In Praise of Regulations

One thing that has historically set the U.S. apart from other nations is its strong adherence to the Rule of Law. Not just through legislation, but through regulations (and the U.S.’s special brand of rules for promulgating regulations), the country has been able to afford all sorts of protections to consumers, workers, investors and businesses without having to increase the size of government a la European socialism.

I know it’s a Republican catch phrase to call everything that they don’t like “big government” but there is absolutely no relationship between regulating activity and increasing the size of government. So it is no wonder that McCain’s recent schizophrenic attacks don’t quite square with reality.

Over the past few days, McCain has been struggling to decide whether we should bail out AIG and other tanking firms and whether the financial sector suddenly needs to be regulated. He is consistently against something until everyone else points to being for it. For example, he was a Phil Gramm faithful proponent and sponsor of deregulation in the Senate, but now seems to call for regulations that will address the government “corruption” that led to this crisis.

One Republican editorial blamed Clinton’s mismanagement and corruption for the demise of Freddie and Fannie — as if Bush and McCain were powerless during the past eight years — and stated that Obama wants the government to be the savior:

Obama and Democrats on the Hill think even more regulation and more interference in the market will solve the problem their policies helped cause. For now, unarmed by the historic record, conventional wisdom is buying into their blame-business-first rhetoric and bigger-government solutions.

On regulations: once again, regulating industry doesn’t mean the government assume controls. It only establishes a framework. The success and attractiveness of the American capital markets has always been the efficiency achieved through their strict disclosure and enforcement rules. On the question of blame-business-first, that is exactly what McCain has done. He has blamed the Wall Street greed along with the corrupt government.

As mentioned, the size of the government is not measured by regulations. Should we no longer regulate at any level (federal or state) driving, alcohol and drug consumption, automobile emissions, abortion, who can get married, building permits, insider trading, and corporate transparency? Should we not enforce the law or be tough on crime? Should parents not regulate what time their children go to bed, what they eat or watch on TV? Does setting up rules for your kids increase your family’s budget? Well, I bet that going to war would. And I bet borrowing a lot of money would affect the family economy.

That’s right, the size of the government is measured by its participation in the overall economy (for example, as measured in terms of GDP or how much the government spends). Eight years ago, the U.S. had a budget surplus and now it has a massive deficit with an enormous increase in government spending and debt. We borrow and borrow and borrow, in part to fight in Iraq, and in part to pay for the tax breaks we give big industry. Yes, war increases the size of government. The surge increased the size of government. Unlike McCain’s original predictions, the war didn’t pay for itself. So will someone please tell me how after years of deregulation, the Republican White House and Congress, not Barack Obama, have left us with such a massive, obese government.

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Filed under Essays, Obama 08

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