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Is Government Regulation the answer to all our problems?

Increasing regulation seems to be the way of government in these days.  This not only increases the scope of government but it increases the cost for government and the private sector of our economy.  In these financial times there needs to be an evaluation of what regulations are necessary and which ones can be eliminated.  This kind of review seems to be a promise by many politicians and some actually look at the regulations in place.  The problem to some extent is the activity is not widespread.

There are specific cases where regulations are needed regarding such things as food safety, the safety of toys for our children and safe work environments.  Today the number of regulations seems to be increasing almost daily.  Legislation passed by Congress and signed by the President becomes law and with such action they present the need for regulations to be created to monitor and enforce the requirements.  Creating regulations is the responsibility of the cabinet level departments.  While I am not against these departments and agencies to create them there needs to be a review of the content in each regulation.  Today this is not a part of the process but may be in the future.

Reviewing regulations generated by the Executive level through the cabinet departments and their agencies may change.  Currently there is legislation in process to require congressional review of regulations generated by these entities.  The legislation is titled the REINS act.  The initials represent the words Regulations from the Executive in Need of Scrutiny.  Today there is much talk about regulation or deregulation but the real need is for the regulations in place and those generated in the future should be reviewed by Congress.  It is a responsibility of Congress to conduct such activity and has technically not been done in great detail if at all in the past.

Each of the Presidential candidates has talked about regulation or deregulation and what their approach would be if they were elected.  What must or should happen is an explanation of what each option means and the impact to society today where they both exist.  The REINS act if passed by both houses of Congress will change everything.  The problem as I see it today is words by all our elected officials are cheap and mean little without action to back them up.

The point of the last paragraph is the following.  Comments from both political parties have been made about reviewing regulations but little if anything has been done to initiate such action.  The language and intent of the current legislation is to establish a requirement that all regulations be reviewed by Congress before they are effective.  I feel our elected representatives would be hard pressed not to pass such legislation and President Obama would be hard pressed not to sign it.  The reason I make this statement relates to the fact that he has indicated there is a need to streamline the regulations in place.  The current process would require the departments and agencies themselves to do such reviews.  While some good may result from such reviews it is better to have impartial analysis by individuals not involved with the regulations being created.

Proper regulations in their place are a good thing but often they do not achieve the purpose for which they were intended.  This is another reason why a good review is necessary before regulations become effective.  I previously mentioned some areas where regulations are appropriate but additional areas include such things as medicine, national security, anti-trust and national defense.

It is also important to understand that the private sector of our economy has worked well without many of the regulations now in place.  Granted there have been issues but overregulation of an industry or segment of our economy is not the answer.  Issues that surface need to be addressed and if additional legislation is required to prevent future occurrences then they should be generated with appropriate penalties.   The consequences of regulation or deregulation must be considered for the specific industries, which are being considered for the action.  Regulation is not the answer to all our problems.  Individuals must take responsibility for their actions and be accountable.  Government cannot solve every problem by simply regulating it.  One key point of regulation, which must be understood, is the fact that if the regulations in place are not monitored and enforced they are worthless.  The financial crisis we are now in is a good example of what can happen when problems are ignored.

It has been mentioned several times in news stories that intervention by the government in dictating actions by private companies in the financial industry created this present crisis.  When the government dictates or heavily suggest that certain decisions should be made which have no basis it creates problems.  Financial institutions must make sound decisions.  They should not be forced or strongly suggested by the government to make loans, which are not supported by the ability of the individuals to repay them.

Government should not be in the mode of controlling or dictating the actions of companies or individuals except in areas previously mentioned in the first paragraph.  The key question in deciding whether to regulate or not is how to achieve the desired outcome.  Regulation, which does not have the methods needed to achieve the desired result, will fail.  Many times mandates are placed on the states for programs, which the federal government does not provide funding or provides little to offset the cost.

Our current financial crises from some reports indicate government regulation was part of the problem.  Good examples are Freddie Mac and Fannie Mae in the loans they made at the urging of Congress.  I am not saying that government control to some extent is not needed to some extent to turn around the financial industry and to protect taxpayer money.

In the matter of the current financial crisis from news reports, the problems appeared to be identified but were ignored by the individuals charged with the oversight.  The warnings of individuals who saw the potential risk to the financial industry were put aside and we are now paying for that mistake.  Regulations are enacted to some extent to assure programs are working efficiently and within the constraints of the requirements.

 

 

In summary regulation is not all bad but it must be used sparingly and only where the need actually exist.  The imposing of regulations should not be based on the opinion of individuals but the necessity for them.  While opinion is involved the decision to regulate or not regulate it should be based on actual data and the impact if regulations were not imposed.  Regulation increases the cost of government not only at the federal government level but also at the state level.  Several government programs or issues should be regulated as it is in the best interest of our citizens.

One main point to consider along with the areas identified is when taxpayer dollars are involved there is a need for regulations. Enacting regulations is not the end as there needs to be oversight to monitor the expenditures and there needs to be qualified individuals doing the monitoring.  When discrepancies or potential problems are identified, the level of government, which enacted the regulation, must take action to resolve problems or prevent potential problems.

Deregulation can and has increased the possibility of competition and should be allowed except in the cases identified in this article.  Competition is healthy for the economy and benefits the consumer.  The law of supply and demand impacts the prices companies can charge.  When companies charge more than what the consumer wants to pay, they will either not purchase their product or service or limit the amount they buy.  They may also go to their competition if they feel they are getting the value for less money.  One must be careful to look at the quality of the product or service as price should not be the sole factor in purchasing a product or service. Our economy was built on competition and should be allowed to continue.  Regulation increases costs and restricts the natural principle of supply and demand.  This principle is engrained in our society and government should not create situations, which affect this principle and allow it to work.

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Dennis AuBuchon

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