Tuesday, November 29, 2016
Note to Trump and the New Congress: Play Conservative and Leave It Alone
When it comes to regulations and economic policy, I am quite conservative. Not a Republican-type conservative (probably more Libertarian in a political sense), but in the sense that I often advocate for less regulation, and even more often, for less changes to laws and regulations. People need to be able to count on a system and work within it. As such, whether it is related to securities law, energy and environmental law, or other areas of the law, I find myself advocating for staying the course rather than adding new laws and regulations.
For example, a while back, co-blogger Joan Heminway quoted one of my comments about securities law, where I noted "my ever-growing sense that maybe we should just take a break from tweaking securities laws and focus on enforcing rules and sniffing out fraud. A constantly changing securities regime is increasingly costly, complex, and potentially counterproductive."
After the BP oil blowout of the Deepwater Horizon well in the Gulf of Mexico, I similarly argued that we should approach new laws with caution, and that we might be better served with existing law, rather than seeking new laws and regulation in a hasty manner. I explained,
[T]here are times when new laws and regulations are necessary to handle new ways of perpetrating a fraud or to address new information about what was previously viewed as acceptable conduct. But often, new laws and regulations are not a reaction to new information or technology; they are a reaction to a unique and unfortunate set of facts that is more likely related to timing or circumstances than an emerging trend. Other times, it is a lack of enforcement of existing protections meaning the problem is not the law itself; it is the enforcement of the law that is the problem.
Choosing a Better Path: The Misguided Appeal of Increased Criminal Liability After Deepwater Horizon, 36 Wm. & Mary Envt'l L & Pol. Rev. 1, 19 (2011) (footnotes omitted). More recently, I have taken the same view with regard to hydraulic fracturing regulations:
There may well be a need for new regulations to improve oversight of hydraulic fracturing and other industries that pose environmental risks, but new regulations do not necessary lead to better oversight. . . . There is a strong argument that the problems related to hydraulic fracturing (and, for that matter, coal extraction, chemical storage, and hazardous waste operations) are more linked to a lack of enforcement and not a lack of regulation.
Facts, Fiction, and Perception in Hydraulic Fracturing: Illuminating Act 13 and Robinson Township v. Commonwealth of Pennsylvania, 116 W. Va. L. Rev. 819, 847 (2014).
I swear I have a point, beyond just quoting myself. Here it is: I'd like to urge the President-Elect and the 115th Congress to sit back and stay the course for a little bit to see where things are headed. I have a strong suspicion things are headed in the right direction from an economic perspective. This is not to suggest that there are not holes in the economy or people in desperate need of jobs, training, and education (there are -- I live in West Virginia. I know.). But with a White House and a Congress controlled by the same party, the GOP play should be simply: we're in charge now, and the economy is ready to move ahead.
We have already seen it -- the stock market is up and economic indicators look better. And there has been no new legislation or regulation (or repeals of either). It's just consumers believing the economy will get better. And consumer confidence is key to expansion. Who cares that it started before the election? What matters is whether we're going in the right direction. And it seems we are. The Financial Times reported today:
A gauge of US consumer sentiment has hit a post-recession high, painting a positive outlook ahead of the key holiday shopping season as recent data point to a strengthening US economy.
The Conference Board’s consumer confidence index climbed to 107.1 in November from 100.8 in October, the highest since July 2007 and above analysts’ forecast of 101.5.
Most of the survey was conducted before the presidential election on November 8. But “it appears from the small sample of post-election responses that consumers’ optimism was not impacted by the outcome,” said Lynn Franco, director of economic indicators at the Conference Board. “With the holiday season upon us, a more confident consumer should be welcome news for retailers.”
And, just to reinforce that is not a post-election position, I have been making this argument on this blog since at least 2010, when I wrote, How to Fix the "Broken" Financial System: Stop Trying to Fix It.
So, let's stay the course for a bit and see how people respond to a little stability. Let's see what a surge in consumer confidence can do for the U.S. and world economies. Let's make sure it's broken (and if so, how), before anyone tries to fix it. And maybe, in the meantime, we can spend a little time treating each other better.
Yes! I ordinarily cast myself as a lefty but I could not agree more on the need for stability in securities regulation. We have a lot of new rules adopted since the financial crisis. Let's use them for a bit, gather information about how they are playing out, and tweak, if necessary, based on what in fact doesn't work and not based on what might not work based on doomsday scenarios.
Posted by: Urska Velikonja | Dec 1, 2016 8:15:10 AM
I certainly hope he'll treat the economy with kid gloves as well - time will tell.
Posted by: Matthew | Nov 30, 2016 7:40:10 AM