THE BLOG
01/15/2015 03:19 pm ET Updated Mar 17, 2015

Radical Deregulation Won't Bring Real Growth

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Throughout the 1920s, Congress was focused on slashing taxes on the wealthy and eliminating business regulations, arguing that a free market could govern itself and that a rising tide would lift all boats.

The results were devastating: Wall Street ran amuck, resulting in the 1929 stock market crash. Wealth became highly concentrated at the top, leaving everyday consumers with too few resources to fuel a meaningful post-crash recovery. Industrial pollution began accelerating, setting the stage for an era of smog and even flammable rivers.

Fast-forward 90 years, and you'll wonder: Why haven't we learned our lesson?

Today -- with majorities they've touted as their largest since the 1920s -- congressional Republicans are pushing the most aggressive deregulatory agenda in nearly a century. My colleagues in Congress should look to both history and to current affairs to learn a simple lesson: Smart regulation is not only necessary for society but can be good for growth.

This is something our constituents inherently understand -- with 70 percent of the general public supporting rules to protect our climate from greenhouse gases, including 56 percent of Republicans. They trust in the power of markets to deliver solutions when regulations properly incentivize reform.

House Republicans' headline bill for this week -- the deceivingly named Regulatory Accountability Act ("RAA") -- exemplifies the wrong-headed approach of the 1920s. The RAA (H.R. 185) would require that all laws implemented through federal regulations be implemented in the weakest and cheapest manner possible with maximum input from industry. The bill would decrease the effectiveness of our landmark environmental protections, create delays that are costly to both consumers and good corporate citizens, and derail many of our most dynamic domestic industries. This is to say nothing of the bill's awful impacts on workplace safety, financial protections, and consumer product safety.

The laissez-faire environmental standards of the 1920s remained largely in place for decades until people could no longer afford to avert their eyes. In 1969 -- the same year of the famous Cuyahoga River fire -- the Rouge River in my own hometown also caught fire. These fires and others in several major cities across the country were a direct consequence of the failure to regulate the use of freshwater systems as sewers, harbors, and dumps. While it's troubling that it took such a conspicuous fiery accident to generate action, Congress finally came to its senses and adopted a smart regulatory response -- the Clean Water Act -- in 1972. Two years later, we passed the bipartisan Safe Drinking Water Act. Both were signed by Republican Presidents.

But the decades of neglect and abuse could not be cleaned up overnight. Thirteen years after the Clean Water Act was passed, a young man died of a rare waterborne disease after falling in the Rouge River and ingesting a mouthful of water. Now, 30 years after his death the Rouge River Basin is in vastly better condition, but it's still recovering -- in spite of decades of work and hundreds of millions of dollars in cleanup costs.

H.R. 185 could erase those decades of environmental progress by forcing agencies and courts to defer to the environmental regulations found in nations like China -- where air pollution cuts life expectancy by five years in the north of the country and 16,000 dead pigs recently filled one Shanghai River. These environmental hazards have direct economic consequences -- easily measured in the responses of the two-thirds of wealthy Chinese who have left China or a planning to do so.

So much money, time, and effort could have been saved with regulations that preempt or quickly address environmental impacts. Unfortunately, too many people want to govern by crisis -- acting only when they are forced to by a catastrophe like a flaming river. This is of course a natural inclination -- we all from time to time refuse to do more than the bare minimum. The GOP's bill this week exemplifies this sort of short-sighted thinking, preferring a pound of cure to an ounce of prevention.

The US public is paying for regulatory inaction with their lives, their health, and ultimately their taxes when the consequences become so egregiously apparent that Congress finally acts. The GOP's 1920s-style deregulation, including bills like H.R. 185, threatens our economy by reducing businesses' expected consequences when they take shortcuts and shirk responsibilities, instead placing the burden on citizens who pay for cancer treatment, and waterway clean-up, and other costs that the polluters should have picked up.

The GOP deregulation agenda also places good corporate citizens at a competitive disadvantage to the greedy and unethical. Every time the good corporate players clean up their mess, source responsible raw materials, and refuse to pass the buck, they fall behind the companies that cut corners to maximize profits. Many of those good guys are eventually forced to play dirty too, or they go out of business.

H.R. 185 and the GOP's broader deregulatory agenda aren't pro-business -- they're pro-bad business. They reward antiquated business models and intransigent managers. As Harvard Business School management guru Michael Porter has demonstrated, US firms have shown again and again that they can and will respond with hard work and innovation when regulations offer them flexibility and a fair playing field. Consider how increases in Corporate Average Fuel Economy (CAFE) standards have empowered Motor City to develop cleaner manufacturing processes, build aluminum F-150s, and develop a $30,000 plug-in hybrid that can drive from Detroit to Lansing on a single gallon of gas. Crucially in a global marketplace, adopting energy-efficiency and consumer safety standards ahead of foreign competitors secures an important first-mover advantage. Any company that can make it in a free market isn't going out of business because they -- and their competitors -- have to reduce ozone emissions or prevent fracking fluids from entering aquifers.

Smart environmental regulations are both good ethics and good economics.

The GOP deregulation agenda is about shifting the burden of responsibility from businesses to taxpayers. It's about shamefully low expectations for US industry. In short, it's about a return to the 1920s economic model that yielded unprecedented inequality, mass pollution, and the worst financial crisis of the 20th century.

H.R. 185 is just the beginning. In the months ahead, congressional Republicans will continue to build on their recent actions to approve the Keystone Pipeline (the perfect economic strategy for an aspiring Russian-style Petro-State) and to deregulate Wall Street derivatives (the recipe for an automatic taxpayer bailout for the riskiest gambling). Let's stand up for the lessons of history and defend the prudent role of government.