The Corruption Of The Regulatory State

Following close on the heels of the 700+ ObamaCare waivers to favored businesses and, especially, unions, we now have waivers from the Obama Administration’s aggressive EPA regulations.  Ed Morrissey connects the dots as they lead back to Obama’s favorite pet corporate rent-seeker, GE.

UPDATE: I published this too soon, before my thoughts were fully formed. 

The problem this illustrates is, in part, inherent the regulatory process.  Legislators adopt massive but vague statutory schemes that leave lots of holes for regulators to fill.  That is not a bug, but a feature of large-scale regulatory legislation.  Legislators know that specificity breeds contempt or opposition, so they negotiate vague compromises no one really understands and leave it to unelected regulators to fill in the details.  It is cynical and an abdication of responsibility by elected officials, but, sadly, business as usual.

Regulators then issue complex regulations based on incomplete information presented by partisans who can afford to engage in the process through lawyers and lobbyists.  As a result, the rules that are issued typically favor the entrenched incumbents in the market to the disadvantage of new entrants, or some other selected special interests.

The problem is also, in part, specific to the Obama Administration.  His Administration views its proper role as picking winners and losers, which leads to corruption by favoring supporters — whether contributors or cheerleaders — at the expense of others in the market. 

Both roads lead to the same place — massive regulatory regimes that inevitably interfere with competitive forces and market efficiency, prop up doddering companies that should shrink, be acquired, or fail, and harm to innovating entrepreneurs.  The people left holding the bag are investors and consumers.

That is not to say that all regulation is bad.  Some is necessary in many markets, particularly where you have collateral harm from industrial activity such as environmental damage. 

But regulatory authority must be narrow, targeted, and constrained by legislation.  Otherwise, you have ObamaCare waivers, EPA grandfathering, lawless regulators, and spilled milk regulated as if it were crude oil. 

All of this imposes costs on society that are largely unseen by the voting public.

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Published in: on February 3, 2011 at 9:47 am  Leave a Comment  

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