GOVERNMENT REGULATIONS: OBAMA
SPECIFIC POLICY POSITIONS
Obama approaches regulation as a pragmatist. He wants “basic rules of the road” to make the economy more fair, based on the painstakingly thought-out views of Cass Sunstein, the University of Chicago scholar who heads his Office of Information and Regulatory Affairs. Sunstein propounds a somewhat oxymoronic idea he calls “libertarian paternalism.” This philosophy seeks to “nudge” people in the direction of rational behavior through rules and regulations that carefully balance costs and benefits. It attempts to reduce regulators’ roles by requiring companies to disclose, on their own, more information—say, about fees—in an easily accessible way. But it assumes that many people need some government help to make informed decisions on such key issues as which health care plan to buy.
Obama tried to force greater transparency and oversight on Wall Street in the aftermath of the 2008 crash by pushing for the Dodd-Frank financial-reform law, but that stance has only brought him criticism from both the Right (for creating an overly broad set of rules) and the Left (for not doing enough about the too-big-to-fail problem and for only reluctantly backing tougher provisions such as the “Volcker Rule”). Even so, the administration created the Consumer Financial Protection Bureau, where Director Richard Cordray is embracing the Sunsteinian view that government can keep a low profile as long as credit-card companies and banks comply with tougher rules requiring “smart disclosure” of fees and add-on costs. Obama takes the same approach to consumer regulation in general.
After having failed to enact large-scale regulatory changes—a new global climate-control treaty or even a domestic cap-and-trade law—Obama has settled for smaller-bore rules that fill in gaps, for example by reining in toxic emissions from power plants and by raising fuel-economy standards. At the same time, he has sought to neutralize criticism from the Right by pushing some expansion of offshore oil and gas drilling, as well as the shale-drilling process known as “fracking.” He wants to cut $4 billion a year in subsidies for big oil while fostering a revolution in natural-gas, wind, solar, and other new technologies.
Obama had one of the most controversial moments of his presidency when, in his 2010 State of the Union speech, he harshly criticized the Supreme Court’s Citizens United decision as the justices sat right there in the House chamber. He said that the 5-4 ruling freeing corporations to spend unlimited sums on elections “reversed a century of law” and would “open the floodgates for special interests.” Obama prohibits lobbyists from serving as campaign fundraisers, and he has sought to work pragmatically within the Citizens United ruling by pushing for his GOP-stymied Disclose Act, which requires all groups spending more than $10,000 on election-related advertising to publicly name donors who give $10,000 or more.
The administration says it saved $91 billion in net benefits—more than 25 times the figure in the first three years of the George W. Bush administration, and more than six times what the Clinton administration saved in its first three years.
Obama called the massive 2010 law, which curbs derivatives trading and imposes capital-reserves standards, “the toughest financial reform” since the Great Depression. But his administration had resisted some of the toughest provisions.
Obama imposed standards for mercury and other toxic emissions, but he also resumed drilling in the Gulf of Mexico after the BP disaster.
Obama is pushing for a pared-down version of the campaign-finance law that requires groups to name donors.
Cass Sunstein: Says Richard Thaler, Sunstein’s coauthor at the University of Chicago: “It’s not an accident that Obama put his very old friend into the job he did.” Sunstein, head of the Office of Information and Regulatory Affairs, recently declared that a top-to-bottom review had saved billions of dollars more than both the Bush and Clinton administrations had in their first three years.
Timothy Geithner: The Treasury secretary, the administration’s longest-serving economic official, has been the touchstone for Obama’s middle-of-the-road regulatory approach to Wall Street reform, and he has declined to break up the too-big-to-fail banks.
Lisa Jackson: The EPA administrator has become the point person for environmental and energy regulation—and has taken the brunt of GOP attacks over what it calls “job-killing” regulations.
James Kvaal: The Obama campaign’s policy director is tasked with refuting Mitt Romney’s argument that overregulation of the economy has slowed growth.
GOVERNMENT REGULATION: ROMNEY
SPECIFIC POLICY POSITIONS
Romney takes a classic conservative approach to regulation, a critique of big government that has been turbocharged by tea party fervor. His criticism of Obama focuses in large part on what he condemns as “excessive regulation” and taxes that have made U.S. businesses uncertain about hiring and expanding. According to “Believe in America: Mitt Romney’s Plan for Jobs and Growth,” Obama’s “major initiatives,” including health care, “represent a quantum increase in the scale of the regulatory burden” on the U.S. economy. Romney plans to impose a “regulatory cap” on agencies that would force them to find offsetting cost reductions for any new regulations they want to impose. Even so, as Massachusetts governor, he imposed new regulations for health care and, for a time, the environment.
Without being too specific so far, Romney has adopted a scorched-earth approach to rolling back regulation. He says he will repeal Dodd-Frank, which he faults for delegating “an extraordinarily wide scope of rule-making power to the same agencies that had failed to prevent the financial crisis.” He will also try to repeal the Sarbanes-Oxley law, which was enacted in 2002 and sought to impose better controls on companies in the wake of the Enron collapse. He condemns the new Financial Stability Oversight Council—intended to monitor giant banks—as having “nearly unlimited power.” Glenn Hubbard, a top Romney adviser, says that the candidate advocates moving the new Consumer Financial Protection Bureau outside the Federal Reserve or breaking it up.
Romney says he would “fast-track” permits and slash nuclear power plant regulations. But here too he largely confines himself to condemning Obama’s actions rather than proposing alternatives. Romney says that the moratorium on offshore drilling after BP, “even in shallow waters,” was “part of a larger energy-policy incoherence.” He inveighs against the administration’s “war on carbon dioxide,” beginning with Obama’s cap-and-trade plan, which “would have been a crippling blow to the U.S. economy.” When that plan failed, Romney says, Obama sought “to find another path to reach the same objective.”
He also takes a laissez-faire approach to this issue. Romney has called the McCain-Feingold campaign finance law, which regulates donations, “a disaster.” But he also doesn’t support the Supreme Court decision on Citizens United. Rather than the complex of laws that have limited individual donations to candidates but have allowed unlimited super PACs, Romney says he’d simply scrap current campaign finance laws. He has admitted that “I don’t have a solution” for the problem of money in politics. But absent that, the best approach is to let candidates accept unlimited donations and take responsibility for their own words, he says. On that narrow topic, at least, he’s not that far from the tenor of Obama’s Disclose Act.
As governor, Romney sought to achieve “the most significant restructuring of state government in half a century,” but his cuts to the bureaucracy did not amount to much. After four years, he reduced the payroll of agencies under his direct control by 603 jobs.
Romney says Obama’s new agencies need to write financial regulations that are simpler, more predictable, and efficient. But as governor he increased fees for permits, licenses, and services.
As governor, Romney tried to create standards for coal-fired plants and even helped to establish a regional cap-and-trade program, but he backed away from the final plan.
While lamenting the influence of money in politics, Romney boasted that he spent so much to run for senator that even wealthy Edward Kennedy had to take out a mortgage on his house to beat him.
Oren Cass: The Harvard Law School graduate, a veteran of Romney’s 2008 campaign, was recently appointed domestic policy adviser and has taken the lead in critiquing what the Romney campaign calls the Obama administration’s “war on carbon dioxide.” He concedes, however, that the campaign has yet to deliver many specifics of its own approaches to issues such as environmental policy and financial regulation. “Stay tuned,” Cass says.
Glenn Hubbard: The former chairman of George W. Bush’s Council of Economic Advisers is a center-right economist who has helped shape Romney’s opposition to Dodd-Frank.
Harold Hamm: The Oklahoma billionaire has inveighed against excess regulation of the energy industry and encouraged Romney to propose curtailing legal liability in lawsuits.
Jim Talent: The former senator from Missouri wrote part of the energy chapter of Romney’s jobs plan.
This article appears in the June 16, 2012 edition of National Journal Magazine.