6 Ways the Government Criminalizes Economic Activity

By Diana Furchtgott-Roth

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.

Here are six examples, and there are many others. As well as tax and entitlement reform, and passing an immigration bill, the 114th Congress could simply let people work.

Federal law criminalizes exports of oil and natural gas

North America’s oil and natural gas production is surging, but it is still unlawful to export it. On Tuesday, Rep. Joe Barton, a Republican from Texas, introduced a bill to allow exports of oil, and the bill will be considered at a House Energy and Commerce Committee hearing on Thursday. In addition, the United States could benefit from exporting some of its natural gas production. Companies in North Dakota waste about 33% of total gas production by flaring, or burning, it.

Exports stimulate the economy and result in more jobs because foreign customers buy U.S. products. Exports also lead to more innovation. With increased oil and natural gas exports, more people would be employed in its production and transportation. Over 1.1 million people are already directly employed and about 9 million are indirectly employed in the oil and gas sector, the vast majority from small and mid-size companies.

The export bans were set up in the 1970s, at a time when America was highly dependent on OPEC for energy. Now we have overtaken Saudi Arabia in oil production, and Congress should update our laws to reflect the new reality.

Financial Stability Oversight Council criminalizes any institution

The Financial Stability Oversight Council, set up under Dodd-Frank, has the power to designate any firm, either financial or nonfinancial, as having significant systemic risk to the economy. Then that firm comes under its oversight. FSOC is chaired by the Treasury secretary and includes the heads of nine federal financial regulatory agencies. If the FSOC says a firm poses a risk to the economy, the government can treat the firm’s shareholders and creditors as they choose, trumping existing law.

Institutions related to the financial sector live in fear of FSOC. Currently, FSOC is considering whether money market funds pose a systemically significant risk to the economy, and what regulations it should place on these funds. FSOC has the power to criminalize just about any firm. Proceedings are held behind closed doors, and there is practically no appeals process.

Minimum-wage laws criminalize low-skill work

Imagine being forbidden to work. That is the case for people with skills under $8.25 an hour. The federal hourly minimum wage is $7.25, and additional costs, such as Social Security, unemployment insurance, and workers compensation bring the cost of employment closer to $8.25. The minimum wage is one reason why the teen unemployment rate is 18%, the youth (20 to 24) unemployment rate is 11%, and the African-American teen unemployment rate is 28%. Those groups have markedly lower skills than average.

University of California (Irvine) economist David Neumark, and University of California (San Diego) economists Jeffrey Clemens and Michael Wither have shown in separate studies that young workers with low skills are harmed the most by the minimum wage. That is not surprising, given that half of minimum-wage earners are between the ages of 16 and 24. When the minimum wage is set above someone’s skill level, that person is left on the sidelines. If people cannot get their first job, how can they get their second or third? People who take minimum-wage jobs gain entry to the professional world. Once they are in, they can keep rising.

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