Obama walks fine line with review of regulations

As Republicans flex their muscles in Congress, the Obama administration Tuesday launched a broad review of government regulations that appears designed to blunt attacks on new laws governing everything from health care to Wall Street.

But the Obama administration, which denies the review is motivated by politics, needs to walk a fine line. While the White House presumably needs to show some results from its high-profile review, it also wants to avoid rolling back any substantial legislative accomplishments of the past two years.

Business groups have recently stepped up their attacks on new and proposed regulations that have been a cornerstone of the Obama administration’s policy agenda, staring with health care. House Republicans this week are planning to push through legislation that would repeal the sweeping health care reform, although the bill is expected to die in the Senate.

Business groups also have taken aim at new regulations on the financial industry and on environmental regulation related to global warming.

“We spend about $1.7 trillion a year on regulation and put out much of it," Tom Donohue president of the U.S. Chamber of Commerce told MSNBC last week. "Much of it is needed and we support it. But a lot of it, particularly in the last three years, has moved from a government of the people to a government of the regulators, or the regulating agencies."

The new policy on business regulation reflects “a common sense approach to how we can bring our regulators system into the 21st century,” according to a senior administration official who briefed reporters on condition of anonymity.

The executive order outlining the review calls for all federal agencies to write ”cost-effective, evidence-based regulations that are compatible with economic growth, job creation, and competitiveness." Government regulations should be “transparent, coordinated and simplified.”

Some skeptics said the move seemed to represent a shift in the administration’s philosophy of government rule-making.

“What Obama seems to be doing is reverting to the old default position where market discipline will solve all our problems,” said Cornelius Hurley, a Boston University law professor and former Federal Reserve lawyer. “My concern is that it’s more a reaction to the new Republican Congress and outreach to the business community than a reflection of good policy on his part."

The White House denied that politics were behind the new regulatory review.

“The notion that (the announcement) is left or right or center frankly is less relevant than: Are we doing what’s good for the American people?” said the senior administration official. “I would hope that’s something that people on the left and right would agree on.”

Consumer advocacy group Public Citizen disagreed, saying in a statement on its website: "This is the wrong way to think about regulation, and it is the wrong direction for the American people. Markets cannot function without proper regulation."

The executive order is the latest move by the administration to mend fences with business leaders who have complained that increased government regulation is weighing heavily on the feeble economic recovery. Obama recently named William Daley, a former commerce secretary and banker, as his chief of staff.

Business Roundtable's warning
"The Business Roundtable, an influential lobbying group, warned this month of a “regulatory tsunami” in a letter to Rep. Darrell Issa, R-Calif., the newly appointed chairman of the House Oversight and Government Reform committee. Attached was a list of dozens of new rules the group said are “hindering investment and job creation." Those include:

  • Financial Reform - The group cited a number of provisions of the Dodd-Frank financial reform legislation that it said are “unnecessary, do not constitute 'reform' in any recognizable sense, and are burdensome and costly.” Those include a new federal right to access corporate proxy statements; disclosure of the ratio of CEO pay to the average workers’ salary; disclosure of the use of so-called “conflict minerals” mined in Congo; new financial reporting requirements for natural resources producers; payments to “whistle blowers” who report securities law violations to the SEC; proposed regulation of derivatives trading and other rules governing executive compensation.
  • Health care, retirement - Various provisions of the new health care reform law will “result in cost increases,” the group said, “without commensurate benefits to employees."  The group cited certain rules “grandfathering” existing health plans; a tax on so-called “Cadillac” health plans; rules governing electronic recordkeeping; elimination of tax breaks for retiree drug subsidies; restrictions on “limited” health plans; reporting requirements on premium increases; and a provision requiring more companies to file 1099 tax forms. The Business Roundtable also took issue with proposed regulations governing retirement plans, including the way pensions account for assets from one year to the next.
  • Environment - The Business Roundtable also cited an “aggressive” environmental regulatory agenda that relies on “unproven technology” to limit greenhouse gases and “threatens a significant number of electric power plants.” The group singled out certain rules governing hazardous air pollutants and said the cost of compliance could reach more than $13 billion through 2013 — roughly four times EPA estimates.

White House officials said Tuesday that the executive order was the result of a policy that’s been in place for months and not a response to the call from the business community for a rollback of government regulations.

“While we are interested in comments from everybody, no particular list is going to be organizing our efforts," the senior administration official said in the briefing.

Though last year’s Dodd-Frank financial reform law ran more than 2,000 pages, much of the specific rule-making was left to new and existing financial regulators. That process, which is now reaching the most contentious phase of specific, detailed regulation, is the subject of heavy lobbying by the companies subject to the new regulations.

“We're going to write 250 new rules that completely rewrite the script for how financial companies operate for the next several decades,” said John Taft, chairman of the Securities Industry and Financial Markets Association, an industry trade group. “It's absolutely imperative that we get it right.”

The financial services industry Tuesday was looking for fresh details on the rollout of new financial rules. Regulators were expected to propose criteria for deciding which market players other than banks, such as hedge funds, could threaten the financial system and require greater scrutiny by the Federal Reserve.

The Financial Stability Oversight Council, created to safeguard the financial system after the 2008 panic, was set to release a study recommending how to put into practice the so-called Volcker Rule, which would ban banks from trading with their own capital for profit in securities and other financial instruments.

The Federal Deposit Insurance Corp. also is meeting to consider proposals for curbing pay practices deemed too risky, another aspect of the Dodd-Frank law.

With memories of the financial crisis fading, the Obama administration seems to be rewriting its efforts at financial reform, said Hurley, the law professor.

“My concern is really with the tone that is set by this executive order that somehow all of a sudden regulations — both existing and on the drawing boards — need to be cast in a new light and that new light seems to be a vestige of the Clinton/Bush White Houses, which is 'regulation bad, markets discipline good,’" he said.

The Obama administration indicated it will take a tough line defending the health care law. On Tuesday, the White House dismissed the planned House vote, saying it's not "a serious legislative effort."