The Specter of Deregulation

There is a specter haunting America – the specter of deregulation.

Or, at least, that is the impression one gets listening to politicians talk these days. During the second Presidential Debate, Senator Obama stated with regard to current economic difficulties the “the biggest problem in this whole process was the deregulation of the financial system.” He did not say what deregulation he was referring to, which is not surprising. Attempting to tie financial problems to a specific piece of deregulation would be complicated, open to falsification in a way that more general claims are not, and would not be as useful in drumming up support for increased regulation in other areas. It is much better, from Obama’s perspective, to speak of “deregulation” and “regulation” as general categories, without either knowing or caring much about the specifics.

McCain, for his part, has largely declined to defend deregulation either specifically or in general, preferring to highlight an instance (Fannie and Freddie) where he favored more regulation of the financial sector than did his Democratic opponents. This is in itself not so surprising. How the author of McCain-Feingold and a supporter of Sarbanes-Oxley is supposed to be tagged as Mr. Deregulation is a little beyond me (in fact, one might question where a Congress that gave us Sarbanes-Oxley and McCain-Feingold could really be as gripped by deregulation-mania as some people are suggesting). But while this is not surprising, it is disappointing. For, as self-described “progressive” economist Glenn Loury has noted, deregulation is an idea that is desperately in need of defending at the moment. Major deregulation over the last few decades in areas such as trucking, the airlines, and telecommunications have brought major benefits to the American economy and to the American people, and there are still plenty of areas that could benefit from being subject to fewer regulations, not more.