Be Careful What You Wish For
November 13, 2000
Financial markets favor political gridlock, and they've got it.
The next president will be viewed as illegitimate by many Americans. The Senate will be deeply split and the Republican majority in the House of Representatives will be even thinner.
Therefore, the next president will not get many laws passed -- even ones business favors. For instance, the foreign sales corporation tax law has been declared illegal by the World Trade Organization, and U.S. firms face penalties unless the law is changed quickly.
The next president will be forced to rely more heavily on executive orders and government regulations.
- Indeed, there are warnings that Bill Clinton is rushing to finalize a massive slew of "midnight regulations" by January 20.
- Among these are new ergonomics standards; blacklisting of government contractors that don't abide by various environmental and safety standards; new pension rules; and new securities regulations.
- The Environmental Protection Administration alone hopes to ram through some 88 new regulations.
Putting a moratorium on new regulations, as Ronald Reagan did in 1981, would allow time to review and possibly rescind some of them. But when George W. Bush's father imposed a moratorium, the Treasury Department was unable to issue regulations clarifying provisions of the tax law, burdening many businesses.
Although the U.S. regulatory process is fairly transparent by international standards, it is still far more difficult to stop or change a pending regulation than a pending piece of legislation.
What financial markets and business really want is not gridlock per se, but continuation of the status quo, in terms of continued economic growth and a higher stock market. However, the status quo cannot continue indefinitely.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, November 13, 2000.
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