Regulation is the problem, not the answer

WASHINGTON (Map, News) - In an op-ed Friday in The Wall Street Journal, Sen. Charles Schumer, D-N.Y., blamed “the Bush administration’s hostility to regulation” for the subprime mortgage meltdown and other economic woes facing the nation. But Schumer’s implication that federal red tape has greatly diminished during the Bush years is patently false.

A study released last week by the Heritage Foundation tells the real story. The Bush administration imposed $11 billion in new regulatory costs last year alone, and another surge is in the pipeline for 2008. The study’s author, James Gattuso, told The Examiner that the notion that U.S. firms have been less regulated during the past eight years just doesn’t hold water. The last time a sustained deregulation occurred was back in the 1980s when Ronald Reagan was president.

Regulation’s “hidden tax” actually increased $30 billion since George W. Bush moved into the White House. Regulatory reductions resulted in savings of $684 million last year, but they were more than offset by new regulations that cost 17 times that amount, bumping up the total regulatory burden on American businesses to a staggering $1.1 trillion. Analysts at George Mason and Washington universities confirmed the Heritage analysis, reporting that appropriations for federal regulatory agencies increased 44 percent from 2001 to 2007, with a corresponding 41 percent increase in staff positions. So far from being “hostile” to regulation, the Bush administration enthusiastically embraced it.

The administration can and should be faulted for neglecting to exercise its considerable oversight powers over the financial industry before the subprime fallout hit crisis levels. But as the Heritage Foundation’s David John points out, banking regulators themselves got caught up in the same speculative housing bubble as everybody else, and were thus unable to spot the warning signs in time. The same thing happened during the tech bubble in the 1990s.

It’s hard to see how hiring even more bureaucrats will cure this collective blind spot.

When Democrats like Schumer talk about some mythical “lack of regulation,” they’re not just deliberately spreading falsehoods about their Republican rival. They’re also busy laying the political groundwork for the imposition of an even heavier regulatory burden that will cripple the economy. Such a scheme will be easier to impose if the American people are tricked into believing that the private sector is not regulated enough. But that simply isn’t true.