Tuesday, November 22, 2011

Romney is regulating his party

Continuing Mitt week, we'll now address his views on the (oh so sexy) role of regulation in the economy. Those who have been watching the debates have surely noticed that most of the candidates either want to destroy or neuter most government agencies (if they can remember them), claiming that the regulation they impose is the cause of the economic malaise. As the burden of regulations imposed on businesses during the Clinton and Bush administrations wasn't any less than it is now, it appears that the theory falls flat in the face of a bit of analysis. The economist Jared Bernstein, for example, weighs in here. So, does Romney toe the party line on this or provide a nuanced perspective on a complicated issue? I'll quote directly from page 136 of Mitt's No Apology:
The Republican Party has ong been an opponent of overregulation, and rightly so. But I believe some people in my part are overly fond of bashing regulation as the constant enemy of growth and competition. They are certainly right about some regulations, but there are wrong when it comes to others. The rule of law and the establishment of regulations that are clear, fair, and relevant to contemporary circumstances provide the predictability and stability that is needed for investment and risk-taking.
Back when I was at Bain Capital, one of our first venture capital investments was in a technology that allowed machining companies to reuse their cutting oil--the cooling lubricants that are used in drilling, routing, and cutting metals. New government regulations had just been established  to prevent companies from simply throwing used oils down the drain. The regulations ultimately led to better machining industry practices, but because they weren't enforced for almost a decade, we lost our investment. Michael Porter is convinced that, far from being a drag on the economy, "National advantage is enhanced by stringent standards that are rapidly, efficiently, and consistently applied." I wish more Republicans and Democrats alike understood that important fact. [emphasis his]
It looks like Mitt is two for two thus far on the economy this week. While some regulations needlessly distort markets, others rightfully force our companies to innovate, which results not only in a cleaner and safer planet, but also one in which American firms can compete with those abroad. One of these days I'll post something he gets wrong regarding the economy, but for now I'm not seeing it.

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