Published in The Tennessean, Sunday, October 31, 2010
Health-care bill and others have given birth to new regulations
by Richard J. Grant
When the Speaker of the U.S. House of Representatives, Nancy Pelosi, famously let slip, “But we have to pass the bill so you can find out what is in it,” she was referring to the health care reform bill of March 2010. She wasn't kidding. The bill had become increasingly unpopular with the American people, so she found it necessary to logroll a coalition by adding big scoops of political sweeteners to buy the support of individual senators and congressmen.
The bill was passed with great urgency but little understanding. It was like a cluster bomb, full of unpleasant surprises. The final bill was so long and complicated that, now seven months later, even its supporters are expressing surprise as insurance companies raise health-care premiums and eliminate particular categories of coverage. These consequences might have been unintended, but they were predictable. Worse, it is still full of unexploded regulatory and tax bomblets.
Another legislative “success” of the Obama administration and the Democratic majority was the passage of the financial regulatory reform bill that was intended to protect consumers by reining in the bad behavior of financial institutions. The financial industry was already one of the most heavily regulated in the country, with protections and restrictions that encouraged much of the moral hazard and bad behavior in the first place.
Passage of the bill began the gestation of a cluster of new regulatory agencies and will give birth to a whole new generation of financial distortions and unintended consequences. Over the past several months, government officials have impugned the financial institutions for not lending more. But at the same time, those officials have deployed regulators to second-guess the actions of bankers and to micromanage the market. While the private debt markets are stilted, the size of the government debt market is exploding. In this we get a hint of what is to come.
Speaker Pelosi, with her large Democratic majority, was successful in passing the carbon dioxide limiting “cap and trade” bill in the House. This would have pounded the entire economy with another cluster of taxes and regulatory bomblets, but public awareness that a better nickname for the bill was “cap and tax” caused some members of the Democratic majority in the Senate to balk.
Where the Senate failed legislatively to impose these new powers of central planning, the Obama administration would fill the gap by mobilizing the already existing regulatory powers of the Environmental Protection Agency. It had already declared carbon dioxide to be a “pollutant,” thereby granting itself the power under the Clean Air Act to impose limits on emissions. Now the EPA stands ready to impose new regulations on electric utilities, particularly those with coal-fired plants. Whether intended or not, it will serve to reduce further our ability to produce energy in America. We will pay more for less.
It should be no surprise that none of the Obama administration's efforts to “stimulate” the economy could succeed. With hundreds of billions of dollars diverted from private sector use into politically selected public works projects, and with the fact and threat of increased regulation, our national productivity levels will continue to suffer. And protectionist currency depreciation is no less destructive than tariffs. Jobs are lost.
Voters can now judge the combined performance of the Obama administration and the Democratic majorities in Congress. It means “not working.”
Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: firstname.lastname@example.org
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