Three Ways the Government Criminalizes Economic Activity

“Although many politicians say they support economic growth, the federal government goes out of its way to criminalize broad ranges of economic activity. It’s as simple as this: A person or a company wants to provide a good or a service, and Uncle Sam says no.”

Last week, Economics21 director Diana Furchtgott-Roth wrote these words in her column on six ways the government criminalizes economic activity. While her list is extensive, it is far from comprehensive. Here are three more ways Uncle Sam says no. 

Firms want to drill for oil and natural gas on federal lands, but cannot obtain the necessary permits to do so.

At the same time as the government is using scarce taxpayer dollars to subsidize green energy, it is actively standing in the way of oil and gas development. 

Even though U.S. oil and gas production has increased by about 25 percent since 2008, over that time federal acres leased for energy exploration have fallen 24 percent and the time taken to secure an energy exploration permit now stands at 194 days. The number of federal permits granted was 3,770 in 2013, a decrease of 43 percent from 2008.

These numbers show that the growth in American energy production is being driven by drilling on state and private lands, not on federal lands. In 2013, the federal government leased only 36 million federal acres. To put this in perspective, 131 million acres were leased in 1984. 

To get a better idea of how the federal government is slowing down the process, an August study by the U.S. Government Accountability Office found that applications to the Bureau of Land Management for drilling permits declined by 50 percent between 2007 and 2012. Additionally, the Bureau said in an internal memorandum that it has not been able to process applications within a month, as is required to do by law.

As oil and gas prices continue to fall, it is critical that the government opens up federal lands for energy exploration. This will help ensure America’s energy renaissance continues for years to come. 

Dodd-Frank rules harm homebuyers by restricting options and access to credit.

The Consumer Financial Protection Bureau’s residential mortgage rules, which took effect in January 2014, have imposed strict home financing standards for both lenders and borrowers. The results have had a chilling effect on the market. For example, Ben Bernanke told an audience that he was unable to refinance his mortgage and that the tightness of mortgage credit is “excessive.”

The CFPB created a category of loans known as “Qualified Mortgages” which are required to meet strict standards. These mortgages cannot offer what the government deems to be “risky features.” Several types of loans that serve district purposes are excluded from the market, including balloon loans, interest-only mortgages, negative authorization loans, and loan terms that are longer than 30 years.

Borrowers must also meet an ability-to-repay requirement.  The “ability-to-repay” rule requires lenders to make good faith efforts to ensure borrowers can afford their loans, and borrowers are entitled to sue lenders if they claim that lenders did not do an adequate job of vetting them.

Borrowers are not entitled to receive a Qualified Mortgage loan if their debt-to-income ratio will exceed 43 percent. For those starting off their careers in expensive cities, this standard is very difficult to meet, especially if the borrowers have college loans. If the previous chairman of the Federal Reserve cannot get a mortgage, there is little hope for young professionals.  

There rules will lead to higher costs, more litigation, and less available credit. They also shift the responsibility of taking out and paying back loans from borrowers to lenders. This loss of options will harm homebuyers, particularly young and low-income Americans.

The Food and Drug Administration makes it too time consuming and expensive for firms to bring new drugs to market. 

The Food and Drug Administration creates an environment which discourages the development of new drugs that can help Americans. Pharmaceutical companies know the immense costs associated with gaining FDA approval. It usually takes between 10 and 15 years to get FDA approval for a new drug. Terminally-ill patients do not have 10 years to wait for treatment. 

Even when life-saving drugs are available, the FDA sometimes decides to stop people from using them. In late 2013 through early 2014, a deadly strain of meningitis was spreading across campuses at Princeton University, University of California (Santa Barbara), and Drexel University. 

While the bacterial infection spread, the FDA held off approving the use of Bexsero, a vaccine approved for use in the European Union, Canada, and Australia. The FDA had previously admitted that Bexsero is safe. 

The FDA eventually granted some campuses approval to use Bexsero, but vaccines are most valuable before outbreaks—not months after people have become ill.

Most states require that college students receive vaccinations against other types of meningitis. It is surprising that state governments force people to be vaccinated against certain strains of a disease, while on the other hand the federal government legally prohibits individuals from vaccinating themselves against a particularly deadly form of the same disease. 

Economic freedom can be defined as the extent to which individuals can pursue economic activity without interference from government, as long as their actions do not violate the identical rights of others. A country’s respect for such economic freedom has a direct effect on investment, innovation, and prosperity. Whether people are working to find jobs, start businesses, or save for retirement, they are negatively affected by government’s prohibitions on free exchange. 

Jared Meyer is a policy analyst at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.

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