GOP Myth Number One: Regulations Are Stifling Our Economy

This article first appeared on Dorf on Law.

One of the myths that Republicans have successfully planted in the mind of the media is that American businesses have been excessively regulated.

This has led to credulous reporting about the supposedly "onerous burdens" of federal rules, recitations of the number of pages in the Code of Federal Regulations, and so on.

That old myth has now oddly merged with a new myth that grew out of the 2016 elections. American political reporters and editors decided that they had been living in a bubble and thus failed to see the misery that purportedly led a surprisingly large minority of voters to pull the lever for Donald Trump.

Solution? Send reporters to The Heartland to talk to Real Americans about why they like the man-child that they put in the White House.

Be respectful. Believe whatever they say.

The results have been absurd, reaching a low point with an infamous New York Times piece in November of last year about a Nazi sympathizer who lives in Ohio. The article was rightly mocked for normalizing a sociopath (He likes "Seinfeld"!), and The Times backtracked furiously.

Yet that incident only served to highlight the ridiculousness of the efforts by self-flagellating media types who think that their job is to engage sympathetically with people who voted for an obviously racist candidate and campaign.

GettyImages-495453927 A tractor trailer drives by a mound of coal after delivering a truckload of coal to Arch Coal Terminals June 3, 2014 in Cattletsburg, Kentucky. New regulations on carbon emissions proposed by the Obama administration angered politicians on both sides of the aisle in energy-producing states such as Kentucky and West Virginia. Luke Sharrett/Getty

How do these two myths fit together? Coastal reporters are going to The Heartland again, but not to talk to the supposedly forgotten people who flipped from the Democrats to the Republicans and put Trump in office. Instead, the new move is to interview Republican businessmen and then gullibly report what they say about Trump's deregulatory agenda as if it must be important and true.

To be clear, I am not equating the hatred of white supremacists with the self important reactionary politics of local business elites. What I am doing is equating the instinct on the part of reporters and editors that talking to people in the Midwest brings with it a requirement to present anything that the interviewees say in sympathetic terms. Uncritical reporting is stenography, and it can make absurd ideas seem normal.

Back in April of 2017, The Times presented the world with an article written by a Business Section reporter who described the newfound confidence that business owners were feeling after Barack Obama had left the White House. In part because the story was filed from my hometown (Toledo, Ohio), I took special notice. What, I wondered, could the business types of a struggling post-industrial city like Toledo tell the world about Obama and Trump?

The answer was wondrous in its banality: Toledo's businessmen did not like the Democrat but liked the Republican. Executives and owners preferring the pro-business party over the not-quite-as-pro-business party? Who would have guessed?

But it was the reasoning (if you can call it that) that made the article memorable. The problem with Obama, in the eyes of these Toledo big shots, was that they were sure he disliked them. One local car dealer is quoted as saying: "With Obama, you felt it was personal — like he just didn’t want you to make money."

This is a perfect illustration of what Paul Krugman memorably called the "Ma, he's lookin' at me funny" theory of economics. Supposedly, businesspeople are so fragile (snowflakes, even) that they cannot stand being told that some of them engage in bad behavior. And when you make them abide by rules, they sulk. When Trump won, they exulted.

The same basic story line dominated another Times article that I discussed in a column last week. On New Year's Day of this year, Two Times reporters wrote a top-of-page-one story about how Trump's promises to deregulate business had led to a "wave of optimism [sweeping] over American business leaders."

As I described in my column, the article's authors went out of their way to acknowledge everything that is wrong with the story they were telling, but they told the story anyway.

A nearly perfect follow-up to their colleague's April piece from Toledo, these reporters claimed that businesses in America are humming again because their owners and managers are so, so excited about Trump's orthodox Republican deregulatory impulses. So excited, in fact, that "it is beginning to translate into the sort of investment in new plants, equipment and factory upgrades that bolsters economic growth, spurs job creation — and may finally raise wages significantly."

Golly gosh, that sounds good. That claim, in fact, is in the opening paragraph of the piece, and it sets the tone for the idea that even people who hate Trump should marvel at how much confidence Trump's presidency has inspired among the mythic "job creators." The headline even dubbed this "The Trump Effect."

In my column last week, I said all that I want to say about the silly political conclusions in that Times piece and the Republicans' hypocritical claims about "stability" as a driver of business confidence. What I want to add here is a refutation of the idea that regulation is bad for the economy and that deregulation is therefore good.

As I noted above, however, The Times article already does that to a large degree. "There is little historical evidence tying regulation levels to growth." "The evidence is weak that regulation actually reduces economic activity or that deregulation stimulates it."

In each case, however, we are then treated to a "but." Immediately following that last quoted disclaimer, for example, we get this: "But business executives are largely convinced that the cost of complying with rules diverts money that could be invested elsewhere."

The authors then list all of the reasons that the economy is doing well, none of which have anything to do with deregulation. "But business executives say the Trump administration deserves credit." Get it? It is not that there is any evidence of a real effect, but business types just feel it

But surely that must matter, right? The great liberal economist John Maynard Keynes famously said that the "animal spirits" of the captains of industry were a better explanation of swings in business investment than anything else.

And The Times thus quotes a liberal economist, Jared Bernstein, who first notes that there is no evidence that deregulation causes growth (which should be the headline, but I digress) but then says this: "What does matter is this idea that confidence matters. If their expectations about the future are positive, then it does make a difference."

Has it made a difference? Not at all. Again, the article itself notes that all of the positive economic developments that we can see in the U.S. (developments which, unfortunately, still stubbornly do not include adequate increases in incomes for the non-rich) are extensions of trends that began in the Obama era and are mirrored in Europe and elsewhere. There is no Trump effect in Denmark or Germany.

But what if it were true that these newly deregulated business owners and executives would respond to their newfound liberty by expanding their businesses? What if there really were a Deregulation Fairy who granted out wishes for higher GDP if only we agreed to let businesses be giddy about a hyper-conservative deregulatory agenda? Would that not be wonderful?

Actually, no. The regulations that Trump is rolling back include things like canceling "several rules approved at the end of the President Barack Obama’s term, including a regulation on limiting mining debris in streams, a requirement that broadband providers obtain permission from customers to collect and use online information, and a ban on plastic bottles in national parks."

This reminds us that "deregulation" can be merely a euphemism for "making the world dirtier and more dangerous." Again, the article itself tells us as much: "[H]home builders have benefited from the killing of regulations written by the Obama administration, including a rule that broadened the definition of wetlands, which could have restricted home building in certain areas. The National Labor Relations Board also reversed a decision that made builders more responsible for the working conditions of their contractors’ employees."

So you liked it when Houston flooded due to excessive development, heedless of the effects of overbuilding? You thought it would be great if employers could evade worker safety regulations by turning their employees into independent contractors? Then the Deregulation Fairy is your gal.

In the end, even the best version of the pro-deregulation story says that we can trade off our safety and health (and privacy) for an increase in measured GDP. But that merely reminds us how woefully narrow the definition of GDP is.

There are intelligent methods to measure the usefulness of regulations and to reject the ones that are a net burden on society. In fact, we have used those methods for years, including under Obama. Trump is getting rid of all that, because Republicans know in their DNA that deregulation is good.

Republicans and their business backers want everyone to forget about the consequences of giving them carte blanche with our lives. Just think of the jobs and growth -- which, according to the evidence, are not coming.

But even if they do, the trade-offs are not worth it.

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.

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