Why The Bonfire of Business Regulations is a Big Business Scam

Neil H. Buchanan

This article first appeared on Dorf on Law.

Imagine that you are in business. You make good products, but you necessarily create a mess while you make them. Like baking cakes, or catering parties, or refining oil into gasoline.

People want what you are selling, and you can make it cheaply enough to make a profit.

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You hate dealing with the mess, but you have to do something about it. What to do?

Cleaning up your own mess is annoying, costly, and time-consuming. You could hire someone else to do it for you, or you could figure out a way to push the mess onto someone else and force them to deal with it.

In each of those two alternatives to doing it yourself, you no longer need to care about how the mess is handled. If your hired clean-up crew is inhaling toxic chemicals or developing repetitive stress injuries, that does not feel like your problem.

If you have successfully pushed the mess completely onto others (by dumping your mess into a river, for example), you do not even need to worry about paying anyone at all. Out of sight, out of mind.

For you, the best part of making your mess other people's problem is that you can do more of what you like to do. You can make more cakes, cater more parties, ship more gasoline. Your revenues are up and (with some exceptions that you can generally choose to avoid) so are your profits.

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Cement Creek, which was flooded with millions of gallons of mining wastewater, is viewed on August 11, 2015 in Silverton, Colorado. The Environmental Protection Agency accidentally released approximately three million gallons of wastewater into the creek from the Gold King mine, polluting the larger Animas River downstream. Theo Stroomer/Getty

Freedom to be entrepreneurial, to be a maker and not a taker, feels good. You like yourself, and people say good things about you.

So when someone comes along and tells you that the way you are shoving your mess onto other people is dangerous or economically damaging or simply unfair, you have two choices. You can admit that your productive activities are more costly than you realized and take responsibility. If so, good for you.

Unfortunately, you can also scream about how other people do not appreciate your genius and the sacrifices that you make, and you can buy politicians who will allow you to keep doing what you are doing (and who will make flowery speeches about you whenever possible).

This has the advantage both of fattening your bottom line and flattering your self image. Who could say no to that?

The Trump Administration and the current Republican Party represent the perfect distillation of that second choice. They talk about deregulation as if they are lifting a burden that was deliberately placed on businesses by liberals who are jealous and vindictive. They are clearly and obviously wrong.

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As I noted in a recent column, several reporters for The New York Times have published articles during Trump's first year in office in which they describe the outright giddiness of businesspeople who are celebrating Trump's embrace of the anti-regulation ideology of his adopted party.

The basic idea is that business confidence is supposedly soaring because of Barack Obama's departure and the installation of a Republican in the White House. There are two elements to that change in businesspeople's attitudes.

First, it is clear that business leaders across the country (including in places like Toledo, Ohio, where one of the Times reporters interviewed car dealership owners and other big fish in a small pond) are viewers of Fox News and its progeny.

As soon as Obama took office in the midst of an economic meltdown that threatened to destroy the global economy, the business side of the right-wing media world decided to vilify Obama.

How to make Obama the bad guy, even though he was the man who presided over a policy response that not only avoided a full-on apocalypse but even set in motion a slow-but-steady economic expansion that continues to this day?

By focusing on his supposedly nasty words, which made businesspeople feel very sad. Obama pointed out the obvious, which is that banks had preyed on unsophisticated borrowers while creating financial products that they themselves did not understand, and this had led to economic calamity.

But again, saying bad things about business leaders hurt their feelings. Spokespeople for the biggest businesses in the world responded with a narrative about how they did not want to help the recovery because it was so obvious that Obama did not like them.

In turn, this trickled down to the small-fry in places like Toledo, one of whom whined that, "with Obama, you felt it was personal — like he just didn’t want you to make money."

That is such an absurd statement that it can only be the result of parroting what the speaker had heard in his echo chamber. Obama hates us! Who cares that there is no evidence of any of that and that it would not make sense for Obama or any Democrat to want businesses to fail?

The second element of the change in businesses attitudes, however, is at least logical in its own limited way. During the Obama years, businesses were being told that they had to be more careful and that they could not conduct business in ways that are sloppy and messy and that shift the costs onto other people. Regulations were created to set up new rules of the road.

Republicans promised to shift the burdens back onto workers, consumers, and the environment. It is, therefore, entirely understandable that a bottom-line kind of person would float on air at the prospect of living in Trump's America.

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The stock market can shake off any other concerns about Trump's effect on the world and the dangers that he poses, because companies will now be able to increase short-term profits by doing things like abusing nursing home patients and not being fined for doing so, even when the patient dies as a result.

Many forms of deregulation are not so overtly inhumane, but they can still be justified by nothing but bottom-line concerns of the narrowest sort. Ending net neutrality is not even good for most businesses, but because it can be cast as deregulation, the Trump people and congressional Republicans loved it. Who cares what impact that will have on everyone but the biggest players?

Similarly, why would Republicans agree with the Obama rule to prevent broadband providers from collecting private information without customers' permission? It hurts the companies' immediate bottom lines, so who cares about anything else? Trump dutifully nixed the rule.

Banks and other financial institutions are doing everything they can to reverse or reduce post-Great Recession rules designed to prevent a repeat of the mistakes and excesses that caused the economy to implode in 2008. Just as they did before that calamity, they are assuring us that they would never do anything that would harm the economy. In the meantime, those nasty new rules have the effect of reducing the bottom-line results. The masters of the universe are not happy, and the Republicans snap to attention.

In my most recent column, I described Republicans and Democrats as, respectively, "the pro-business party over the not-quite-as-pro-business party." I offered that description to highlight the idea that Democrats are often all too willing to cave to the desires of business leaders. (See, for example, both the Clinton and Obama retreats on public investment).

Even so, that framing misstates the overall story, because both parties are pro-business in the sense that they want private businesses to succeed and grow.

Republicans are fiercely opposed to regulation as a categorical matter. Trump has imposed silly rules such as his edict that every new regulation that is promulgated must be accompanied by the elimination of two old ones, and he has stood in front of stacks of paper representing regulations and literally cut a piece of red tape.

Just as they do with taxes, Republicans like to pretend that the opposite of their absolutist opposition to all regulations can only be for Democrats to be in favor of all regulations. Even though Democrats are "not quite as pro-business," however, that does not at all mean that they are anti-business.

They simply understand that businesses do not always make decisions taking all costs and benefits into account (what economists refer to as externalities), and they are keenly aware of the dangers of allowing the pursuit of short-term profits to cause long-term problems.

Democrats, in other words, do not wake up in the morning dreaming of ways to excessively tax or regulate. They do wake up trying to figure out how to balance the interests of everyone, which means that they do not elevate business profits above all else.

As with so many other issues, this used to be a bipartisan endeavor, with both conservatives and liberals arguing over empirical questions about whether particular regulations were worth the cost.

This necessarily involved serious debates about whether certain applications of cost-benefit analysis were inherently biased by omitting key variables, and there was a range of reasonable disagreement over how to measure and weight various costs and benefits.

That is the technocratic, neoliberal, centrist approach that the Obama Administration embodied. One need not defend every regulation that they issued in order to defend their reality-based approach.

The radicalized version of the Republican Party, however, has long since decided that reality is for chumps. From evolution to climate change to gun violence to reproductive rights, Democrats seek to be guided by science, evidence, and logic.

Republicans used to do the same. Admittedly, they did so in ways that often put too much weight on factors that would lead to their preferred outcomes, but at least they were having the same conversation that Democrats were having, trying to strike difficult and reasonable balances based on careful analysis.

Now, however, Republicans prefer to just say "burn, baby, burn" or "drill, baby, drill" (unless, of course, immediate political considerations create a need to exempt Florida from deregulating offshore oil drilling). They have convinced themselves that tax cuts and deregulation are good, full stop.

The damage that this mindset will inflict on the world will initially be masked by some increases in business profits, but the ultimate costs will be much larger and will be borne by all of us.

Neil H. Buchanan is an economist and legal scholar and a professor of law at George Washington University. He teaches tax law, tax policy, contracts, and law and economics. His research addresses the long-term tax and spending patterns of the federal government, focusing on budget deficits, the national debt, health care costs and Social Security.

This article was first written by Newsweek

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