Republicans like me are always happy to wage war on the legion excesses of the federal regulatory state. There's no doubt that federal regulations -- literally millions of them -- overwhelm small business, dictate what individuals do in their own backyards, and hamper innovation. But for all the whining Republicans do about deregulation, few are willing to do much about it. Many of the "deregulatory" efforts made by the current Republican Congress -- like efforts to repeal the health care plan -- may make for good political theater but will never succeed so long as Democrats control the Senate and White House. That's why it's puzzling in the extreme that Republicans in Congress haven't flocked to support a simple deregulatory measure that would help the economy. The bill in question would reform laws governing credit union lending and inject hundreds of millions of dollars into the economy at no cost to taxpayers. It is just the sort of thing conservatives should be supporting in both houses of Congress.
The bill in question, the "Small Business Lending Enhancement Act," is proffered by Sen. Mark Udall (D-CO) along with 18 other Democrats and only three Republicans in the Senate. (Its House companion, proffered by Ed Royce (R-CA) has much more evenly bipartisan support.) In a few short sentences, the bill lifts the cap on the percentage of assets credit unions may lend to businesses from 12.5 percent to 27.5 percent. And this would do a lot of good for business. Credit unions, democratically run, member oriented financial cooperatives, often extend credit to groups having a difficult time getting it from banks and are right now sitting on millions of dollars they could lend to job creators if only Congress would repeal the regulations that stop them from doing it.
And there's no doubt that the regulations have real consequences. A study from Pepperdine University shows that nearly 60 percent of small business owners who applied for bank loans during a one year period got turned down. A recent study from the group Small Business Majority, likewise, shows that 90 percent of small businesses have credit access problems. Keeping dated regulations in place makes sure that the number won't go down soon. Repealing them should be a tenet of conservative get-government-out-of-the-way orthodoxy.
Of course, it isn't quite that simple. Banks already control about 94 percent of the depository institution marketplace and don't want more competition from credit unions. Moreover, opposition to credit unions provides a common cause that keeps small banks that compete directly with credit unions in the same trade organizations with big ones. Thus, big banks, small ones, and their trade organizations have managed to prevail over credit unions' efforts to get the cap lifted. The process creates jobs for lobbyists and preserves profits for banks, but it doesn't do much good for the country or the small businesses that everyone on both sides of the aisle claims to support.
All of this, of course, is nothing new. Interest groups with narrow, not-necessarily-ideological agendas have immense influence amongst both Republicans and Democrats. But most members of both parties still hew to certain core principles and getting government out of businesses' way has long been vital to the GOP. Letting Democrats lead on a deregulatory issue speaks poorly of the Republican Party. Republicans need to look for more creative ways to fight burdensome government regulations. They can -- and should -- start by looking at credit union lending.
A previous version of this post reflected that nine Democrats supported the "Small Business Lending Enhancement Act." That number has since increased to 18.
Kai
Of course, the opposite is true when a government requires something. When CA required driver's insurance across the board, insurance rates went up 20%. When Obama started the legislation to require healthcare, healthcare went up 20% across the board.