Is America Over-Regulated?
February 23, 2012
The cover story of this week’s Economist magazine highlights a theme I’ve been discussing for several years now: From the Patriot Act to Sarbanes-Oxley to Dodd-Frank, we have wrapped a suffocating amount of red tape around American business over the past decade. These onerous regulations have prevented a full-scale rebound for our economy.
The poster child for these burdensome regulations has been Dodd-Frank. The Economist says:
“Consider the Dodd-Frank law of 2010. Its aim was noble: to prevent another financial crisis. Its strategy was sensible, too: improve transparency, stop banks from taking excessive risks, prevent abusive financial practices and end “too big to fail” by authorising regulators to seize any big, tottering financial firm and wind it down. This newspaper supported these goals at the time, and we still do. But Dodd-Frank is far too complex, and becoming more so. At 848 pages, it is 23 times longer than Glass-Steagall, the reform that followed the Wall Street crash of 1929. Worse, every other page demands that regulators fill in further detail. Some of these clarifications are hundreds of pages long. Just one bit, the “Volcker rule”, which aims to curb risky proprietary trading by banks, includes 383 questions that break down into 1,420 subquestions.”
In addition to the paralyzing effect these regulations have on investment, they come with a sizable price tag. According to a study completed by the Small Business Administration, the average cost of compliance with all these regulatory rules is over $10,000 per employee.
The article offers a solution: The Economist says “rules need to be much simpler” because “all-purpose instruction manuals” get lost in an “ocean of verbiage.” I agree. What makes the U.S. special is our entrepreneurial spirit, and we must adopt policies that promote prosperity and efficiency in order to empower the world’s best businesses.
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