Donald Trump says he wants to make America great again and we finally know what year represents the “great” he wants to go back go: 1960. Last week, he cut literal red tape on a display showing the number of pages of federal regulations today compared to those in 1960 and pledged to return us to those happy days of four short stacks of pages versus the towering piles that govern us in 2017.
I was a lawyer in the pro-regulatory Environmental Protection Agency of the Carter administration and in the “regulatory relief” Office of Management and Budget in the Reagan administration. I arrived at EPA just as massive new legislation directed the agency to issue dozens of new regulations. And then I went to OMB, working under then Vice President George H.W. Bush, who chaired the Presidential Commission on Regulatory Relief. I have a good sense of the scope of domestic regulatory programs and what they can and cannot do.
President Trump’s announcement is ignorant and meaningless. It is also a #fakenews distraction and distortion that undermines confidence in the integrity of the federal government.
Basically, there are three kinds of regulations:
- The first category is health, safety, and fairness rules. Those are regulations that keep rat droppings out of food, make sure that medication is safe and effective, keep our air breathable and our water drinkable, and prohibit discrimination. EPA’s authority was vastly expanded in the 1970’s when the air and water were posing severe risks to public health. A few blocks from the EPA’s headquarters, the Potomac River was dubbed “a national disgrace” by President Lyndon Johnson because it was filled with sewage, toxic chemicals, and rotting fish. There were no air quality standards in the 1960’s and toxic smog was visible in big cities. Regulations sharply reduced illness, injuries and deaths from pollution, auto accidents, consumer products, and workplaces. Disclosure requirements make companies give investors and consumers the information they need to make good choices, from energy efficiency of appliances to whether corporate board members have conflicts of interest. Back in the era President Trump wants to return to, 1960, it was legal to discriminate in employment, restaurants, hotels, credit cards, and educational programs on the basis of race and gender. There were no protections for the disabled to ensure accessibility to schools and public buildings. Regulations made a difference. It is generally understood that what has made the American capital markets the most robust and wealth-generating in the world is the stringent transparency and accountability rules imposed after the 1929 stock market crash. The original rules we overseen by Joseph Kennedy (father of President Kennedy), a Wall Streeter whose appointment by Franklin Roosevelt was criticized because he was thought to be too much of an insider. “Set a thief to catch a thief,” FDR responded. The stock market bounced back after the Enron/WorldCom/MCI frauds of 2001 and tripled after the financial meltdown of 2008 in large part because tough new rules restored the confidence of investors around the world. Those rules were not in place earlier only because government warnings by Brooksley Born and other were ignored due to pressure from bankers Wall Street executives. Deaths by car accidents are much lower due to regulations. Deaths by guns are not because even the most simple safety regulations, having nothing to do with who can own guns or what guns they can own, have been thwarted by lobbyists for gun manufacturers. The CDC is not even allowed to research the issue.
- The second category of regulations keep the government from getting swindled. When I was at OMB I used to say that the government will spend a dollar to make sure it is not cheated out of a dime. That might be an exaggeration, but a lot of people try to steal money from the government by not paying taxes or getting benefits they are not entitled to. Many rules that annoy people are there to minimize this, based on past crimes.
- The third category is the one that frustrates me most: regulations inserted by corporations and hedge fund managers to limit their liability, impose barriers to entry, and otherwise thwart the reality test of the free market they pretend to be so excited about. It was heartbreaking back in the Reagan era to be visited by wealthy, powerful people who said, “I completely support the President’s deregulation effort, but there’s just this one thing I need.” It was never about promoting competition. It was always about special deals that constitute corporate welfare. Starbucks paid a lobbyist $60,000 to have making coffee classified as “manufacturing” to get a billion dollar tax break. Corporations and wealthy individuals are using and subverting the tactics public interest groups used to promote health, safety, the environment, civil rights, justice, and transparency, often to counteract those goals.
No bureaucrat wakes up in the morning and says, "Let's make some regulations!" Every single one is specifically required by legislation passed by Congress and, under current rules, can be overturned by Congress if they don't like it, as just happened with the binding arbitration rule and almost happened with the fiduciary rule, both crucial protections for consumers. Every one of them is published in draft and the agency has to read through and respond to all the comments that come in, ranging from dozens to millions. All regulations must pass a rigorous cost-benefit analysis and Paperwork Reduction Act test, too.
I’m a passionate supporter of the free market, an entrepreneur who has helped start four successful companies, and an advocate for shareholders as the foundation of capitalism. But there are some things the free market cannot do and some problems the market cannot fix. Only the government can resolve an issue if the obstacle to optimal solutions is collective choice, externalizing costs, or informational asymmetry. What that means, for example, is that the free market will never solve the problem of a manufacturer dumping toxic chemicals into the lake the community uses for water, fishing, and swimming or the air the community uses for breathing because there is no way, absent government involvement, to make the company pay for the damage it causes.
Are regulations frustrating? Complicated? Are there negative unintended consequences? Subject to abuse and distortions to extend turf or pay political favors? Sure. Government employees are human beings, too. Are the characters in “Parks and Recreation” any less efficient and principled than the characters in “The Office?”
As Ezra Klein explained by analogizing regulations to Van Halen’s M&M’s contract rider, these are extremely complicated problems and the regulations addressing them will not be perfect. But regulations can spur innovation, as with environmental rules that limit emissions but give companies flexibility in how to meet the goals instead of directing them on what kind of equipment to buy.
I can guarantee what will not help are dumb photo ops with piles of blank sheets of paper and a return to a time when there were no significant regulations to limit the pollution, discrimination, and abuses that made the America of 1960 far less great than it is today.