The regulated citizen

I’m neither an anarchist nor a libertarian.  I accept that the government must at times make me an offer I can’t refuse – though, I must insist, in a manner consistent with our customs and traditions.  I’m okay with paying two bits at the toll plaza, and I put up with the yearly inspection to get a state sticker for my SUV.

But, for both practical and moral reasons, I object to losing my freedom in any meaningful degree.  I have a quarrel with government regulations that protect me against my will – with being treated, in essence, like a minor.  And I believe governmental ambition to control and regulate my actions has, in recent years, surged from a meandering trickle to a mighty flood.

This is not – or not entirely – a partisan or even a political issue.  It’s foundational:  it goes to the heart of the American people’s character and moral standing, of what we allow the immense power of government to do and to be.

Thus the trend began with former President Bush, after the Enron scandal and the horrors of 9/11.  Both events stoked the passion to regulate.  Costly governance and accounting mandates were imposed on companies following the collapse of Enron.  Bizarre, time-consuming, and degrading rituals were imposed on travelers to avoid another terrorist attack.

Other restraints on freedom became more pervasive during that time.  Privacy regulations made it impossible for one hospital to exchange information with another, for example.  The law increasingly treated smokers like adulterous women of biblical times.

The financial crisis had the same effect as 9/11.  Candidate Barrack Obama blamed the crisis on “deregulation,” and he has stuck, once in office, with that interpretation.  Yet  the wikipedia page on financial regulations lists no less than seven federal agencies with regulatory power over the financial markets:  besides the the Fed and the SEC, there’s the Federal Deposit Insurance Corporation, the Commodities Futures Trading Commission, the Office of the Comptroller of the Currency, the National Credit Union Administration, and something called the Office of Thrift Supervision, no less.

I don’t know what caused the financial crisis, and I doubt anyone does.  But this was not an under-regulated activity.

President Obama, in any case, seems never to have met a regulation he didn’t like.  Since his inauguration, the itch to control – to portray citizens as helpless children, in need of a responsible adult – has gone on steroids.

The federal government has regulated interactions between credit card companies and their customers.  Ordinary people, the law now presumes, don’t know what a payment deadline is.  They can’t imagine that failure to pay one’s debts brings unpleasant consequences.  They need protection from the credit card companies’ “profitable and punitive practices.”

Our health system is in the throes of massive regulatory intervention.  I will say nothing more, since the subject is an obsession of the political class and, hence, of the media.  But health care is a respectable chunk of our economy, and any legislation that is over 2,000 pages long must come pretty close to telling me when I’m allowed to use the toilet.

President Obama, who along with his predecessor has practically made the US government a majority owner of the banking industry, recently lashed out at “fat cat bankers” and – yes – called for tighter regulation of the banks.  At the President’s urging, the House passed a 1,279-page bill said to be the most ambitious regulation of the financial sector “since the Great Depression.”

Timothy Geithner and Larry Summers explain:  “In recent years, the pace of innovation in the financial sector has outstripped the pace of regulatory modernization, leaving entire markets unregulated.”  Why is this bad?  Because bankers are “predatory lenders” and citizens are helpless meat.

The EPA has just declared carbon dioxide, which is emitted by vegetation as well as industry, to be a threat to the public health.  This opens the door to the regulatory transformation of all industry, either by direct government mandate or by lawsuit.

I won’t argue for or against any one of these measures.  Taken together, they represent a broad advance of government power into the lives of the American people.  It’s with this totality, this trend, this mindset, that I wish to pick a fight.

I said I had practical and moral objections to intrusive government regulation.  Let me explain what I mean.

From a practical standpoint, regulations can only be pursued to a certain point before they strangle economic activity.  If EPA declares me a poison-maker, I won’t invest a dime in my factory.  If the Secretary of the Treasury calls me a predatory lender, I will severely cut back my loans.  Eventually, wealth creation will move to a freer environment beyond our borders.

When is the point of no return reached?  That’s an empirical question, which I will leave for economists to debate.

Far more important is the moral objection to government paternalism.  Moral adulthood means the exercise of free choice.  Living a good life means making the correct choices for ourselves, our family, and our community.  Deprivation of freedom makes moral sense only with regard to children, the incapacitated, and criminals.  By insisting on our helplessness, by forbidding us our choices, including even our mistaken choices, the government is usurping the moral prerogative of the people.  We are being protected from failure, but also from the good life.

Regulations entail a class system destructive to liberal democracy.  We must all be either regulators or regulated.  The former must stand above the latter, and be subject to none of their character flaws.  Regulators can’t be weak or wicked – yet the regulated must be one or the other.  To the usurpation of the individual moral life, government intrusion adds the violation of the most basic principles of equity.

A class system will engender corruption.  If one regulates bankers, car-makers, credit card companies, industrial carbon emitters – if one commands trillions without any particular productive goal in mind – the opportunities for favoritism and shakedowns are infinite.  Corruption will happen.  The regulators, having absorbed all morality to themselves and risen above the common herd, will steal our money with a clear conscience.

When we complain, they will labor to make us ever more helpless and victim-like in fact, as well as in principle.  Those with the urge to regulate love the people as little children, but fear and hate them as adults.  And here we circle back to the beginning, when I said this was a foundational, rather than a political, question.

We elect those who make and execute the laws.  They are our servants, and if we behave like grownups we will treat them as such.  If we allow them to infantilize us, to shove us behind the bars of a comfy prison-cradle, who then should we blame?

5 Responses to The regulated citizen

  1. Missy says:

    This post is why your blog is one of very few I’ll read past the first paragraph.

  2. Adam says:

    Your remarks about a class system and the fact that the proposed health care legislation is 2,000 pages are highly related. Though I’m not about to attempt the herculean feat of reading the whole bill myself, I’d wager money that a sizable minority, if not a small majority, of the bill is not dedicated to handing out favors to the constituents of the politicians whose votes are needed to pass the bill, rather than on telling people when they’re allowed to use the toilet.

    In other words, I very much believe that the “favoritism and shakedowns” are already the most important part of what drives legislation in the nation’s capital.

  3. j says:

    There is no such thing as a free market and no such thing as deregulation. Even ancient Rome had business laws.

    The financial mess WAS CAUSED almost ENTIRELY due to poor or non-exsistant regulation. WHY? Because For-Profit compainies are only interested in making money and could care less about how they do it. If corporations acted like good citizens and were responsible we would not need all the regulations to begin with. The regulations are the fault of companies that do not behave ethically. Unfortunately those same regulations effect the other folks who have morals.

  4. Chris says:

    @ j: Please provide some citation detailing your causality.

    Lets walk through the sequence of events here:

    1. Congress (both parties mind you) sells homeownership as a “right.”

    2. Congress through legislation and in conjunction with the Federal / Private hybrid FannieMae and FreddyMac pressure lenders to lower credit/lending standards for mortgages, under the auspices of #1.

    3. Banks and brokers start issuing loans to individuals who would not have qualified. This starts the flood of new homeowners

    4. Loans start going out. Some fly by night companies start going into the mortgage business and start issuing crazy interest only loans and such (some of the big names companies also started doing this too).

    5. Housing prices start going through the roof (more demand).

    6. Housing is seen as an investment that will always go up so brokerage houses start packaging these loans into various investment types.

    7. People start defaulting on loans the probably should not have qualified for, nor should they have signed to begin with.

    8. Bank and brokerages, as well as individual investors, that had been using these mortgages as a major part of their financial structure hit the skids, hard.

    9. This effectively pops the bubble, and other sectors of the economy hit the skids.

    Is government really the best choice to clean up a government created mess?

    Now to your “profits are evil” comment. This displays an absolute ignorance of how a market is supposed to work. What do you think happens to the profits of these evil corporations? Do think that the CEO of Bear-Sterns gets his Scrooge McDuck on and swims around in his money and laughs manically? The money goes back into the economy, it is used to expand the company, hire more workers, build new facilities etc. That helps the economy, no? That creates jobs, no? Companies are supposed to by profitable, if they are not they fail.

  5. Brutus says:

    A good part of the regulations put in place are meant to protect the average citizen from the unscrupulous operator. Yeah, there’s a measure of paternalism in that, but consumer protection is to most of us a worthwhile trade-off, especially against known abuse like melamine in toothpaste or lead in paint.

    It is strange to characterize regulation as a means to protect the citizen from failure. Normally, I’d be happy to see a fool parted from his money. The problem of recent decades is that amongst the scams, cons, usury, and plain old thievery, the citizen has become a walking mark to be exploited by regulated and unregulated industries alike. And that’s if the industry doesn’t instead go directly to the source — the treasury — and game the system or become too big to fail, the new kind of monopoly.

    All that said, I’m in agreement with your identification of the trend and the infantile attempts to insert onerous regulation into the most minute aspects of commerce. As with most things, it’s a balancing act, and we have veered pretty far toward making citizens even more helpless and unable to learn from setbacks.

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