With President Trump's response to the role of red bureaucratic tape in hampering small business just in the news, we thought we'd take a historic look at how many pages of new rules and regulations the federal government spits out every year.

Or rather, in each year beginning with 1936, because that's all as far back as we could find the data! The chart below visualizes what we found for more than 80 years worth of federal regulations, and as you can see, it ends with a bang!

With the exception of the period of World War 2, we find that the federal government used to be pretty well contained when it came to imposing new rules and regulations on the American people - at least, all the way up to 1970, when it appears to have undergone a bureaucratic explosion!

Here, the creation of the Environmental Protection Agency appears to have been the impetus for unleashing unprecedented waves of new rules and regulations affecting nearly every aspect of American life all throughout the next decade.

That changed in the 1980s, as the number of new rules and regulations being issued each year was brought under control. In the 1990s though, the number of federal regulations began creeping steadily upward until 2000, after which, the number of pages of regulations published in the Federal Register each year began to grow much more slowly, which lasted through 2015.

And then, they went *BOOM* in the last year of Barack Obama's term in office, as the lame duck President sought to crank out as much of an enduring legacy as he could in his administration's waning days by publishing 96,994 pages worth of regulations in the Federal Register in 2016. Many of which were rushed into print to beat the clock after his preferred successor, Hillary Clinton, failed to win the 2016 Presidential election.

Since President Trump's Executive Order on Reducing Regulation and Controlling Regulatory Costs requires government agencies to remove two regulations for every one new regulation that they issue, and because those changes would also have to be documented, we wonder how many future pages of the Federal Register might be taken up by the corresponding reductions in the federal government's regulation of the American people.

Update: President Obama's 2016 regulation rush continued well into 2017, where the Federal Register expanded by an additional 7,600+ pages before he finally exited the Oval Office on 20 January 2017 and President Trump acted to shut off the regulatory spigot.

Data Sources

Crews, Wayne. Ten Thousand Commandments. Federal Register Pages, 1936-2011 [Google Docs Spreadsheet]. Accessed 24 July 2012.

Crews, Wayne. Ten Thousand Commandments. Federal Regulation - The Updates. Accessed 30 January 2017.

Previously on Political Calculations

Political Calculations. The Regulation of the American People. [Online Article]. 25 July 2012.

The U.S. stock market passed a major milestone in Week 4 of January 2017, but one that's just not as big a deal as the market's next major milestone, which isn't far away.

We'll discuss that a little bit more after reviewing the rest of the week's news. For now, we find that the S&P 500 continued to behave as expected during the fourth week of January 2017.

Let's get to the more significant market-driving headlines for the week that was.

Monday, 23 January 2017

• Fed's Lacker favors faster rate hike path to curb inflation
• Oil slips as U.S. drilling recovery offsets OPEC-led cuts
• Trump signs order withdrawing U.S. from Trans-Pacific trade deal
• Good example of what we meant when we mentioned "noise out of Washington D.C." last week. President Trump's action came at approximately noon, which marked the bottom for the market during the day, after which stock prices went on to recover a little over half of its range for the day.
• Wall Street dips on Trump protectionism, Qualcomm drag

Tuesday, 24 January 2017

• Trump signs executive orders on manufacturing, infrastructure
• U.S. home sales drop as supply tumbles to 17-year low
• S&P 500, Nasdaq set records as tech, banks lead
• The S&P 500 is on course to do something it hasn’t in 52 years
• You have to love stories like this one, which come on the day before certain CNBC reporters' long-held wishes are finally granted!

Wednesday, 25 January 2017

• Oil edges down as traders weigh U.S. stock build, OPEC cuts
• U.S. home mortgage applications at highest since June: MBA
• Stocks up on reinvigorated Trump rally; Dow tops 20,000
• Factbox: Dow eclipses 20,000 - historical facts & figures

Thursday, 26 January 2017

• Oil up two percent on stock market, but U.S. supply caps gains
• Wall Street ends flat after 2-day run; Dow stays above 20,000

Friday, 27 January 2017

• Fed to stop mortgage reinvestments in 2018: Morgan Stanley
• If so, this will mark the real end of the Fed's third round of quantitative easing, which it has quietly kept going at low levels since the taper "officially" ended in the fourth quarter of 2014. The Fed has been using its proceeds from the loans that government entities Fannie Mae and Freddie Mac have been paying back since the financial crisis to continue funding its low volume purchases of Mortgage Backed Securities.
• Oil prices fall as U.S. drillers add rigs
• Wall Street slips after soft GDP data, earnings

Elsewhere, Barry Ritholtz summarized the week's positives and negatives for the U.S. economy and markets.

Looking forward again, the next big psychological threshold for the market is more meaningful than Dow 20,000 - it's S&P 2300!

Today, the S&P 500 rules. And that’s why a record high close above 2300 (it briefly crossed that milestone intraday on Thursday before closing a little more than 5 points shy Friday) carries more weight than the headline-grabbing Dow 20,000.

“The S&P 500,” says Bill Hornbarger, chief investment strategist at Moneta Group, “has surpassed the Dow in terms of its importance. The simple reason is that it is broader and more representative of the domestic economy.”

The Dow, for example, only has six tech stocks, and mainly old-tech names like Microsoft, Intel and IBM, versus more than five dozen tech stocks in the S&P 500. The Dow doesn’t have online-advertising giant Alphabet (the parent of Google) or social media giant Facebook or online-retail powerhouse Amazon.com. Nor does the blue-chip Dow have any exposure to the utilities or real estate sectors, or regional banks like Cincinnati-based Fifth Third Bank or oil services-related firms like Schlumberger.

Money flows show the S&P 500's supremacy. Currently, $2.1 trillion is invested in “passively managed” index mutual funds and exchanged traded funds that mimic the S&P 500, vs. only $35.6 billion invested in these types of funds that track the Dow, according to S&P Dow Jones Indices.

Sure, we could spend time forecasting where the Dow will go next, but it just isn't as meaningful an exercise as it is for the S&P 500!

Which established big media outfits do a good job in producing high quality news reporting? And where do they really stand on the political spectrum?

There's a viral chart that's been floating around for nearly a month now that claims to answer both questions, but it's not really doing a good job in capturing which news organizations are good and where they objectively sit on the political spectrum.

Fortunately, there's a better version out there. Credit for tweaking the original version to produce the following chart belongs to Adrian Sjoberg, which we're stealing directly from Doc Palmer!

Long time readers will recognize that when we link to or quote news stories, we tend to do so from the organizations in the top-oval shown on the chart, particularly those that fall within the range from "Skews liberal" on the left to "Skews conservative" on the right.

But then, that's almost exactly what you should expect us to do!

Two good sources of news and analysis that missed the cut include Maclean's (skews conservative) and Wired (skews liberal).

We also like to pay attention to a handful of up-and-comers for in-depth news coverage that didn't make the chart, so we also recommend RealClearInvestigations (bias TBD, since it's brand new), The Intercept (skews liberal) and ProPublica (skews liberal).

Once upon a time, we came up with a empirical relationship between the size of the national debt, the nation's gross domestic product and the nation's population that seems to have some explanatory power for how high the maximum income tax rate in the U.S. is set.

By request, we're revisiting that relationship with the best estimates we have for each of these things for 2016, which we've plugged into the our tool that does the math.

Given the size of the national debt, the nation's GDP and the population, our tool would predict that modern U.S. politicians would set the maximum income tax rate in the U.S. to be about 45%. (If you're accessing this article on a site that republishes our RSS news feed, you may want to click here to access a working version of this tool on our site).

In reality, the maximum federal income tax rate that applies in the United States today is currently 43.8%. This is the income tax rate that self-employed Americans pay if their adjusted gross income exceeds $415,050 for single income tax filers, or $466,950 for married income tax filers.

The way to get to that figure is to add up the following maximum tax rates:

• 39.6% regular income tax rate
• 2.9% Medicare payroll income tax, which goes to sustain Medicare's trust funds (if you have an employer, they pay half this tax, where you pay the other half through your paycheck).
  
• 0.9% Additional Medicare Tax, which was passed as part of Obamacare, but doesn't go to sustain Medicare's trust fund (instead, it feeds straight into the U.S. Treasury's general fund, where it can be spent on anything the government wants).

In 2017, the payroll tax for Social Security isn't imposed on income earned through wages or salaries above $127,200, so its tax rate of 12.4% for the self-employed (or 6.2% each for employer and employee) doesn't add to their maximum income tax rate for higher incomes. The highest income earners don't get a break however, because the U.S. government more than makes up the difference by imposing higher regular income tax rates on these income earners that kick in at levels above Social Security's cap.

The following chart illustrates the political equilibrium that U.S. politicians have generally followed since the income tax was enabled to go into effect by the 16th Amendment to the U.S. Constitution in 1913.

The key thresholds to which to pay attention are the blue-dashed upper limit, which represents the U.S. government gouging American taxpayers so badly that they were forced to back off imposing such high tax rates, and the red-dashed lower limit, which generally represents the equilibrium level at which modern politicians have set the maximum income tax rate over the last 30 years. Too far above the lower limit, recent politicians have acted to cut income tax rates. Too far below the lower limit, politicians have sought to impose higher income taxes to compensate for their having increased the national debt too much to be absorbed by the growth of the economy and the population.

For President Trump, who has indicated a desire to cut tax rates, this tool suggest that he can do so provided that the burden of the national debt declines, which would take significant cuts in planned spending growth, robust growth in the U.S. economy, and also an increase in the size of the population (ideally of working-age individuals), each of which would reduce the nation's debt burden per capita.

The trick for U.S. politicians is figuring out how to achieve each of these things.

A Giffen good is a product that defies one the basic laws of economics. More specifically, these goods defy the Law of Demand:

The law of demand is a microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa. The law of demand says that the higher the price, the lower the quantity demanded, because consumers’ opportunity cost to acquire that good or service increases, and they must make more tradeoffs to acquire the more expensive product.

Named after Robert Giffen, a Giffen good directly contradicts this basic economic principal, so that when the price of a good increases, the quantity demanded increases as well. Here is the definition of a Giffen good from Investopedia:

A Giffen good is a good for which demand increases as the price increases, and falls when the price decreases. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand which states that quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve. A Giffen good is typically an inferior product that does not have easily available substitutes, as a result of which the income effect dominates the substitution effect. Giffen goods are quite rare, to the extent that there is some debate about their actual existence.

We've previously argued that debt qualifies as a Giffen good under certain circumstances, which we're bringing up today because of a news story about U.S. home sales that appeared just before the holidays, which provided information on how both mortgage rates and housing sales have changed since the U.S. elections on 8 November 2016 (emphasis ours):

U.S. home resales unexpectedly rose in November, reaching their highest level in nearly 10 years, likely as buyers rushed into the market to lock in mortgage rates in anticipation of further increases in borrowing costs....

Existing home sales increased 0.7 percent to an annual rate of 5.61 million units last month, the highest sales pace since February 2007. October's sales pace was revised down to 5.57 million units from the previously reported 5.60 million units....

Since the election, the interest rate on a fixed 30-year mortgage has increased about 60 basis points to an average 4.16 percent, the highest level since October 2014, according to data from mortgage finance firm Freddie Mac.

Mortgage rates are expected to rise further after the Federal Reserve raised its benchmark overnight interest rate last week by 25 basis points to a range of 0.50 percent to 0.75 percent. The U.S. central bank forecast three rate hikes next year.

The prospect of higher mortgage rates could be pushing undecided buyers into the market.

For the sake of catching up with the rest of our previous argument, there was something of a natural experiment in 2011 that goes a step farther in suggesting that all debt is a Giffen good, and is not just limited to the examples of mortgage debt that we've focused upon.

Monday August 8 2011 witnessed a truly impressive financial spectacle—a natural experiment of the kind we see only once a century or so. The S&P downgraded US debt, and the price of US Treasuries skyrocketed....

While it all seems confusing, I would argue there’s a very simple explanation, and that people are behaving rationally. Money (and by extension, US debt), is a Giffen good. This is an argument I made to Scott Sumner in 2009 here and in emails. Recently Eric Falkenstein made it here. Simply, as the price goes up, consumption increases. This is because the income effect (people getting poorer) dominates the substitution effect (people want to shift to other assets). This is a pure microeconomic explanation of the drop in Treasury rates after the downgrade, and unlike the macroeconomic explanation does not require a circular argument with uncertain directionality in the causation.

As you can see, the conditions that make debt into a Giffen good are somewhat unique, so we wouldn't expect the current and unexpectedly strong state of affairs in the U.S. housing market to continue for long before going back to act more in accordance with the laws of supply and demand. If you're in real estate, enjoy it while you can!

For the last three years, the U.S. government and the governments of the 50 states and the District of Columbia have been running an experiment on live human beings.

That experiment seeks to answer the question of whether providing "free" health insurance coverage through the Medicaid welfare program to low-income earning Americans whose household incomes fall between 100% and 138% of the poverty threshold would improve their health through increased access to health care resources enough to save lives.

The 50 states and the District of Columbia were divided through a political process into two groups in 2014, when the Patient Protection and Affordable Care Act (aka "Obamacare") went into effect. In that year, the governments of 26 states and the District of Columbia had acted to expand the eligibility of these low-income earning American households for their respective Medicaid programs, while the other 24 states did not. In the 24 states that did not act to expand their state's Medicaid welfare program, low income earning households were instead eligible for highly-subsidized health insurance coverage through their state's Affordable Care Act marketplace (or ACA exchange), which they would be able to opt out of if they chose instead to pay the ACA's "shared responsibility" tax.

Divided into these two groups, between Medicaid-expansion states and non-expansion states, we should be able to tell whether the expansion of eligibility for the Medicaid welfare program for low-income earning but non-impoverished American households saved lives through the National Center for Vital Statistics' data on each state's age-adjusted mortality rates given that this portion of income earners represents a significant share of each state's population.

In theory, because the expansion of eligibility of the Medicaid welfare program should improve the access of these low-income earning households to costly health care services by eliminating the need of these households to pay for their medical treatment, we should expect to see a noticeable reduction in the mortality rates for all causes in each Medicaid-expansion state that would not be evident in the non-Medicaid expansion states.

But to do the job properly, we need to take into account any trends in age-adjusted mortality rates that existed in the period prior to the implementation of Obamacare in 2014, which establishes a counterfactual for what we should expect mortality rates from all causes to be in each state in the absence of any expansion in Medicaid eligibility.

We did that for each state and the District of Columbia for the five full years from 2009 through 2013 using linear regression, which we used to project what each state's age-adjusted mortality rate would be in 2014. We can then compare those projected results with the actual age-adjusted mortality rates that was recorded for each state in 2014, which is the most recent year for which the NCHS has published final data for deaths at this time. All that data is presented in the following table (if you're accessing this article on a site that republishes our RSS news feed. and the table hasn't been rendered properly, you can see the original here).

Collectively, from 2009 through 2013, the 26 states and the District of Columbia that acted to expand their Medicaid welfare program eligibility in 2014 averaged annual declines in their age-adjusted mortality rates of 4.0 deaths per 100,000 population. Meanwhile, the 24 states that did not expand their Medicaid welfare program eligibility in 2014 saw an average annual decline in their mortality rates of 1.3 deaths per 100,000 population in the years from 2009 through 2013.

The chart below visualizes the age-adjusted mortality rate projected for each state in 2014 along with the actual mortality rate that was reported in 2014.

Collectively, there was very little difference in the average projected change in the age-adjusted mortality rate and the average actual mortality rate for the 26 states and the District of Columbia that chose to expand their Medicaid programs in 2014. The average actual rate was 0.2 deaths per 100,000 population higher than the projected decline based on the existing trend from 2009-2013, which is not significantly significant. If expanding the eligibility for Medicaid in these states produced life-saving benefits, you cannot tell the difference with this data.

The age-adjusted mortality rates in the 24 states that didn't expand their Medicaid welfare programs declined by 4.1 deaths per 100,000 population compared to what would have been expected in 2014 based on the preceding trends in these states from 2009 through 2013. We suspect that also is noise in the data.

These are interesting results, which if repeated again in both 2015 and 2016, would confirm that the expansion of Medicaid did very little to produce noticeable life-saving benefits for the Americans who were enrolled in it (one potential explanation for that result is presented here). With the single year of data we do have, it would appear that the Affordable Care Act's expansion of Medicaid provided very little benefit to the portion of the U.S. population that earns the lowest incomes outside of those falling below the poverty line in the jurisdictions where the expansion was implemented.

References

U.S. Centers for Disease Control. National Vital Statistics Reports. Volume 60. Number 3. Deaths: Final Data for 2009. Table 19. Number of deaths, death rates, and age-adjusted death rates for major causes of death: United States, each state, Puerto Rico, Guam, American Samoa, and Northern Marianas, 2009. [PDF Document]. 8 May 2013.

U.S. Centers for Disease Control. National Vital Statistics Reports. Volume 61. Number 4. Deaths: Final Data for 2010. Table 19. Number of deaths, death rates, and age-adjusted death rates for major causes of death: United States, each state, Puerto Rico, Guam, American Samoa, and Northern Marianas, 2010. [PDF Document]. 8 May 2013.

U.S. Centers for Disease Control. National Vital Statistics Reports. Volume 63. Number 3. Deaths: Final Data for 2011. Table 19. Number of deaths, death rates, and age-adjusted death rates for major causes of death: United States, each state, Puerto Rico, Guam, American Samoa, and Northern Marianas, 2011. [PDF Document]. 27 July 2015.

U.S. Centers for Disease Control. National Vital Statistics Reports. Volume 63. Number 9. Deaths: Final Data for 2012. Table 19. Number of deaths, death rates, and age-adjusted death rates for major causes of death: United States, each state, Puerto Rico, Guam, American Samoa, and Northern Marianas, 2012. [PDF Document]. 31 August 2015.

U.S. Centers for Disease Control. National Vital Statistics Reports. Volume 64. Number 2. Deaths: Final Data for 2013. Table 19. Number of deaths, death rates, and age-adjusted death rates for major causes of death: United States, each state, Puerto Rico, Guam, American Samoa, and Northern Marianas, 2013. [PDF Document]. 16 February 2016.

U.S. Centers for Disease Control. National Vital Statistics Reports. Volume 65. Number 4. Deaths: Final Data for 2014. Table 19. Number of deaths, death rates, and age-adjusted death rates for major causes of death: United States, each state, Puerto Rico, Guam, American Samoa, and Northern Marianas, 2014. [PDF Document]. 30 June 2016.

HealthPocket. Expansion of Medicaid in 2014. [Online Document]. 10 July 2014. Accessed 18 January 2017.

U.S. Census Bureau. Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2016 (NST-EST2016-01). [Excel Spreadsheet]. 7 December 2016. Accessed 18 January 2017.

Blase, Brian. New Gruber Study Raises Major Questions About Obamacare's Medicaid Expansion. Forbes. [Online Article]. 27 November 2016. Accessed 18 January 2017.