President Obama, in his State of the Union address Tuesday night, was right to focus on the challenges the United States faces as domestic companies try to compete with low-cost global competitors. But he was wrong to suggest that the United States can “win the future” by getting Washington more involved in innovation and education.

As the president conceded elsewhere, Washington is, in fact, a big part of the problem—with high corporate tax rates and excessive regulation.
Just a week earlier in a Wall Street Journal article, the president elaborated on this, rhetorically declaring a truce with business and laying out the administration’s strategy for moving “toward a 21st-century regulatory system.”
Mr. Obama said this new system would need to strike a balance between the innovativeness, job-creating capacity and robust growth produced by free markets and the responsibility of government to impose “common-sense rules” to protect the public. He called for a “government-wide review of . . . rules already on the books,” and said that “careful consideration” would be given to the costs and benefits of all pending regulations. But as Yogi Berra once said, “This is like deja vu all over again.”
Presidents Clinton and Reagan both signed executive orders requiring that proposed federal regulations be implemented only if their economic benefits exceeded the costs of complying with them. Reagan even established a branch within the Office of Management and Budget—the Office of Information and Regulatory Affairs (OIRA)—to make sure executive branch agencies complied. The executive orders by and large were ineffective.
In fact, the federal government has been expanding its control of the private economy since the 1890s, on the theory that vulnerable people must be protected from cradle to grave by an omniscient bureaucracy that knows what’s best for them. The growth in regulation typically has been justified by analyses, prepared by the regulatory bureaus themselves, which grossly overstate regulation’s benefits and understate its costs.
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