Does Regulatory Backlash Explain the Midterm Elections?

On the front page of the NYT this morning:

Mr. Obama, having just cut a painful deal with Republicans intended to stimulate the economy, can ill afford to be seen as simultaneously throttling the fragile recovery by imposing a sheaf of expensive new environmental regulations that critics say will cost jobs.

The delays represent a marked departure from the first two years of the Obama presidency, when the E.P.A. moved quickly to reverse one Bush environmental policy after another. Administration officials now face the question of whether in their zeal to undo the Bush agenda they reached too far and provoked an unmanageable political backlash.

Finally! The light dawns. As I showed in my recent PPI policy memo, the regulatory burden actually rose under George Bush, with most but not all of the increase concentrated in homeland security. The Obama Administration then ladled another hefty layer of regulation on top of the Bush regulatory burden. Let me reproduce a chart from the memo.

The problem is that adding more regulations in a period of weak economic and job growth is precisely the wrong thing to do, and people know it in their hearts. If Obama really wants to support jobs and innovation now, he can’t be regulating willy-nilly.

That suggests the correct middle ground is pro-growth, pro-fairness, and sane regulation.

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About Michael Mandel 126 Articles

Michael Mandel was BusinessWeek's chief economist from 1989-2009, where he helped direct the magazine's coverage of the domestic and global economies.

Since joining BusinessWeek in 1989, he has received multiple awards for his work, including being honored as one of the 100 top U.S. business journalists of the 20th century for his coverage of the New Economy. In 2006 Mandel was named "Best Economic Journalist" by the World Leadership Forum.

Mandel is the author of several books, including Rational Exuberance, The Coming Internet Depression, and The High Risk Society.

Mandel holds a Ph.D. in economics from Harvard University.

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