When the Enron scandal broke, Bush threw all of his free market principles to the wind and endorsed the biggest expansion of government regulation in decades by signing the Sarbanes-Oxley bill. Had this legislation been in place years earlier, it would not have stopped Enron from doing the things that got it in trouble. Yet it flew through Congress under pressure to “do something” about the various corporate scandals making headlines daily.
Experts in securities law predicted that the Sarbanes-Oxley bill would do nothing except impose a vast paperwork burden on public companies without doing anything to aid investors. They predicted that companies would go private to avoid complying with the new law and move their financing from New York to London and other money centers. This has indeed been the case. Even liberal Senator Charles Schumer, New York Democrat, now says that Sarbanes-Oxley must be reformed to reduce its compliance cost.
By 2003, OMB was watering down the requirement that agencies find evidence of market failure before issuing new regulations. Writing in Regulation magazine, Ms. Dudley complained that the new policy was “inconsistent with an administration philosophy that embraces markets and limited government.”
According to a report by the Small Business Administration, by 2004, the burden of government regulation on the economy reached $1.1 trillion—$10,172 per American household. A recent report from the Competitive Enterprise Institute found the regulatory onslaught continuing through 2006, with many new regulations still in the pipeline.
Fears about global warming may soon stimulate the same kind of legislative frenzy that gave us the ill-advised Sarbanes-Oxley bill. Thus there is a critical need for a reexamination of federal regulatory policy. We must ensure that the government’s command-and-control power is only used as a last resort and that regulations are well designed to be efficient and impose as little economic burden as necessary to achieve their legitimate purpose. Ideally, we should have some sort of regulatory budget, so that old regulations are jettisoned when no longer necessary and to accommodate the burden of new regulations.
Belatedly, Bush is now doing something to ease the regulatory burden. He has nominated Ms. Dudley to be OMB’s regulation czar and put in place a mechanism that will improve its regulatory oversight. A key provision of Bush’s new executive order is to restore the requirement that agencies impose new regulations only after finding evidence of market failure.
Although Democrats are complaining about the Bush initiative, they should remember that deregulation has a solid Democratic pedigree. Jimmy Carter deregulated the airline and trucking industries, saving consumers billions of dollars every year. The next Democratic president may find Bush’s new rules helpful when he or she is forced to deal with the problem of regulation.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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