President Trump's Deregulation Signals Addition by Subtraction
President Trump, in a “brief telephone call” with the New York Times earlier this month listed “what he saw as his biggest accomplishments, including a focus on deregulation.”
The Times relegated the mention of deregulation to a paragraph low down in the story, which itself ran inside the newspaper rather than on the front page.
It wouldn’t be the first time that the elite press or its readership made the mistake of failing to pay attention to, and to actually hear, what Trump is saying.
More sophisticated observers are starting to take note. The Economist, in a piece published last month, reported, “the impact of the Trump administration has been dramatic. The flow of new rules is suddenly a dribble. Since Mr Trump was inaugurated the number of regulatory restrictions has grown at about two-fifths of the usual speed.”
The British newsmagazine, which is not generally a Trump cheerleader, praised the administration’s approach to financial deregulation as “thoughtful…detailed and rigorous.” It reported, “the new approach in Washington does seem to have boosted business confidence.”
In rolling back regulation, Trump is focusing on a real problem. The Mercatus Center at George Mason University captures the growth of federal red tape with a thought experiment explaining the difficulty of even reading, let alone complying with, the government imposed rules.
“The US Code of Federal Regulations—the annually published set of books containing all federal regulations currently in effect—contained 35.4 million words in 1970. A person could read the entire code in just a few days short of a year, assuming he or she read 250 words per minute, 40 hours per week, 50 weeks per year,” the Mercatus scholars wrote.
“Fast-forward to 2016, the last year for which we have data, and the task becomes more than three times as difficult,” the Mercatus scholars say. “By 2016, there were 104.6 million words of federal regulation on the books, about 195 percent growth over 1970, with a corresponding increase in reading time of almost two years. “
IBM has been running full-page newspaper ads boasting that its Watson artificial intelligence capability can help compliance officers “keep up with 20,000 new or modified regulations a year and 200 revisions a day.” An IBM executive and former bank regulator warns, “humans alone are not going to be able to meet these challenges. Advanced technology tools are essential.”
There are so many rules, and they change so fast, that you need a supercomputer to keep track of them. Either that or more and more people. The number of people with the job “compliance officer” has more than doubled, to 273,910 in 2016 from 126,840 in 2000, according to the federal Bureau of Labor Statistics. More regulations mean more people whose job is making sure companies follow the regulations.
Mercatus warns about “unintended consequences, including slower economic growth, reduced employment opportunities, and disproportionate harm to low-income households.”
There’s also a risk of selective enforcement. When rules multiply, impartial enforcement becomes challenging, and the temptation increases for prosecutors, or regulators, to pick an unpopular individual or industry, and then look for an offense.
Pruning back regulation doesn’t have to be a partisan issue. President Carter, Senator Edward Kennedy, and Kennedy’s then-aide Stephen Breyer, now a Supreme Court justice, all Democrats, got this going when they tackled airline deregulation in the 1970s. Even Hillary Clinton campaigned in New Hampshire in 2015 saying, “I want to do everything I can to help make it easier for people to start businesses, cut that red tape....and really take a hard look at licensing requirements from state to state.”
The idea is also catching on globally. Excessive European Union regulation was one of the factors that motivated the British Brexit vote. In France, President Emmanuel Macron has moved to make labor laws more flexible and less restrictive on businesses. In Israel, the leader of the opposition Labor Party, Avi Gabbay, tells Bloomberg News that he wants to, as Bloomberg put it, “streamline bureaucracy and regulation."
If Trump can succeed not just in slowing the rate of growth but in actually reducing some of the rules, it’s a real opportunity for addition by subtraction. If Trump himself is identifying it as one of his key accomplishments, it just might be worth listening.
