Politics & Law

Why the Republican attack on ‘job-killing regulations’ is dumb

Robert Reich

Republicans aim to end all “job-killing regulations” — especially those that, according to House Speaker John Boehner, are “strangling” business with detailed requirements over health, safety, the environment, corporate governance and finance.

Here’s another instance of where the White House’s attempt to preempt Republican rhetoric (the President said last week his administration would root out all nonsensical and inefficient regulation) ends up legitimizing it — and reframing the public debate around an issue that’s hardly central to what ails America.

The reason we have continued sky-high unemployment has nothing to do with excessive regulation. There was no sudden outpouring of federal regulation in 2007 before the economy tanked and millions lost their jobs.

If anything, the economy unraveled because of too little regulation. Wall Street went on a binge, remember? The Street could get almost free money from the Fed (which had reduced interest rates to near zero) and do just about whatever it wanted with it. Thirty years of deregulation, culminating with the dismantling of Glass-Steagall and the abject failure of regulators at the Fed and the SEC to use the authority they still had, enabled the Street to make bundles of money and expose the rest of the economy to unprecedented levels of risk.

The Fed had slashed interest rates in the early 2000s, by the way, because the corporate looting scandals at Enron, Worldcom, Sunbeam, and other major corporations had sapped investor confidence. Those scandals themselves wouldn’t have happened had securities regulations been stronger and better enforced.

No one wants unnecessary regulation. And rules ought to be clear and simple. But let’s be real. Most of the complexity and verbiage that finds its way into the Code of Federal Regulations is the result of industry lawyers and lobbyists who exploit every potential ambiguity to avoid doing what lawmakers intend — thereby necessitating ever-more detailed and picayune rules to close the loopholes. It’s an endless cat-and-mouse game that runs from regulatory agencies through the courts and then back again. And it’s occurring right now, as regulations are being drawn up to put the healthcare and financial laws into effect.

There’s no necessary tradeoff between regulations and jobs. Regulations that are designed well — that tell industry what to achieve by a certain date but don’t dictate exactly how (such as fuel economy standards) — can generate innovation as companies compete to find the most efficient solutions. And innovations can lead to more jobs as they spawn new products and industries.

Even where there is a tradeoff — where regulations are costly and those costs result in fewer jobs — it still makes sense to opt for regulation when the public benefits exceed the costs to industry. We could have millions more jobs tomorrow if we eviscerated all health and safety regulations and allowed our air to turn yellow and our rivers and lakes to become fetid stinkholes. But that would be dumb.

“Job-killing regulations” is a silly phrase that substitutes for real thought. And it’s a distraction from the hard work of creating more jobs in America.

Cross-posted from Robert Reich’s blog.

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Comments to "Why the Republican attack on ‘job-killing regulations’ is dumb":
    • Anthony St. John '63

      Prof. Reich, I can’t believe how incredibly naïve you are. Even though you have experienced the worst that Washington has to offer, you still assume that you can reason with the republican leadership as if they actually care about We The People.

      As you say “the economy unraveled because of too little regulation,” but the republicans will never admit that because the special interests that control them always have been and always shall be the rest of the corporations with the same destructive cultural values as Enron, Worldcom and Sunbeam, cultural values that never change.

      You need to admit that the republican leadership shall continue loot and will never stop making saps out of us as long as the saps continue to watch and do nothing about stopping the republican special interests from sucking the blood out of our economy.

      You can start by understanding that the GOP will continue to enable looting and sapping We The People until our economy collapses, then they’ll just move their wealth wherever they will be allowed to continue to loot and sap.

      [Report abuse]

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