Business Ethos Blog

If You Can’t Legislate, Regulate – A Summary

Dr. David Mielke, Retired Dean of the College of Business at Eastern Michigan University

Dr. David MielkeIn the closing weeks of 2015, we saw a number of important bi-partisan bills, from road funding to the federal budget and tax bill, pass in Congress.  The legislation demonstrated that Congress can work.  However, we also saw a number of new regulations promulgated by the Obama administration that did not go through the legislative process.  What significant regulations were instituted?  Will the impact improve the economy?  Should Congress instead have worked on the issues?  Were the regulations the “Right Thing to do?”  Let’s look at some issues:

1. The EPA took major strides toward implementing President Obama’s climate agenda in 2015.  No rule is more controversial that the carbon emissions limits for existing power plants.  Power plants will be required to cut emissions by 32% by 2030.  This will have a major impact on the coal industry and coal fired power plants which still supply the majority of electricity in the US.  Congress passed legislation to overturn the carbon rule, but President Obama used a pocket veto to kill the bill.  Dozens of states are challenging the rule in federal court.

2. The EPA also announced that it is tightening the ozone limits for air pollution to 70 parts per billion, imposing tougher restrictions on communities than the previous standard of 75.  Business groups call it the most expensive regulation in history, with the National Association of Manufacturers suggesting the rule could cost $1.1 trillion to comply.  A number of lawsuits have been filed from industry and a handful of states.

3. The EPA also passed a new water pollution rule.  The EPA is already responsible for regulating major bodies of water, but the new rules would give the agency more authority over smaller water sources like streams and ponds.  Farmers are concerned the EPA could misuse the rule to regulate small ponds and temporary puddles on their land.  Dozens of states are challenging the rule in court.

4. The Department of Labor is pressing ahead with new overtime protections that will raise pay for nearly 5 million workers.  Many workers do not qualify for overtime pay under the current standards.  Anyone who makes more than $23,660 per year is not eligible.  The new standard would raise the cutoff limit so workers who make less than $50,440 qualify for time and a half.

5. The Labor Department also proposed rules for retirement investment advisers.  Retirement advisers would be required to act solely in the best interest of their clients.  The Obama administration argues the rule will protect investors from bad investment advice.  Republicans argue that the rule will drive up the price for consumers and keep some from seeking out advice.  The fiduciary rule survived a challenge in the recent budget bill.

6. If the EPA was the most controversial agency in 2015, the National Labor Relations Board was a close second.  The NLRB passed a new union election rule, which speeds up the process by which worker can organize.  President Obama blocked efforts by Congressional Republicans to overturn the rule.  The NLRB also ruled that parent companies, such as McDonalds, Burger King and all franchise companies can be held responsible and sued for the labor violations of their franchisees.  This rule is being challenged in court.

7. The Department of Housing and Urban Development released rules to root out segregation across the country.  The ruling requires public housing to be developed in nicer neighborhoods. This rule has created a major discussion about whether or not low income people are better off living in more affluent neighborhoods.

8. The Securities and Exchange Commission issued a rule that will require public companies to disclose the pay gap between their top executives and other employees.

Which one of these regulations will spur the economy?  Will any of the regulations provide benefits to business or will all add additional costs?  If the EPA and others had concerns about the environment, why wasn’t there a push by the Obama Administration to revisit, revise or amend the existing environmental laws?  Isn’t there an obligation to the general public to have Congress discuss and debate major issues, such as those discussed here before regulations are imposed and the regulations are challenged in court?  Were these regulations the “Right Thing to do?”  Bypassing Congress and the American public to have the opportunity to discuss and debate these important issues and to have Congress act, does nothing but increase the public distrust of government and leads to the rancor we see in the political system overall.  It seems the primary beneficiaries in the economy for many of these new regulations are the attorneys who have many challenges to address in court.