Deregulation Fever

Congressional Republicans, unlike the elephant that symbolizes their party, act as though they have short memories. A key example is their embrace of deregulation in the wake of two of the biggest regulatory screw-ups in generations: the 2008 financial meltdown and the BP Gulf disaster. Both of these events, by the reckoning of most, were disasters that could have been avoided if regulations had been properly maintained and applied.

Economic regulations that secure our long-term health and safety obviously make sense from a societal standpoint, protecting the public from abuses based on narrow, profit-related considerations. It is important to remember, however, that regulations can be defended from a purely economic standpoint as well. Evidence suggests, for example, that while regulatory policies may affect industry priorities, they do not harm job creation in a significant way. In many cases, compliance requirements actually encourage innovation and competitiveness. Think only of the fuel mileage standards legislated for the American automobile industry which had the effect of enhancing its competitive standing vis-a-vis Japanese auto makers.

But this is a message that Republican advocates do not want to hear. Since the 2010 GOP take-over of the House of Representatives, congressional deregulators have been conducting a war on the whole concept of regulations, egged on by industry lobbyists and large corporate donors. Thus, on the heels of their House victory, Darrell Issa wasted no time in directing his Committee on Oversight and Government Reform to explore ways of freeing businesses from the burden of rules. The committee sent out a missive asking those affected, especially major corporations and trade associations like the American Petroleum Institute, for a wish-list of their least favorite regulations to put to the axe. Its rallying cry was that regulations hurt the economy and prevent job-creation.

The problem for the Republicans, of course, is that the idea of having clean air and water, fuel-efficient cars, and fair banking practices is generally popular with the public. Conversely, the average citizen has no huge interest in maintaining Exxon’s and Morgan Stanley’s high profit margins. Realizing this, the deregulators have crafted a message with appeal for a broad middle class audience. In essence, they speak of relieving the regulatory burdens on small businesses. Since a large number of Americans engage in small business, or have friends and relatives who do, messages conveyed in their name are much more likely to be have the sympathetic ear of the public. In light of this, the small entrepreneur has become a ready symbol for the “job-creator” harrassed by the regulatory system.

There is thus a bogus quality to the whole deregulation campaign. In advancing their message, the Republicans essentially obscure the difference between small and big businesses and the role regulation plays in the activities of each. In sheer numbers, small business owners tend to be store keepers, restauranteurs, electricians, and the like who see regulations primarily as filling out forms and meeting petty requirements. As Mike Taibbi has noted, “they see regulation as an ADA inspector or a health inspector coming to bother them and ring them up with little fines here and there.” Darrell Issa would love to have the public think of regulating British Petroleum or Morgan Stanley as the same sort of thing, a nuisance that needs to be done away with so that the company simply can perform more efficiently.

The fact is, regulating the big fellas is different in both its nature and consequences. It is not so much a matter of niggling paperwork as a “law enforcement problem” affecting the basic welfare of the public. Failure to regulate adequately can lead to massive fraud or involve deep costs for society. Just speak to entrepreneurs on the Gulf coast or the millions who lost their houses during the mortgage scandal.

By and large, small business people understand the distinction. Counter to the impression that Rep. Issa would like us to have, they are not reflexively opposed to regulation when it involves safety and quality-of-life issues. A recent poll of small business owners (half of whom identified as Republican or leaning Republican) sponsored by the American Sustainable Business Council confirms this fact. It showed that 93% of those questioned believed that business can live with some regulation “if it is fair, manageable and reasonable.” 80% were for “product safety standards,” 80% for regulation of toxic materials, and 61 % for “moving the country towards energy efficiency and clean energy.”

In essence, the current crew of deregulators is blurring distinctions to sow confusion, using small business as a decoy to protect the bigger fish. Clearly their efforts to blow a hole in the regulatory system help the latter, not the former. It is a smart but cynical ploy that becomes persuasive only when both parties accept a Republican frame, which has been the case of late. Democrats need to understand that most Americans, including small business owners, support the idea of an economy that works for everybody and where reasonable regulation plays a central role.

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