02 Mar Regulatory Overload

“If you want less efficient markets, over-regulate them.” – The Lonely Realist

Good regulations benefit the public. They maximize safety and clarify ambiguities. Excessive regulation does the opposite. It undercuts competition, destroys businesses, pours sand into market machinery, and creates societal friction. The fact is that not every business activity requires government intervention and, despite the best of intentions, governments cannot protect everyone from everything all the time. Moreover, maintaining government bureaucracies is expensive and, yes, there is such a thing as too much government. The wealth of America and its economic breadth grew at dizzying speed under the laissez-faire economic principle of caveat emptor – let the buyer beware. The goal of government intervention in America’s successful laissez-faire markets has been to create measurable improvements. Unfortunately, mechanisms for measurement have been discarded in favor of Democratic Party paternalism and Republican Party populism.

Take as an example the recent bidding for US Steel, an American stalwart that, after decades of decline, found suitors in Cleveland-Cliffs, an American competitor, and Japanese steel producer Nippon Steel, with Nippon offering the better price. Nippon’s acquisition of US Steel cannot proceed, however, without satisfying the amorphous politicized national security hurdles critical to the America First protectionism advocated by both political parties set by the Committee on Foreign Investment in the United States, which scrutinizes foreign acquisitions of domestic companies – even ones like US Steel that are not technology developers or part of a strategically sensitive industry. Its role is to chill acquisitions by China America’s adversaries, not by its allies (like Japan), though that is precisely what it will be considering for US Steel. In making its decision, the Committee of Biden Administration appointees undoubtedly will be influenced by the fact that a combination of US Steel and Cleveland-Cliffs would result in the loss of union jobs (and would raise antitrust issues as well). At the same time, Donald Trump, the Republican Party’s presumptive Presidential nominee, has stated that “I would block it, I think it’s a horrible thing [that US Streel is sold to a foreign entity]…. I would block it instantaneously.”

US Steel provides one illustration of the exhaustive level of government oversight-and-control that has become integral to Democrat and Republican policy-making. Despite the seeming differences between the two parties, the actions of Democrats and Republicans evidence a shockingly shared belief in big government, a belief that government all-too-often can do a better job than industry, that it can reduce the number of economic losers without collateral damage, that it can maximize winners without unbalancing markets, and that the government can solve problems that previously were in the domain of capitalism’s invisible hand. Although methods differ – with Democrats favoring regulation and Republicans relying on Executive Orders –, the over-emphasis on the exercise of government power is the same. Such interference in markets has consequences …, as the Soviet Union illustrated and China is confirming. US Steel is but one example of two-party overreach, resulting in a larger and more intrusive government, a problem that is becoming more acute with the regulatory deluge emanating from the Biden Administration (tracked by the Brooking Institution here). A big government predisposition was similarly apparent in the Trump Administration’s failure to reduce, dilute or eliminate America’s regulatory overreach. It instead stopped enforcing selected Obama-era regulations while issuing expansive Executive Orders that the courts subsequently struck down. Despite protestations against big government, the Trump Administration was shockingly inept at reducing regulatory excess and shockingly capable of expanding government power (a tendency that may be furthered by Donald Trump’s pledge that, if elected, he would raise tariffs by at least 10% across-the-board).

Despite the rapid growth of government power and control, TLR has been taken to task by those who question whether the Biden Administration truly has been flooding America’s economy with an unparalleled quantity of onerous regulations. It is. Although TLR previously focused on the Biden Administration’s expanding regulatory reach in the securities, commodities and commercial fishing industries, an approach that has resulted in unprecedented industry lawsuits that question the government’s Constitutional authority, the Biden Administration also has extended the government’s reach in the labor markets, FTC trade regulation and antitrust enforcement, and to enforcement actions by the National Labor Relations Board intended to empower labor unions …, and these are far from an extensive catalog of the comprehensive approach to government regulation and enforcement taken by the Administration.

In a nation that has flourished under the Rule of Law, clarification-by-regulation and Executive action is a necessity, providing intelligibility and consistency. However, government excess weakens democracy and undermines free markets. adds complexities that constrict freedoms, empowers special interests, and impedes law enforcement, adding financial costs that siphon away personnel and dollars. If America wants efficient markets, bigger is not better.

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