Will GOP gains halt a regulatory renaissance?

Will GOP gains halt a regulatory renaissance?

Will GOP gains halt a regulatory renaissance?

How to protect your pockets.
Nov. 6 2010 11:10 PM

Populists v. Consumers

Will GOP gains halt a regulatory renaissance?

House Republican Leader John Boehner. Click image to expand.
Presumptive House Speaker John Boehner

"We've got to end the threats of the excessive government regulations," Sen.-elect Pat Toomey, R.-Pa., said in his acceptance speech. Rep. Eric Cantor, R.-Va., who will likely be House majority leader, wants to conduct "an immediate and comprehensive review of proposed government rules, regulations, and statutes." The phrase "job-killing" is back in vogue as an adjective to describe government regulation. The House Republicans' "Pledge To America" reiterates the opposition to regulation voiced 16 years ago in Newt Gingrich's "Contract With America." The new Republican majority, says the pledge, will "rein in the red tape factory in Washington, DC by requiring congressional approval of any federal regulation that may add to the deficit and make it harder to create jobs."Search and replace the word regulation with consumer protection, and this subcategory of populist conservative bombast looks a lot less politically saleable, even in this moment of tea-party-fueled antigovernment fervor. Granted, the Republican takeover of the House and its gain of a half-dozen seats in the Senate is hardly good news for consumers. But it probably isn't as bad as it sounds. Lets consider the possibilties.

Health care. This is the GOP's most highly-valued target. As my Slate colleague Will Saletan points out, Republican claims that their retaking of the House is a mandate to repeal health care reform isn't supported by exit polls, which showed an even split; 48 percent said it should be repealed while 47 percent said it should be maintained or expanded. That means the public feels the same way it felt in March, when the bill cleared Congress. A poll released days before final passage had 46 percent supporting the bill and 45 percent opposing it. You can fault the Obama administration for not selling more people on the bill's benefits after it became law. But with its most significant provisions years away from taking effect, health reform remains, to voters, mostly the same abstraction it was this past spring.

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Nonetheless, Republicans are already treating the election results as a license to gut health reform. As N.C. Aizenman explained in the Nov. 4 Washington Post, that isn't going to happen. Outright repeal, of course, is impossible because Democrats maintain control of the Senate. Even if by some miracle repeal cleared the Senate, Obama would be certain to veto it. Repealing the "individual mandate" requiring virtually everyone to buy health insurance—which many Republicans claim is unconstitutional—is also never going to happen, because Democrats know that without it health reform will collapse like a house of cards.

Republicans might have more luck going after two other provisions in the bill, Aizenman noted. One of these is the so-called 1099 provision, which, as Annie Lowrey recently explained in Slate, lowered the threshold for filing 1099 forms to the IRS to a level that will create enormous paperwork for small businesses. The business community's gripe about this appears to be legitimate, and many Democrats now say they want to repeal the provision too. The only catch is that if this provision is eliminated Congress will have to either reconcile itself to adding $17 billion to the deficit (that's how much the Congressional Budget Office projects the 1099 provision will save over ten years through higher IRS compliance) or find $17 billion to cut, probably from the health reform bill itself.

The likeliest part of health reform that Republicans will want to cut, unfortunately, is its massive expansion of Medicaid coverage, on which the federal government will spend $434 billion over ten years, according to the CBO. The GOP will argue that expanding this state-federal program, which provides health coverage to the poor, is an "unfunded mandate" that the states can't afford. Democrats will answer that the feds are paying for 96 percent of this expansion over the next ten years (as well they should); the states just need to cough up 4 percent, or about $20 billion over ten years. (According to the Center on Budget and Policy Priorities, a liberal nonprofit widely respected for the rigor of its numbers-crunching, between 2014 and 2019 the additional cost to the states will be just 1.25 percent more than they were going to spend on Medicaid without the expansion.) Republicans will answer: We're glad you brought that 96 percent up, because the federal government can't afford to spend $434 billion on Medicaid expansion! Then the Democrats will answer: It's wrong to squeeze budget savings from society's most vulnerable population. Republicans will answer: We're not cutting spending here, just cancelling some of the program's expansion. Then the Democrats will answer: Bottom line is you're taking health coverage away from poor people who would otherwise get it.

The Republicans will probably win. An eternal (and eternally depressing) fact of life in Washington is that it's easier to cut programs for poor people than it is to cut programs for anyone else, because poor people lack lobbying and fundraising clout.

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Cap and Trade. This is the GOP's second-favorite target, and President Obama may already have abandoned it. "Cap and trade was just one way of skinning the cat," Obama said in his post-election press conference. "It was not the only way. It was a means, not an end. And I'm going to be looking for other means to address this problem."

In truth, though, cap and trade was already pretty much dead. Senate Majority Leader Harry Reid, D.-Nev., couldn't get it through the Senate after it cleared the House, and said soin July. James Pethokoukis of Reuters speculates that the House will try to strip the Environmental Protection Agency of its jursidiction over greenhouse gases, thereby blocking an administrative end-run around Congress. The votes will likely be there in the House; it's more iffy in the Senate. But of course Obama could veto the bill.

Dodd-Frank.The financial-reform law is another popular GOP target. Repealing this law would be more difficult even than repealing health reform, because Wall Street isn't loved by tea partiers. Rep. Spencer Bachus, R.-Ala., the ranking member of the House Financial Services Committee (and therefore its likely next chairman), conceded to the Financial Times that he was "not sure that repeal was attainable." Bachus is already trying to limit implementation of the so-called "Volcker Rule," which severely restricts proprietary trading by banks. But it's doubtful he has the necessary leverage. At a banking forum Nov. 5, Michael Barr, assistant treasury secretary for financial institutions, rejected the idea of making any technical changes to the law.

Republicans really hate the Consumer Financial Protection Bureau created by Dodd-Frank, and especially with its proprietress, Elizabeth Warren, who was not named its director because it was feared that she couldn't win Senate confirmation. But Warren and the CFPB may prove elusive targets for awhile, because the new agency is still eight months away from possessing any regulatory authority at all. Warren has been staffing the CFPB up, but mainly she seems to be giving a lot of speeches around the country denouncing "tricks and traps" that various financial institutions use to sucker their customers. Early signs suggest that she'll focus mainly on "transparency"—strengthening and clarifying disclosures to consumers so they actually understand what they're paying for. Republicans may find that opposing such consumer protections is politically difficult. Who's against giving the customer clear information? Even if Republicans are able to use their new clout to somehow chase Warren out of Washington, the CFPB's role is unlikely to become less "radical," because it's not particularly radical now.

The Big Picture. The new House majority wants to give Congress authority over any regulation that "may add to the deficit." The Pledge To America's use of the word "may" covers an awful lot of regulations, but it's hard to believe Congress really wants to vote yea or nay on them all. Proposed federal regulations whose comment periods are due to end in the next 90 days number 1,096. Republicans can pretend they all represent nothing more than red tape, but halting their progress would play havoc not only with environmental protection, food safety, and other consumer concerns, but also with commerce. Companies need rules so they can know what their competitors won't be permitted to do, so they can limit their liability in potential lawsuits and criminal prosecutions, and for a host of other little-discussed practical reasons that conservatives choose to ignore.

After Republicans regained both the House and the Senate in 1994, they pushed for so-called regulatory reform by trying to subject new regulations to cost-benefit analyses heavily biased in favor of calculating costs to businesses. I covered this incipient revolution for the Wall Street Journal. In 1995 Congress actually passed a law giving itself 60 days before any given regulation took effect to overrule it. One catch was that if Congress did nothing, as it was likely to do in virtually all cases, the regulation would go into effect. Another was that Congress already had authority to block any regulation in wanted to, because legislation always trumps regulation. Five years passed before Congress bothered to overturn a single rule.

What Congress was able to do, and what the House will try to do again, is tighten the noose on all regulatory agencies by squeezing their budgets. In Feb. 2010 John Judis published an articlein the New Republic pronouncing that President Obama had effected a "quiet revolution" by reviving the regulatory state. What he mainly meant was that Obama increased funding levels at key regulatory agencies like the Environmental Protection Agency and the Food and Drug Administration. The EPA hadn't seen a budget increase in eight years. Now the regulatory agencies may face a period of relative austerity. The Democrats still congtrol the Senate, but the Senate tends to be more cautious about spending than the House. This, then, is the main way Republicans will weaken consumer protections: indirectly, by putting regulators on a diet.