Let’s talk about deregulation as an economic strategy…

It has begun. Steve Bannon, the president’s closest advisor and noted white nationalist radical, recently addressed the crowd at CPAC, crowing about how his goal, the “dismantling of the administrative state”, was now within reach.  And to be sure, the cabinet appointments of this administration are perverse:  people with the stated goal of  dismantling the regulatory agencies that are supposed to act as watchdogs for the public interest are now the heads of those very agencies.  Scott Pruitt, a lawyer who, as a state attorney general, filed multiple lawsuits against the EPA challenging its authority is now the head of the agency, and a known climate change denier to boot.  Rick Perry, former Dancing With the Stars contestant, now heads the Department of Energy, an agency he once wanted to abolish (although he famously couldn’t remember its name in the primary debate performance which doomed his attempted 2012 presidential run).  And the Department of Education….well, let’s not even get into Betsy DeVos.

 

Truth be told, none of this is anything new.  Daniel Troy, who was Chief Counsel to the FDA under George W. Bush, was a pharma industry attorney, who did much to fast-track drugs to market without adequate testing or labeling, championed the “federal preemption” doctrine as a bar to lawsuits for people injured or killed due to dangerous drugs, and pretty much re-wrote drug labeling rules to benefit the pharma industry.  So putting foes of an agency in charge of the agencies they oppose is a proud Republican tradition, even if it means that the public interest is getting screwed over in favor of the private interests of favored client industries (i.e., pharmaceuticals, insurance, banks, etc.).   Even Reagan did it, and his head of the EPA (Neil Gorsuch’s mom) was every bit as perverse a choice as Scott Pruitt is today.

The Trump administration, however, seems to be taking it to a new level.  His choices seem to range between nefarious to grossly incompetent (Ben Carson, I’m talking to you).  But why?  Why do Republicans hate regulations and regulatory agencies so?

The answer to that question goes back to the days of the robber barons. Back in the late 19th and early 20th centuries, there was pretty much no such thing as regulation as we now know it.  “Freedom of contract” won the day, meaning that courts let powerful economic interests get over on the little guy left and right.  Bad labor conditions?  Too bad, if you don’t like it, go work somewhere else.  Black lung and mineshaft collapses?  Same thing.  In fact, it was the commonly accepted notion at the time that any attempt by the government to regulate businesses was actually illegal.  This philosophy reached its high water mark in the notorious case of Lochner v. New York, a 1905 Supreme Court case.  In Lochner, the issue was the constitutionality of a New York law limiting the working hours of bakery employees to 10 hours a day and 60 hours a week (excessive exposure to airborne flour causes all sorts of occupational illness, which is why the law was enacted).

By a 5-4 majority (sound familiar?) the Supreme Court found that the law violated the 14th Amendment.  Oliver Wendell Holmes’ dissent became one of the most famous opinions  in legal history, but in the meantime, the controversial decision ushered in what is now known as  the Lochner era, a time when the Supreme Court issued several decisions invalidating federal and state statutes that sought to regulate working conditions during the Progressive Era and the Great Depression.   This continued until West Coast Hotel Co. v . Parrish in 1937, when the Supreme Court upheld the constitutionality of minimum wage legislation in Washington State, which was progressive long before it had legal weed.

Since then, we have seen regulations in almost every area of commerce, typically justified by the notion that the economic activities that are regulated “affect interstate commerce” and are therefore within the power of the government to regulate under  the Commerce Clause of the Constitution. Workplace safety rules, clean air and clean water rules, and many, many others are all Commerce Clause regulations.

The Republican party, ever since Reconstruction, has been in favor of a laissez-faire, unregulated business environment, and essentially wants a return of the robber baron days, although that is never openly stated.  Instead, the idea of deregulation is sold under the general penumbra of anti-government ideology, a dominant Republican ideology since the Reagan administration, and, more recently, as a way to create jobs.  If less regulations are in place, the argument goes, then employers don’t have to worry about red tape and can just go and create more jobs.  Voila, the notion of “job killing” regulations is born.  It’s a great sound bite, isn’t it?  From what we’ve seen since January, Republicans may not be good at governing, but you have to admire their messaging.

Anyhoo, the new president has pledged to cut “regulations” by “at least 75%.” Obviously, elimination of regulations providing for environmental protections, putting reasonable curbs on predatory and fraudulent practices in the financial industry, food and drug safety, workplace safety and many other areas can have significant negative effects. But according to the President, regulations are “job killers” and deregulation will increase employment. But there’s little evidence that’s the case. Facts have very little to do with the dominant Republican narrative about jobs and regulation.

•Research has failed to establish a link between regulation and increased unemployment.  Generally, deregulation may have a positive effect on corporate profits (witness the stock market surge, now pretty much over, based on the expectation that massive deregulation and tax cuts were on the way).  Still, increased profits alone don’t drive employment.  Employers only hire additional employees when sufficient demand exists.  In the case of the coal industry, deregulation of coal regulations, which will likely be an environmental nightmare, won’t bring the jobs back, because the market for coal has simply shrunk with the availability of cheaper, cleaner renewables and cheaper natural gas.

•Surveys consistently show that small business owners do not see regulation as a major impediment to growing their companies.  This is because small businesses typically aren’t  in the most heavily regulated industries.

•The cause of the most recent recession, which has cost millions of Americans their jobs, was inadequate regulation of Wall Street banks, not too much regulation.  Scarily, the safeguards enacted to prevent another such debacle (which probably weren’t sufficient anyway) are some of the first items on the chopping block for the Trump administration.

•Unemployment is now about 4.7%, the lowest since the recession, even though nearly all of today’s regulations on business were in place since the housing crisis that precipitated it all.

The report I’m linking to below is a little bit dated, but its findings hold true. The costs of deregulation to the economy, to health and to public and worker safety will be huge, and in the case of financial regulation, will take the shackles off the economic predators that sent us into a recession. The benefits are almost non-existent as far as causing jobs are concerned.

The full paper is available here: http://www.sensiblesafeguards.org/assets/documents/report-a-quick-guide-to-the-evidence-on-regulations-and-jobs-epi.pdf