Economic Security: The Coming Era of Re-Regulation.
Lexington Institute.
http://lexingtoninstitute.org/1259.shtml
Economic Security: The Coming Era of Re-Regulation
Loren B. Thompson, Ph.D.
Issue Brief
Apr 24, 2008
Remember the Reagan Revolution? It's over. For 30 years, the
political system has been dismantling the burden of taxes and
regulations imposed on the economy by the New Deal. When Ronald
Reagan won the White House in 1980, he inherited a tax system that
claimed up to 70% of taxpayer income, and a political culture in which
even Republicans were willing to consider price controls as a way of
suppressing inflation. The Reagan Revolution eclipsed such thinking,
wiping out a generation of liberal presidential candidates -- Mondale,
Dukakis, Gore, Kerry -- who wanted to return to New Deal policies.
But a counter-revolution is brewing, and the regulators are poised to
return to power. Tighter fuel-economy standards are being imposed on
autos. Controls are being instituted to rein in mortgage lenders.
Suburban jurisdictions around Washington and other cities are
mandating "green" construction standards for new homes. And those are
just the headlines from today's Washington Post. The drumbeat of
doubt about whether market forces can be trusted to deliver the best
results has become deafening. In the years ahead, the heavy hand of
re-regulation is likely to descend on a wide range of industries:
-- The poor on-time records and flagging finances of airlines have
convinced many observers that Carter-era deregulation is a failure.
Fares are much cheaper than back then, but most other industry metrics
have deteriorated. Things have gotten so bad that even industry gurus
like Robert Crandall are calling for a return to regulation.
-- Deregulation of electricity generation has become a political hot
potato as rising rates convince many users they are being gouged. In
some states such as Texas and Massachusetts, rates have risen over 50%
since deregulation occurred at the beginning of the decade. A lot of
the increase results from higher fuel costs, but rates aren't rising
as fast in states that still regulate.
-- After resisting efforts to impose new fuel-economy standards on
automobiles for years, the Bush Administration now plans to toughen
requirements. Average fleet efficiency will be required to rise from
25 miles per gallon today to 32 miles in 2015 -- a one mile
improvement each year for seven straight years. The move is supposed
to reduce dependence on overseas oil and limit greenhouse gases.
-- With the finance industry facing problems reminiscent of the
Reagan-era savings and loan debacle, federal regulators are asserting
greater oversight. Federal Reserve officials say the regulatory
system needs to be streamlined to detect problems sooner. That means
less innovation in a sector that has turned indebtedness into a core
feature of national life.
Heavier regulation of other industries will follow, from housing to
healthcare to higher education. It isn't hard to see why faith in
market forces has waned: the economy has made a weak start to the new
millennium, with sub-par growth rates, weak job creation (at least in
the private sector) and staggering trade deficits. The cost of just
about everything has risen faster than wages, from food to energy to
education to medical coverage. So proponents of regulation in
academia and government are gaining the upper hand against advocates
of market forces. But it's an open question whether more regulation
can solve any of these problems. And we'll see how all the academic
critics of free enterprise feel when the government tells them their
colleges are charging too much for an education.
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