When conservatives and Republicans bemoan job-killing regulations, liberals and Democrats typically respond that the GOP wants to help businesses profit by polluting our rivers, or something. Over at the liberal Mother Jones, though, Kevin Drum takes a different, and more interesting, tack today.
The headline of the post caught my eye: “Corporations Hate Regulation, Until They Love It.” The url of the post (and presumably the original headline) is even more interesting: “Why Businesses Love Regulatory Complexity.”
But Drum’s thesis, as far as I can tell, is that corporations cause the complexity of the regulatory code by carving out exemptions and loopholes, which they can then steer through. He’s right in a lot of ways, but he’s ultimately led astray, I think, by his wedding business interests with being left alone by government.
Drum points out that big Wall Street bankers are experts at navigating complex regulation, and thus “no one should take too seriously Republican complaints about burdensome regulations strangling the economy….”
Later on, he drills a tiny bit deeper: “businesses don’t like simple rules, because simple rules are hard to evade. So they lobby endlessly for exemptions both big and small….”
Finally, Drum gets very interesting when he comments: “Complex rules, conversely, are the meat and drink of $500-per-hour lawyers and whiz kid engineers. If the rules are complicated enough, smart lawyers can always find ways around them. And American corporations employ lots of smart lawyers….”
If you’re anything like me, right now you’re seeing the distinction that Drum is missing, and thus the real reason you sometimes find corporations loving regulatory complexity.
Here’s the distinction: Some businesses are bigger than others. Some businesses can afford to hire as their lobbyists the very staffers who wrote the bill whose implementation is now being hammered out. Some businesses can afford to hire $500-an-hour lawyers to navigate the rules.
Some businesses cannot.
So, if you’re a big business, even if you don’t like a law, you can be confident that you’ll survive it better than your smaller competitors will. And that’s one reason why the biggest businesses often favor regulation in the first place while smaller guys oppose it. I call it “The Overhead Smash.”
Philip Morris supported Obama’s federal regulation of tobacco, while all the smaller tobacco companies opposed it. Mattel supported Obama’s toy-safety law, while smaller toymakers opposed it. Big food producers supported Obama’s food-safety bill while some smaller producers opposed it. Wal-Mart backed a higher minimum wage and an employer mandate in health care while smaller employers opposed it. H&R Block and Jackson Hewitt supported stricter IRS rules on tax preparers, while smaller preparers opposed them.
It happens in finance, too. I would not be surprised to see Dodd-Frank, on net, benefit the very largest banks.
I recommend liberals, when thinking of government’s effects on business, distinguish between the effects on the big guys and the small guys.
