Deregulation: Another Failing God

During the Republican presidential primary, all of the candidates saw deregulation as a  primary way to get the economy moving. Herman Cain, for example, pleaded for government to get off the backs of banks, assuming that banks have backs. Deregulation, however, is a god that has failed and will continue to fail.

The U.S. Chamber of Commerce is leading the antiregulation campaign, designed to block new safeguards against corporate wrongdoing and rolling back environmental, health, financial and other regulatory protections.

Unfortunately, for the Democratic Party cause, President Obama is not well positioned to make the case against his Republican opponent, because he is deeply compliant in watering down or eliminating regulations.

In an op-ed published in the Wall Street Journal in January 2011, Obama warned about “burdens that have stifled innovation and have had a chilling effect on growth and jobs.” He further wrote that, “We are making it our mission to root out regulations that conflict, that are not worth the cost, or are just plain dumb.”

More recently, the Obama White House withdrew a proposed requirement  for a simple and inexpensive way for employers to track repetitive stress injuries. More importantly, Obama over-ruled his environmental science advisors and ordered the withdrawal of smog rules that would have complied with the Clean Air Act.

On the plus side, President Obama has made some good appointments to regulatory positions and he has increased enforcement budgets. Probably his best action for protection of the environment was to secure agreement on a significant increase in fuel efficiency standards, although these new standards don’t go into effect until 2025. Yet Obama’s regulatory record is far too compromised to pose a credible alternative to his Republican opponent, Mitt Romney.

Is excessive regulation the main reason that businesses are not hiring nor growing their business activity? In a survey done by the National Federation of Independent Businesses, small businesses rated “poor sales” as their biggest problem and governmental regulation ranked second.

Is it the cost of complying with governmental regulations that is a major reason businesses aren’t hiring workers? This doesn’t appear to be the case, as businesses are loaded with cash. The 500 companies that comprise the S and P Index have about $800 billion in cash and cash equivalents, the most ever, according to the research firm, Birriyi Associates. The rating firm, Moodys, says that the roughly 1,600 companies it monitors had $1.2 trillion in cash at the end of 2010. That’s 11 percent more than at the end of 2009.

The upshot of the above is that neither reducing regulations nor making major cuts in business taxes pose a solution to the employment problems in the United States. President Obama has bought into the deregulatory craze to a great extent and he is relying on tax cuts to businesses as an important incentive in his current jobs plans. President Obama’s positions on both regulation and tax cuts are not that much different from those of Mitt Romney for that to be a reason for voters to choose him.

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