Tuesday, September 30, 2008

On Republicans and Deregulation


It is correct to say that there has been significant deregulation in the U.S. over the last 30 years, most of it under Republican auspices. But this deregulation -- in long-distance telephone rates, air fares, securities-brokerage commissions, and trucking, to name just a few sectors of the economy where it occurred -- has produced substantial competition and innovation, driving down consumer costs and producing vast improvements and efficiencies in our economy.

The Internet, for example, wouldn't have been economically possible without the deregulation of data-transfer rates. Amazon.com Inc., one of the most popular Internet vendors, wouldn't have been viable without trucking deregulation.

-- Republicans have favored financial regulation where it was necessary, as in the case of Fannie Mae and Freddie Mac, while the Democrats have opposed it. In 2005, the Senate Banking Committee, then under Republican control, adopted a tough regulatory bill for Fannie and Freddie over the unanimous opposition of committee Democrats. The opposition of the Democrats when the bill reached the full Senate made its enactment impossible.

Barack Obama did nothing; John McCain endorsed the bill in a speech on the Senate floor.

A true instance where politics and finances cross. Why is it that absolutes are applied so easily in politics. Being against regulation when there are instances when it stops competition makes perfect sense but somehow this was used as a means of bludgeoning opposition to reforms needed at Fannie and Freddie. It is the worst sort of slippery-slope reasoning and for some reason it is never stopped.

I am old enough to remember the telecommunications industry before it was deregulated. You leased the same rotary phone every month from the time you took service until the time you died unless you really wanted some very expensive fees. In almost every example cited you went from one very expensive choice to an array of choices and price plans. Most of the time there wasn't much savings because the companies enticed you with an every expanding array of services in an attempt to keep their revenues up. The results have been phenomenal. It is only in areas like higher education, medicine, housing now and perhaps soon stocks with this bailout where the disconnect from the market becomes too large to sustain and thus we have a crisis that requires we all pay to fix the previous solution that is now a mistake.

How long this can go on only depends on how long the government can print money and have others accept it as something of value. My suspicion is that the bill will soon come due.