raises electricity bills by nearly $1,500 a year. Despite consuming 34% less energy than the national average, Californians’ power bills were 56% higher than the U.S. average in 2020.
Third is the petroleum and coal products manufacturing industry, which has been a target for policymakers’ mandates and directives for a number of decades, which has taken a toll on oil and gas business.
Slashing the rules should be a priority in Sacramento. It is “abundantly clear,” say the authors, that the states that have actively pursued a deregulatory agenda “have begun to see positive results. Interestingly, those same states that have been able to cut red tape have also enjoyed higher average annual economic growth rates.”
This can – and should – happen at lower levels of government, as well. Municipalities that limit government interference in the private sector attract “employers, investment, jobs, and tax revenue,” says Winegarden, author of PRI’s Free Cities Index.
“Cities with higher regulatory burdens make it more difficult for businesses, particularly small businesses, to turn a profit. These greater operational difficulties sap the relative business vitality in the cities with the higher regulatory burdens,” says Winegarden.
Three of the bottom five pro-growth cities in the Free Cities Index are in California.
Los Angeles, which, Winegarden explains, imposes “large restrictions that make it costly and time consuming to develop real estate, which increases the overall cost of living and exacerbates problems like homelessness.”
Oakland, which, not coincidentally, has lost the NFL Raiders, MLB A’s and the NBA Golden State Warriors.
Long Beach, the least pro-growth city in the index, and where, for an example of regulatory overreach, the City Council is considering fining retailers $2,500 if they don’t run their self-checkout operations the way the city wants them run.
Regulation is sacred among California policymakers. They believe that more is always better and cannot conceive of deregulating – until excessive damage has been done. There’s no better example than the California Environmental Quality Act, which is more than a half-century old and has been causing housing headaches for nearly that long. It took until the present day for lawmakers to finally begin to correct the problem, an agenda that is going to take time to complete. If they would just dedicate themselves to spending more time unwinding the red tape, they’d have less time to create new regulations.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute and co-author of The California Left Coast Survivor’s Guide.
