The Midnight Regulations Massacre

The Midnight Regulations Massacre

Below is an opinion piece from my friend David Brodwin who is co-founder and CFO of the American Sustainable Business Council, a national organization that I  co-chair.


US News & World Report
January 30, 2017

The Midnight Regulations Massacre

Blind cuts to regulation kill jobs and stunt economic growth.

By David Brodwin | Opinion Contributor

Recently, Congress took action to unwind a broad range of regulations enacted in the waning days the Obama administration. The so-called Midnight Rules Relief Act lets Congress stop, with a single vote, all the executive branch actions that were enacted in the last 60 days of an outgoing administration. Under prior law, Congress would have to consider each regulation individually on its merits.

Many cheered, thinking that gutting regulations will inevitably boost corporate profits and create jobs (as if profit-boosting and job-creating go hand-in-hand, but that’s another story). Stock prices have soared, fueled by expectations that the coming wave of deregulation will bring higher profits.

But be careful what you wish for.

In many ways regulations actually protect and create jobs, helping the economy grow. And blind deregulation kills jobs and stunts growth. Here’s are seven ways that regulations help:

  1. Sometimes regulations create jobs directly. In the electric power industry, regulations promote the use of wind and solar over coal. Dollar for dollar, wind and solar employ more than twice as many workers as coal and oil.
  2. Sometimes regulations protect one company or industry from killing the others. Around Lake Erie, unregulated agricultural runoff creates toxic algae blooms that got bad enough to make Toledo’s water undrinkable. Restaurants had to close. Homes and offices had to rely on bottled water. Then, in Flint, Michigan, lead-tainted water inflicted irreversible brain damage on thousands of children.
  3. Nationwide, failure to regulate for-profit colleges has put millions of Americans deep into debt for job training that turned out to be useless. These people now lack skills they need to participate in the economy, and they can’t afford to fix the problem. Their lost earnings will impair the economy for decades.
  4. Sometimes an industry needs regulation to prevent it from destroying itself in a race-to-the-bottom. Fishing is one of these. Without catch limits, most of our fishing areas would be barren by now, and our fisherman would be unemployed.
  5. Sometimes regulations sound the wake-up call to an industry that needs to meet a rising challenge from foreign competition. The U.S. auto industry grew so complacent in the 1960s about reliability, fuel efficiency and safety standards that Japanese manufacturers could take tremendous market share. Government regulations involving seat belts, air bags, fuel standards, emissions and so-called lemons prodded the industry to get better, faster.
  6. Sometimes we need regulations to prevent industries from dumping their costs on the taxpayer, hurting the economy in other ways. For example, when companies misclassify employees as contractors they’re forcing the taxpayers to absorb extra costs for health insurance, unemployment insurance and more. These costs don’t just vanish; they cut into consumer spending power. And since our economy depends on consumer spending for most its growth, when consumers can’t spend, economic growth slows, profits fall and jobs disappear.
  7. Finally, some regulations are needed to prevent destructive practices that endanger the economy as a whole. The mortgage banking crisis that clobbered the economy in 2008-09 grew directly out of the repeal of Glass-Steagal and other – and our failure to develop a sound way to regulate derivatives exposure.

Of course, not all regulations are good, or well-crafted or sensibly enforced. There are bad ones, and we need to fix these. But to repeal all regulations without considering each on its merits will do catastrophic damage to the economy.