By Sean Moulton and Nicholas Trevino, Project on Government Oversight
In 2016, 22-month-old Ted McGee died when an IKEA dresser tipped over and fell on him. IKEA had not built the dresser to the government’s recommended safety standards. It didn’t have to. Despite the U.S. Consumer Product Safety Commission’s estimate that between 2014 and 2016, 2,800 children each year suffered contusions and abrasionsfrom tipped furniture, these standards are voluntary. It took four months after Ted’s death for IKEA to finally recall the dressers. At least four children are believed to have died due to this model IKEA dresser tipping over.
Examples like this one make clear why we need rules on things from consumer products to financial markets—without strong protections, people get hurt.
On June 5th, Senator Elizabeth Warren (D-MA) and other leading regulatory advocates made such arguments at The Coalition for Sensible Safeguards’ symposium, The War on Regulation: Good for Corporations, Bad for the Public. The event addressed the Trump Administration’s deregulation policies and the impact they have on people’s health and lives.
The Case for Regulations
Senator Warren emphasized that sensible regulations actual expand people’s freedoms, not restrict them. Regulations can give people freedom from a wide range of harms—including exploding toasters, predatory financial institutions, polluted air, and more.
Senator Warren presented the history of America’s financial systems as an example of the need for, and success of, government rules in addressing widespread problems and promoting equality and fairness. She noted the instability of financial markets during and after the industrial revolution—the boom and bust cycle that destructively repeated until the Great Depression. In the aftermath of that national financial disaster, the government built a parapet of financial rules to help stop the heavy vacillation of the economy and restrict banks and other financial institutions from engaging in dangerous speculation.
She noted that those checks worked for decades to provide stable markets. But starting in the 1980s, financial lobbyists began attacking and weakening these bedrock regulatory safeguards, like the Glass-Steagall Act. All too predictably, as the protections were removed, the instability returned, causing a major financial crisis.
It’s a powerful example not just of the need for regulatory protections, but also of how we can become complacent under those protections and convince ourselves that the dangers no longer exist. Deregulation carries with it real risks to ordinary people, and as such should be conducted with great care and pursued only when ample evidence supports the change.
The Case Against Regulations
Many deregulatory hawks frame regulations as inherently restrictive of freedom. They firmly believe that burdensome federal rules stifle innovation and economic growth, and unfairly saddle companies with confusing and almost impossible requirements for no real reason.
The costs associated with regulations are a legitimate concern. Some major regulations require substantial investments from companies to implement. Agencies work hard to figure out the best way to accomplish the goal while minimizing compliance costs as much as is practical. Significant regulations, costing more than $100 million annually, get extra attention from the government including a full cost benefit analysis. Sometimes, though, agencies make mistakes in their projections or cost estimates and when companies find it costs much more to implement than expected.
Regulations can have other shortcomings, too. The regulation may not fully address whatever issue the agency intended to fix. At other times, technological changes in an industry make regulatory requirements obsolete or suboptimal. Lawmakers should be on the lookout for such situations and update, adapt, and remove rules that don’t function properly or have costs that outweigh the benefits.
At the symposium, even Senator Warren noted that not all regulations are perfect and that it made sense to reform those that became problematic. For example, she touted a deregulation bill that many Members of Congress believe will make hearing aids easier to access by allowing people to buy some types of them over the counter.
The Reality of Regulations
The reality of regulations encompasses the spectrum from lifesaving to outdated. Some regulations have more burden then benefit and some may no longer be necessary. But regulations are not just superfluous paperwork developed to keep bureaucrats busy. Good rules are designed to protect the public and provide a benefit. Before we change regulations, we need to prove they aren’t working and identify what exactly is wrong with them.
While regulations can cost companies significant amounts of money and can even result in jobs lost in an industry, generally the economic impact of regulations is neutral or even beneficial. This is because the regulatory cost to one industry, in money and jobs, is a boon to another industry. For instance, when power companies spend money on air scrubbers and other methods to limit their emissions, it creates jobs and profits for pollution control companies.
The Office of Management and Budget (OMB) has constantly found regulations to save taxpayers money—by a lot. In its yearly review of federal regulations, the OMB found that the country reaped between $287 billion and $911 billion in annual benefits from major rules over the last decade, while only spending between $78 billion and $115 billion to implement them. That’s a big return on investment.
The Administration’s Attack on Regulations
The Trump Administration has taken the deregulation argument to extreme lengths by solely focusing on the cost of regulations and rarely acknowledging that regulations bring any benefits. President Trump’s regulatory executive orders have required agencies to identify two existing regulations for elimination when proposing a new significant regulation. The orders also established an entirely new regulatory budgeting system where agencies must offset all new regulatory burdens on companies by cutting or lightening the impact of other regulations.
President Trump wants to eliminate as much as 75 percent of regulations. And agencies have taken up this challenge by creating deregulatory agendas that heavily favor industry wish lists.
For instance, we pointed out in October 2017 that when the Environmental Protection Agency asked for public input on deregulation,
…According to Elizabeth Southerland, a senior EPA staffer at the time, the overwhelming majority of the comments were from the general public with brief statements urging the agency not to roll back environmental regulations. But the task force focused in on the few industry comments requesting detailed and specific regulatory rollbacks. After the deregulatory team pulled those ideas from the coal, electric power, oil, and natural gas companies, they asked agency scientists to respond within one day to the industry requests to repeal the rules. Southerland wound up resigning on August 1 of because of the new “industry deregulation approach” being embraced by the EPA.
How Weak Regulations Impact People’s Lives
Part of why regulations lead to such high savings is because they prevent people from being needlessly injured or accumulating punishing amounts of debt—an ounce of prevention is worth a pound of cure. At the symposium, regulation proponents shared why they believed weak or non-existent regulations hurt their finances, health, and family.
Andrea Carlton, a U.S. Army veteran, accrued substantial college loan debt after using the GI Bill to attend two for-profit universities—Brown Mackie and the University of Phoenix. She says they encouraged her to take out loans and repeatedly lied to her about post-graduation job prospects. The Trump Administration has worked to postpone or weaken two rules designed to prevent situations like Carlton’s. Education Secretary Betsy DeVos postponed enforcing one Obama-era regulation that tried to hold for-profit universities accountable if their graduates could not afford pay off their loan debt. According to New America’s Clare McCann, DeVos weakened another regulation that forgave loan debt held by students defrauded by for-profit universities by allowing partial rather than full loan forgiveness.
Other regulations can help prevent communities of color from suffering under pollution at higher rates than white communities. The Executive Director of Community Housing and Empowerment Connections Inc., Penny Dryden, said she lives in a Delaware community littered with brownfields and alongside the busy Route 9 corridor. According to Dryden, her community and other communities of color suffer from disproportionally higher cancer rates than the rest of Delaware. Under Administrator Scott Pruitt, the Environmental Protection Agency has proposed rules to limit the research the Agency can rely on, which would make it harder to use large scale epidemiology studies that explore the health damage of environmental pollutants.
Having weak or non-existent regulations can put peoples’ finances and health at risk and makes it easier for predatory institutions with considerable resources to take advantage of people. Addressing outdated regulations should not make us overlook the fact that good rules free people to live safer, more prosperous lives.