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Obama's Contradictory Views On Regulation

By Big Tent Democrat

The big claimed achievements of the Obama Administration are largely the paper creation of new regulations for the health insurance market and the financial markets. Matt Yglesias extravagantly claimed:

TARP gave Barack Obama a once-a-century opportunity to transform the American economy through state control over the commanding heights, an opportunity he deliberately declined [. . .]

Actually, what the Obama Administration claimed, not only with regard to financial markets but also the health insurance market (and what it seems to claim about everything) is that regulation is "the third way." As Ed Kilgore wrote:

To put it simply, and perhaps over-simply, on a variety of fronts (most notably financial restructuring and health care reform, but arguably on climate change as well), the Obama administration has chosen the strategy of deploying regulated and subsidized private sector entities to achieve progressive policy results. This approach was a hallmark of the so-called Clintonian, "New Democrat" movement, and the broader international movement sometimes referred to as "the Third Way," which often defended the use of private means for public ends.

Whether these were the right choices is not subject of this post. Rather, the jarring contradiction of President Obama's critique of government regulation in the face of the choices he has made makes any sense. President Obama wrote:

Sometimes, those rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs.

It is a strange thing for a President who has relied almost exclusively on a regulatory governance framework to write. The President preemptively responded to this critique as follows:

Over the past two years, the goal of my administration has been to strike the right balance. And today, I am signing an executive order that makes clear that this is the operating principle of our government.

I'm sure every Administration would say the ssme thing. But let's consider what the Obama Administration has really done. At every turn, for better or worse, the Obama Administration has eschewed direct government intervention and chosen "instrusive" government regulation instead. The question of the efficacy of such regulation ( the regulatory capture issue)) is important, but again not the subject of this post. Again, the jarring contradiction of what Obama is saying and what he did is my point here.

Consider again the health bill. The idea of a new public insurance program was rejected by the Obama Administration in its dealings with Congress. Instead a complex system of regulations and state based exchanges was erected. President Obama wrote:

As the executive order I am signing makes clear, we are seeking more affordable, less intrusive means to achieve the same ends [. . .]

That certainly was not the watchword on health insurance reform. Medicare (or Medicaid) Buy-in with a subsidy system would have been much less intrusive and costly (and much more effective) reform of the health insurance market than the health bill that was actually enacted.

The reality is the Obama Administration has made a choice to impose more regulations (the efficacy of these regulations is another issue) at every turn. It has rejected other forms of government intervention.

On a political level, this is obviously triangulation by Obama. It is no coincidence that Darrel Issa said:

I applaud President Obama for joining what must be an effort that stretches beyond ideological entrenchments to identify the regulatory impediments that have prevented real and sustained job growth in the private sector[.]

Unlike Clintonian triangulation, which was mostly about nothing (school uniforms!), welfare reform the exception, Obama has basically taken a shot at his own governing philosophy.

I do not think this turns out very well.

Speaking for me only

Full post as published by TalkLeft on January 19, 2011 (boomark / email).