Far too often, we hear of new regulation, new taxes and new fees coming out of Congress. Too often these “new” ideas are simply ways to complicate or destroy the accumulation of wealth and creation of needed products and services. All of us should stand up to intrusion into our lives, as well as intrusion into business and the markets.
Senator Christopher Dodd (D-Connecticut) graced us all with his new financial reform bill. He took the point on which many concur, e.g. that “too big to fail” must end (interestingly excluding auto companies, while in typical democrat fashion, creating new expensive bureaucracies (Consumer Financial Protection Agency) and excluding Fannie/Freddie and other politically favored entities.
Conservatives should oppose Dodd’s overreach as they should have fought Sarbanes-Oxley legislation, but did not. That congressional overreaction has slowed US innovation and sent more business creation and employment off shore than is measurable.
Dr. Edwin Feulner, president of The Heritage Foundation, opined concerning another overstepping regulation. He spoke of the Sarbanes-Oxley accounting regulations (March 16, 2010),
“Before the law took effect, the SEC predicted it would cost American business about $1.2 billion to comply. “In fact, the total cost has been more like $35 billion of direct costs of compliance,” Rep. Tom Feeney, R-Fla., told a Heritage audience a few years ago. “It’s been almost 30 times what the estimated costs were.”
“Even one of the bill’s authors had to admit its shortcomings. “It was difficult to legislate responsibly in that type of hot-house atmosphere,” Rep. Michael Oxley told a group in London. “If I had another crack at it, I would have provided a bit more flexibility for small- and medium-sized companies.”
“While Sarbanes-Oxley increased costs to American companies and drove business overseas, it didn’t solve the problems with our financial markets. Now policymakers are poised to inject another dose of bad medicine.”
The new Dodd financial regulatory scheme will harm consumers and the economy by eliminating the innovations that create better, less expensive financial products.
Feulner wrote further, “Beyond expanding the bureaucracy, lawmakers also want to: 1) give the FDIC (or another agency) broad power to seize and close failing financial institutions, and 2) establish a government fund to “resolve the affairs” of firms it takes over.
This makes little sense. In effect, this would create a new and permanent TARP, making future bailouts more likely. Meanwhile, it would strip private businesses of the protections currently available in bankruptcy courts, leaving them at the mercy of Washington bureaucrats, who could order them to be shuttered.
As usual the Washington D.C. prescribed cure is worse than the disease.
The Health Care Reform bill currently up for vote before the House of Representatives, is also full of interference masked as protection. The bill has greater regulation and a flood of federal money. In Dr. Paul Krugman’s March 11th article, Health Reform Myths in which he defends Obamacare, he admit (if not in these words) that the current system is already rife with federal money and regulation even as prices and premiums continue rising. Krugman's article then calls for more of the same. At no point in the article does he connect the current problems with the current socialization of medicine nor explain how more of the same, compounded with new mandates, would help the situation. To make matters worse this bill has price controls in it.
Price controls are not new. They have been tried by States and Nations throughout history, with clear results. The result; (drum role please), everywhere and always: shortages and higher prices.
During the Energy Crises of the ‘70s, price controls led to gas lines, and when the controls were taken away, prices skyrocketed until the market adjusted and solved the problem. Price controls during the depression squashed competition and sent some to jail.
In California, in the late ’90s, price controls were attempted to address that fact that the Golden State had not produced adequate energy to provide for their growing population. Utility costs increased rapidly, plus the residents of our most populous State were graced with rolling Black Outs. The Democrat Governor, Gray Davis, blamed deregulation for the failure of his own bad policies.
Conservatives should make every effort to teach the truth about these failed regulatory experiments.
In a recent campaign speech Cherilyn Eagar, sought to differentiate herself from other Republican Candidates. She accomplished this by embracing the economic protectionism of Pat Buchanan. Eagar said that she was in favor of “fair trade” as opposed to “free trade.” Fair Trade is a term that many protectionists are eager to employ but it always means higher tariffs, which is when all is said and done, a tax increase. How has that worked out in the past? The Smoot Tariff’s of the early 1930’s is the single most cited cause of the Great Depression. The steel tariffs of 2000 meant to aid domestic steel production hurt many industries that were dependant on less expensive steel. So the attempt to save one industry damaged others.
The case for protectionism often cites Harley Davidson. Tariffs were placed on Japanese motor bikes to help Harley Davidson’s loss of market share. The protectionists hail this example as a success, but was it? One could just as easily make the case that the domestic bike manufacturer modernized assembly and outsourced parts manufacturing. The cheaper foreign made parts enabled Harley to streamline costs. There are many inconvenient truths surrounding that example.
Too many Conservatives too easily accept anti-corporate mentality. We hear of Big Tobacco, Big Pharma, Big Insurance, Big Oil and Big Corporations in general. The placing of the word ‘Big’ is supposed to trigger feeling of anger and exploitation (except when referencing “Big Government”). We aren’t supposed to trust corporations. Far too many people fall victim to this reflexive hatred of corporations. Phelim Mcaleer, is the director of a recent documentary, Not Evil Just Wrong, in which the merits of actions to combat “global warming” are disputed. At a preview for his upcoming film release, Mr. Mcaleer confronted the mentality of anti-corporate mentality. He said that while we say that we don’t trust ‘big business’ when it comes to our health or safety ‘big business’ is the only entity we trust. We trust them as the safe makers of the cars we drive, the planes we fly in, the manufacturer of the pills we take, the sound equipment we listen to, computers we use and on and on. Yet intrusions, limitations and punishments on “evil” corporations are too easily accepted by too many.
Intrusions in the market often yield poor results. Just as there is movement in the country to learn more about our founding principles, we should also study the history and real world results of various trade and regulatory policies both here and around the world. As we read the Constitution and other founding documents, we would be benefited by reading Milton Friedman, George Gilder, Steve Forbes, Thomas Sowell and other defenders and documenters of the success of market-principles. We should also read the history of early small government economic thinkers such as; Adam Smith, Thomas Jefferson who influenced the Presidencies of Grover Cleveland, Harding and Coolidge, and eventually Ronald Reagan.
Our economic system performs best when the footprint of Federal intrusion and protectionism is small and limited. Our wish for the smallest amount of governmental intrusion in our lives and wallets, should extend to others, and large and small associations of others. We call those associations, business.
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