This week’s edition of The Economist has an excellent article on over-regulation in the United States, and how it is stifling economic growth. For example, America’s share of initial public offerings (IPOs) fell from 67% in 2002 to just 16% last year. Firms increasingly listed their shares abroad to avoid the increased cost and difficulty of listing them in America in the wake of Sarbanes-Oxley legislation, which not surprisingly, passed in 2002.
As if Sarbanes-Oxley did not harm American financial competitiveness enough in 2002, the 2010 Dodd-Frank Act will likely negatively impact the industry even more. The Act contains some 848 pages of law. There are also additional rule clarifications, some of which are hundreds of pages. The so-called “Volcker rule” in particular, includes “383 questions that break down into 1,420 subquestions.” One industry study estimates that this single rule could cost companies and investors more than $350B.
Jaime Dimon, the chairman and CEO of JPMorgan Chase, summed up the law’s unnecessary complexity best:
The financial industry is not the only one suffering under the crushing weight of unnecessarily complex and ham-fisted regulation. Despite its stated intent to lower costs, President Obama’s healthcare legislation will do anything but reduce regulatory complexity, and by extension, costs. Next year, the number of federally mandated categories of illness or injury for which hospitals can claim reimbursement from the government will expand from 18,000 to 140,000. According to The Economist, these new categories contain nine codes classifying parrot-related injuries, and three codes that cover burns related to flaming water skis.
Yes, there are actually nine codes that cover parrot-related injuries. Why? Because some government bureaucrat deemed it was necessary to cover every permutation and combination of the hazards associated with parrot cohabitation. What’s worse is that we, the people of the United States, paid this bureaucrat to do it.
A recent study for the Small Business Association has found that regulations add $10,585 in cost per employee. Is it any wonder that unemployment is still at 8.3% today?
Regulations are a necessary evil in today’s business world. However, unnecessarily complex regulations are just plain evil. The Dodd-Frank Act seeks to accomplish much of what the original Glass-Steagull Act of 1932 did, only Dodd-Frank is 23 times longer.
Regulation simply need not be this stupid. It should just be simple.