In the March/April 2017 issue of Foreign Affairs magazine, John Paulson, a former economic advisor to Donald Trump, wrote an article “Trump and the Economy.” Mr. Paulson said that President Trump would accelerate the economy by lowering taxes and reversing regulations. “Unnecessary regulation makes it harder for companies to succeed and results in increased costs, lower investment, and restricted growth … The cost of complying with cumbersome new regulations has been staggering. For example, from 2011 to 2015 alone, the 10 largest US banks collectively paid $52.5 billion in consulting and advisory fees on compliance related issues.”
Perhaps it was just to keep his word count down but Mr. Paulson doesn’t seem to mention that these are the same banks that in 2007 effectively crushed the world economy and caused the worst economic downturn since the Great Depression. The cumbersome regulations were passed by the Obama administration to assure that these same banks couldn’t repeat the behaviors that had done so much damage under the Bush administration.
Mr. Trump is concerned about the economic impact of regulations, without regard to their other effects. Mr. Trump signed a bill that repealed regulation prohibited coal companies from dumping their waste into streams. The Office of Surface Mining Reclamation and Enforcement (OSM) of the Department of the Interior had estimated that it would present the coal industry with annual compliance costs of $52 million . Now that sounds like a great deal of money to comply with a regulation, but it also seems like a lot of coal waste being dumped into the water supply.
On Feb. 3, President Trump signed an executive order directing the Secretary of Labor to consider delaying or replacing the fiduciary rule that is scheduled to go into effect in April. On Feb. 9, Chief Judge Barbara Lynn for the US District Court for the Northern District of Texas upheld the rule and two other courts have blocked efforts to prevent the bill’s implementation. The fiduciary rule is simple enough – it requires brokers to put their clients’ best interests first when advising them about individual retirement accounts or 401(k) retirement plans. Before that rule financial advisers were free to recommend investment in whatever securities paid the adviser the highest commission rate.
On Feb. 1 the House approved a resolution killing a Security Exchange Commission requirement that publicly traded US energy companies disclose their payments to foreign governments. According to Tyler Durden, “The idea behind the measure is simple: If foreign oil companies disclose payments of $1 million to the government of Country X, then the lawmakers and citizens of Country X will know that $1 million should show up on the country’s budget. If less shows up, then obviously some of that amount was ‘diverted for private use,’ i.e., embezzled.”
Useful reading would be Does Regulation Kill Jobs?, edited by Cary Coglianese, Adam M. Finkel, and Christopher Carrigan (University of Pennsylvania Press). The general conclusion is that regulations don’t have a major effect on jobs, and there’s frequently a balance. In one example, regulations banning the use of leaded gasoline would cost jobs, but would be balanced by new factories making catalytic converters to help assure cleaner air. When Mr. Paulson wrote, complaining about the cost of consultants to assure regulatory compliance, he didn’t offer a count of how many consultants had high paying jobs, and lost them when the regulations were withdrawn. What are the goals, jobs or corporate profits? Mr. Trump made promises to people, but he’s giving the benefits to corporations.
On Jan. 30, President Trump signed an executive order requiring all new regulations be accompanied by the withdrawal of two existing regulations. This may give us the clearest understanding of the Trump administration and where it is taking the country. Since regulations are issued to solve problems, we know that for every problem the Trump administration solves, it will revive two others, so that we’ll end with twice as many problems as when we began.
Sam Uretsky is a writer and pharmacist living in New York. Email firstname.lastname@example.org.
From The Progressive Populist, April 15, 2017
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