By Robert Pembroke
Mark Twain once said, “Figures don’t lie, but liars do figures.” I am sorry, folks, but after my four score and three years, I no longer respect politicians. At the beginning of my professional career, I not only respected politicians, I gave money to them.
I have worked with many politicians. I have sold products and services to many politicians. I have testified in front of Congress. And before the Vietnam War, I respected politicians. At the start of the war I was a hawk. Then after the killing of four unarmed, demonstrating students by soldiers from the Ohio National Guard in 1970 at Kent State University, I became a dove and lost all respect for our federally elected leaders.
A cost-benefit analysis is a way a manager can determine if a capital investment is worthwhile. Can it save money? Can it save time? Can it improve the quality of the service or product? If the investment can’t do one of these three things, then the investment is unwise.
Our company sold imaging products such as copiers, printers and faxes to businesses and institutions. I did not feel comfortable when presenting a proposal to a decision-maker if the cost-benefit analysis did not have a 2 1/2-year payout. If the product sold for $10,000, unless I could save the prospect $4,000 a year, the chances of getting an order were slim.
A cost-benefit analysis of any new regulation, ordinance, law or executive order protects us as taxpayers. But here is the kicker: A cost-benefit analysis can be influenced one way or the other if you use different parameters in the model. An excellent example is the difference in the way the Obama Environmental Protection Agency and the Trump EPA analyzed a regulation on carbon emissions.
Before the Obama administration, cost-benefit analysis only contained demonstrable domestic benefits. But then Obama’s EPA changed the rules and introduced “global social costs” and “global social benefits.” Obama’s EPA calculated that its new carbon emissions regulation would save the American taxpayer $43 billion. Trump’s EPA — by changing the word “global” to “domestic” — said regulation would cost the American taxpayer $13 billion. That’s a $56 billion swing with just the stroke of a pen.
Carbon emission standards were created to influence automobile manufactures and the driving public to reduce the use of fossil fuels. If you can demonstrate to me how an American regulation will influence a citizen of Belarus to reduce the use of his truck or buy a new truck that gets more miles per gallon, you have got my vote.
Another regulatory faux pas that strikes at the heart of small business is the set of onerous rules when it comes to lending. The ability to get a loan is the lifeblood of small-business owners. Most banks will not issue a SBA loan to startups. They are then forced to go to other sources for their capital needs. Here’s the problem I have with this:
What gives a politician or a regulator the right to tell a bank who they can loan to? This should be a business decision made by the bank. Our recent ruinous recession can be laid at the doorsteps of those politicians who decided that everyone needs to own a house. Mandating lower equity requirements when purchasing a house cost Americans trillions of dollars and this was done with just the stroke of a pen.
“Barack Obama’s Environmental Protection Agency jammed through an average of 565 new rules each year during the Obama presidency,” said The Wall Street Journal in a story that ran in June called “Cost-Benefit Reform at the EPA.” Not only do these irresponsible acts reduce the worldwide competitiveness of American businesses, they reduce the quality of all of our fellow citizens.
Thankfully the Trump administration is rolling back regulations. The U.S. has been over-regulated for eons and it is encouraging to see Trump’s team whack them down. Wouldn’t it be neat if Utah’s elected officials did the same thing?
Robert Pembroke is the former chairman and CEO of Pembroke’s Inc. in Salt Lake City.