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Deregulation puts consumers at risk

Conservative candidates tout deregulation as desirable: Fewer burdens on businesses will foster growth and create jobs, whereas federal and state regulations are unnecessary impediments that put people out of work for no reason. The target audience is often small business owners. Has this myth been examined by the party?

Recent government data on unemployment during the recession suggests that it holds some truth, but not nearly as much as Republicans claim. CNN reported that in the first half of 2011, only 2,085 unemployed people cited government regulation as the culprit. Over 55,000 lost jobs were attributed to insufficient demand. The National Federation of Independent Business claimed that less than 20 percent of small businesses cited regulation as their most important problem. Once again, demand was key.

Some jobs are lost due to regulation, but it is not the devilish economy killer that Republicans say it is. Gary Burtless of the Brookings Institute agreed that little evidence supports that notion. Only a couple of the team of 16 economists from CNN Money seriously complained about regulations.

Enbridge CEO Pat Daniel, who works in North American energy transportation, praised new crude finds in Canada. Why? The country has the social consciousness, technical competence and regulatory infrastructure for responsible development. Daniel supports a new bill in the Senate that would place more regulations on the pipeline industry, including increasing inspections and creating new guidelines for infrastructure updating.

Tort reforms regulate problems after they have occurred, when regulations could have prevented those problems in the first place. That would decrease the need for litigation; so deregulation may be the problem that Republicans are trying to fix on a different front.”

Candidates also ignore ways that businesses are increasingly protected by tort reform bills (including Texas businesses: Perry crowns this as a fine achievement). States have been enacting these bills in order to reign in supposedly out-of-control litigation. They often place monetary limits on damages awards, joint and several liability, and venue choice, restrict the time frame consumers can bring lawsuits, make government agency approval sufficient to bar suit and mandate additional pretrial screenings. That means that someone who is hurt by a product has less time to initiate a lawsuit and faces a multiple gatekeepers. The producer faces much less threatening payments if the plaintiff is successful, and these rules make slim chances of success even slimmer.

Basically, regulating hurt consumers’ methods for recourse is fine, but regulating businesses’ ability to shirk responsibilities is a heinous act of anti-patriotism.

Arguments against regulation seem backwards, or at least lacking. Bart Chilton, a commissioner on the US Commodity Futures Trading Commission, told the New York Times that he is confident that new Dodd-Frank regulations will actually spur growth. Mandates create jobs in the financial sector, adding accountants and other internal controls. EPA emissions regulations or taxes would create incentives for investment and job creation in research and development.

Another unfortunate flip side is that tort reforms regulate problems after they have occurred, when regulations could have prevented those problems in the first place. That would decrease the need for litigation; so deregulation may be the problem that Republicans are trying to fix on a different front. Plus, what are a few thousand jobs when considering the good done by meat inspection, prevention of nuclear radiation accidents and adequate disclosure of information on products such as cigarettes and prescription drugs?

We cannot know precisely how regulation affects the economy, and politicians are doing a horrible job pretending that they can. Economic debates should focus less on which governor created the most jobs and more on realistic balancing of interests.

Rachel Farhi is a senior English literature and political science double major and may be reached at [email protected].

 

3 Comments

  • There is a lot to address in this article and I could go on for a really long time about this topic. I can't talk about everything, but there are a few points that need to made because maybe, if I'm lucky, some person will read this, change their mind, and support more pro-growth policies.

    First off, ZERO regulation is not the conservative position. Many regulations are unnecessary and harmful to the economy, we need to consider the costs of regulations, deregulation has often been a good thing (see: airline industry) we would benefit from more efficient and simpler regulation, federal agencies should not have unchecked power to write new rules and misinterpret old ones expand their power…but I don't know of many conservatives who are opposed to every single regulation.

    "…only 2,085 unemployed people cited government regulation as the culprit." This figure does not account for the jobs that could exist if we had a more reasonable regulatory framework. It does not measure how many businesses could have expanded how much more if the costs of regulatory compliance were lower, or how many new businesses could have started if there was less red tape. (Also, with the amount of power the govt. has over businesses, they have an incentive not to blame the government for lay-offs, which could cause underreporting) As one high-profile case, the NLRB stopped Boeing from building a plant in South Carolina because they had the audacity to build in a right-to-work state when union work stoppages in WA had cost the company billions. In addition to the jobs directly killed by the ruling, it sends a clear message to other businesses: Reconsider expanding, we might step in and stop you.

    "…less than 20 percent of small businesses cited regulation as their most important problem. Once again, demand was key." I've seen that NFIB survey. Out of ten possible choices (including Other), the 3 biggest problems for small businesses were 'Poor Sales' (31%), 'Taxes' (22%), and 'Govt. Regs. and Red Tape' (13%). Regulation is not some minor problem near the bottom of the list. Also, when you put them together, the two things conservatives focus on (taxes and regulation) outweigh even low demand as a problem for small business.

    "Enbridge CEO Pat Daniel…" An executive in energy transportation (read: most likely pipelines) supports a bill that would require more spending on pipelines, and this is some evidence of the inherent goodness of all the rules that politicians can cook up? Also, funny that you should mention Canada: They outrank us on the Economic Freedom Index, scoring an impressive 96.4 in the Business Freedom category. (Though we're not far behind. While overregulation is a problem here, we are thankfully much better off than most other countries. Also, its no coincidence that the more capitalistic, relatively free market nations are the most prosperous)

    tort reform: There is a clear difference between government fixing the way a branch of govt. (the courts) works and government imposing politicians' will on the marketplace.

    "Bart Chilton, a commissioner on the US Commodity Futures Trading Commission, told the New York Times that he is confident that new Dodd-Frank regulations will actually spur growth." So a government regulator likes some new government regulations? Forgive me if I'm not convinced. On Dodd-Frank and jobs: http://online.wsj.com/article/SB10001424053111904

    Finally, regulation often hurts consumers. For example, there's the removal of the chemical that makes dish and laundry detergent work (http://www.npr.org/2010/12/15/132072122/it-s-not-your-fault-your-dishes-are-still-dirty), one front in the War on Appliances that Actually Work. Then you have cases where deregulation helped consumers, such as airline deregulation which decreased fares (in real prices).

  • Attention all corporate contacts … blackball Rachel Farhi.
    Look Rachl Leah, some regulation is needed, but not to the point where business is driven overseas. I believe you see America as the oppressor, and especially corporations.
    Every person, and their salary or income adds to our economy. The more they make, the more they spend. Excessive regulation drives jobs overseas. It lowers our job pool, and thus less money is being spent.
    And because of the cloud or storm of regulation, businesses hoard money, because they fear growth, and to what Obama might do to them after they spend the money on hand. Everyone is hoarding money. I can buy a new car right now w/o a loan, I have so much lying around in the bank, but what's the use when you cannot plan for the future.
    Obama and his overwhelming presence in our lives, like Big Brother in 1984, is just to much. Businesses, and I, cannot plan for the future because of this living Constitution, and whatever directive he might issue on a whim, well it could wipe out what the company just did.
    Leftist like Rachel Leah will just not get it until it turn to get out there, away from the safety of mum and dad in Meyerland.

  • Regulations? Are they, or are they not a tool utilized by the economically "entrenched" to ensure profits, growth, and sometimes existence by suppressing competition from small businesses? Stated differently– Are regulations merely tools of corporatism?

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