ON-THE-RECORD PRESS CALL
ON THE CEA REPORT DETAILING THE POSITIVE
ECONOMIC IMPACTS OF THE TRUMP
ADMINISTRATION’S DEREGULATORY EFFORTS
Via teleconference
11:03 A.M. EDT
MS. SLOBODIEN: Thank you. Good morning everyone, and thank you for joining today's press call on the latest report from the White House Council of Economic Advisers on the positive impact that the Trump deregulatory efforts have had on our nation's economy. This call will be on the record and we'll also open it up to questions.
I'll now turn things over to a member of the Council of Economic Advisers, Tomas Philipson, who will announce the other speakers on the call today.
MR. PHILIPSON: Thanks everyone for joining for joining. This is Tomas Philipson. I'm one of the members here at CEA. Today we're going to talk about a report entitled, "Economic Effects of Federal Deregulation Since January 2017: An Interim Report."
As you probably are well aware, deregulation is the cornerstone of the President's pro-growth economic policies that has been implemented since he took office. And I view today's report as an extremely important report in that vein, in showing the economic impact of the deregulatory -- those deregulatory actions.
It contains both new work on the regulations that CEA has not analyzed to date, as well as some discussion of past reports we've issued on deregulatory efforts in the past two years.
I'm going to turn it over to Casey Mulligan, our Chief Economist, who will go through, sort of, the main contents of the report. Casey.
MR. MULLIGAN: Morning. Since January 2017, the Trump administration has made a historic effort to reduce costly regulation while protecting workers, and public health, safety, and the environment.
Deregulation has been a massive effort. There's been hundreds of deregulatory actions already in this administration. So we have a challenge: How do you summarize all of that? It reminds us of the vastness of the Grand Canyon. How can anyone fully appreciate it when there are so many perspectives?
But it is possible. And in a two-year effort here at the CEA, we've utilized the toolboxes, from statistics, from economic theory, and from the economic literatures studying the various industries.
We sampled the 20 economic regulations that got the most attention from the public, either through Congress or through the comment process. And then we then did a detailed study of each of those 20 rules and the industries to which they applied. So what we're going to talk about today is the sum total of those 20.
CEA estimates that after 5 to 10 years, the new approach to federal regulation will have raised real incomes by $3,100 per household, per year. Twenty notable federal deregulatory actions alone will be saving American consumers and businesses about $220 billion per year after they go into full effect.
To put this in perspective, many of the most notable deregulatory efforts in American history, such as the deregulation of airlines and of trucking that began during the Carter administration, did not have such large aggregate effects even when measured as a share of national income, which was, of course, less during the Carter years. This new approach to regulation under the Trump administration not only reduces or eliminates costly regulations, but it also sharply reduces the rate at which costly new regulations are introduced.
The ongoing introduction of costly regulations had previously been subtracting an additional 0.2 percent per year from real incomes, thereby giving the false impression that the American economy was fundamentally incapable of anything better than slow growth. Now, new regulations are budgeted and kept to a minimum.
The Trump administration’s regulatory approach also significantly reduces consumer prices in a number of markets. To name a few, we have prescription drugs, health insurance, and telecommunications. And it also prevents price increases in other markets.
The Trump administration’s work to reduce healthcare costs means that consumers are already saving almost 10 percent on retail prescription drugs, which results in an increase of $32 billion per year in the purchasing power of the incomes of Americans.
Consumers are also saving money on Internet access: about $40 per subscriber thanks to the deregulatory actions of Congress and President Trump. Considering that most households have multiple Internet subscriptions, when applied to both wired and wireless, $40 per subscription becomes $15 billion per year in the aggregate.
Consumers are also saving money on health insurance, as we analyze in detail in the most recent Economic Report of the President.
The deregulatory efforts of the Trump administration have also removed mandates from employers, especially smaller businesses, and have removed burdens that would have eliminated many small bank lenders from the marketplace. These deregulatory actions are raising real incomes by increasing competition, productivity, and wages.
The benefits of this recent deregulation effort compare favorably with the most significant in American history. Take the deregulation of airlines and trucking that occurred four decades ago as major parts of a deregulation wave once described as “one of the most important experiments in economic policy of our time." Combined, the Carter-era deregulation of these two industries are estimated to have provided net aggregate benefits of about 0.5 percent of national income.
Although no two of the 20 recent actions we looked at have such a large benefit, at least according to our estimates, their combined net benefits expressed to be comparable to those earlier deregulations exceed 0.6 percent of national income.
Another notable deregulatory historical episode was the series of natural gas deregulation. But again, those net benefits are also estimated to be less than the net benefits of deregulation since 2017.
Another interesting thing to see here is that, measured in terms of economic impact, the Trump administration’s work with the 115th Congress was quite prolific. Sixteen separate pieces of legislation deregulated education, mining, retirement accounts, and more. These are expected to increase annual real incomes by more than $40 billion.
And we have the Tax Cuts and Jobs Act, which got in the regulatory arena with the individual mandate penalty. And setting that to zero saved Americans $28 billion per year.
The bill about banking, sometimes known as the Crapo bill, which President Trump signed into law in 2018, provides an additional $6 billion in savings to Americans every year.
And finally, this report also estimates the next benefits of -- the net benefits of deregulatory action. Some regulatory actions trade private goods for public goods, such as environmental quality. With public goods and other situations where private markets may fail, it is necessary to carefully consider both the benefits and the costs of regulatory actions to get any net benefits.
Even if the original regulatory action addressed a private market failure, a deregulatory action is still warranted when the regulatory cost savings outweigh the forgone regulatory benefits.
GDP and real income capture the value of private goods production, but they don't capture the value of public goods and other important non-pecuniary benefits. But we considered those additional benefits in this report, and when including them, we estimate that the deregulatory actions have a net benefit of more than $2,500 per household per year, compared with the previous trends of growing regulatory costs.
Thank you, and we welcome your questions.
Q Yeah, hi. This is Cheryl Bolen with Bloomberg Government. I am wondering, of the 20 deregulatory actions that you looked at, have those already been completed or do you anticipate completing them in the future?
MR. MULLIGAN: Most of those, they are final rules. Now, part of the rules involve, you know, phasing in different changes and so on. So it is kind of a yes-and-no answer. We have a table in the report that shows each rule, and there you could see, you know, some that are final.
For example, the 16 regulations with the Congressional Review Act, not all 16 are on our sample. But any of those were finalized right away when the President put his signature on.
MR. PHILIPSON: So, this is Tom Philipson. One area where we have seen deregulatory action is in the healthcare space, already, through guidance at FDA that increased a lot of generic entry into the pharmaceutical industry. And we have a previous report on that. And the price reductions induced by that increased competition is actually estimated from what the rule actually did, as opposed to predicted effects of rules going forward.
Q So, it's Josh Mitchell at WSJ. So, two questions. First of all, when you're talking about these price decreases, like, for example, the subscription -- the wireless subscriptions -- are you saying that like the actual money -- the actual cost is being reduced? Or is it that it's not increasing as much as it would have been?
And then, my second question is, are you looking at these 20, you know, deregulations outside of the broader context? Because I know there are some concerns among businesses that the tariffs, for example, are creating their won types of new regulations and new types of compliance efforts among businesses -- if they have to apply for exemptions, for example, for tariffs.
So, you know, if you're just taking a look at these 20 rules outside of the broader context, how much can we -- how much stock can we put into this if other types of regulations are going up?
MR. MULLIGAN: Thank you for your question, Josh. On the telecom, if you look at the first chart in the report, it shows the answer is "yes" and "yes" to both your perspectives. I mean, the price of Internet subscriptions went down sharply when the President put his signature on one of those rules. And, in fact, it was so sharp that even the Federal Reserve had commented at the time that it might be affecting the overall inflation numbers that they are targeting. So that's something that really did happen, and it was a sharp break downward.
Now, you asked about -- I opened by saying: Hey, there's hundreds of regulatory actions and deregulatory actions; how do we select? We select based on the ones that get the most attention from the public. By the way, most regulations get zero comments -- exactly zero comments -- from the public. And that's how we made our selection. In principle, regulations could have come in there if they were highly commented. In fact, the top 20, in terms of comments, were not any regulations; they were deregulations.
And certainly, as a matter of arithmetic, there are regulations that didn’t make our sample. There are also deregulations that didn’t make our sample. And we do report in the paper, OIRA -- the OMB Office of OIRA has some estimates of the sum total of the regulations that we didn’t look at it. They're not using the detailed methodology that we did. And the sign of that effect is: On the whole, it's deregulation in the stuff that we left out -- I mean, saving consumers, saving businesses on the whole. Not necessarily rule by rule.
Q Hello, this is (inaudible) with WATV TV. You stated that, with the 115th Congress, you had 16 separate legislations that was able to work together. What about the 116th Congress? Is this moving at all?
MR. MULLIGAN: The 116th Congress did not have any regulatory statutes that made our sample.
Q Hi, yeah, it's Alan Rappeport from the New York Times. Thanks for doing this. I just wanted to see if you could talk a little bit more about comparing the savings from the deregulatory efforts to the increased cost that CEA has found from the tariffs or the impact of the trade wars.
MR. MULLIGAN: We have our deregulation team here on this call. We don’t have the trade people here to discuss that. But thank you for your question.
MS. SLOBODIEN: Thank you.
END 11:19 A.M. EDT
