• Tag Archives regulations

  • Biden Administration’s New ‘Woke’ Corporate Disclosure Rules Will Cost Companies Billions, Experts Warn

    Posted on by Azrael Comment

    Under the Biden administration’s leadership, the Securities and Exchange Commission (SEC) has proposed new “woke” corporate disclosure rules. A new form of social-justice-based financial regulation, the federal agency’s rules would mandate that companies track, report, and disclose a wide array of data on issues such as climate change emissions and diversity.

    This might poll well or look nice at first glance. But like any complex federal regulation, the woke reporting rules will have many unintended consequences—namely, they’ll cost businesses billions.

    “Business groups are trying to calculate just how much money public companies might have to shell out to comply with the Securities and Exchange Commission’s planned new ‘woke’ corporate disclosure rules, and initial estimates aren’t pretty,” Fox Business reports. “While no exact estimate can be determined, the SEC’s new disclosure mandates involving everything from the environment to board diversity is likely to cost U.S. public companies well into the billions of dollars.”

    The goal of the SEC regulation is to promote environmentalism and racial equality, with regulators likely having good intentions. But they are either unable or unwilling to foresee the adverse consequences that could accompany this virtue-signaling effort.

    Heritage Foundation senior fellow David R. Burton, a specialist in tax and financial regulation, laid out the many ways these rules will likely backfire in a letter to the SEC.

    He agreed that “requiring all public companies to develop climate modeling expertise, the ability to make macroeconomic projections based on these models and then make firm-specific economic assessments based on these climate and economic models will be expensive,” likely costing billions. 

    The result? 

    “These expenses would harm investors by reducing shareholder returns,” Burton explained. This means it’s not just Big Business, but the millions of Americans who invest in the stock market or rely on it for their retirement, who could bear the costs.

    Burton further warns that these woke disclosure rules would result in “the creation of a new compliance eco-system and pro-complexity lobby composed of the economists, accountants, attorneys and compliance officers that live off of [regulatory compliance].” Simply put, they would even further entrap firms into wasting money on red tape compliance costs.

    The Heritage expert also added that the rules would fuel a huge rise in costly litigation.

    Meanwhile, it’s unclear what, if anything, the SEC’s woke disclosure mandates would accomplish—beyond merely virtue-signaling, of course. 

    “This whole ESG thing is just one giant waste of time and money,” said Chris Whalen, chief of Whalen Global Advisors. “It’s just a big show that only benefits the consultants and the lawyers who are making money off of this.”

    Like this story? Click here to sign up for the FEE Daily and get free-market news and analysis like this from Policy Correspondent Brad Polumbo in your inbox every weekday. 

    Brad Polumbo


    Brad Polumbo

    Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Policy Correspondent at the Foundation for Economic Education.

    This article was originally published on FEE.org. Read the original article.


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  • Oregonians Are Panicking about Self-Serve Gas Pumps

    Posted on by Azrael Comment

    Oregon and New Jersey are the only two states that ban self-service gas stations. But thanks to a new law that went into effect on January 1, customers can now pump their own gas in Oregon, though only at stand-alone gas stations in counties with fewer than 40,000 residents. Elsewhere, the ban still holds.

    But even this tiny increase in freedom was apparently too much for some Oregonians. In a Facebook post that’s now gone viral, local news station KTVL polled their fans for their thoughts about the new law. Some did not take the news well.

    When Pumping Gas Is Just a Bridge Too Far

    Here are a few premium selections:

    “Many people are not capable of knowing how to pump gas and the hazards of not doing it correctly. Besides I don’t want to go to work smelling of gas when I get it on my hands or clothes. I agree Very bad idea.”

    “I don’t even know HOW to pump gas and I am 62, native Oregonian…..I say NO THANKS! I don’t want to smell like gasoline!”

    “I’ve lived in this state all my life and I REFUSE to pump my own gas. I had to do it once in California while visiting my brother and almost died doing it. This a service only qualified people should perform. I will literally park at the pump and wait until someone pumps my gas. I can’t even”

    Of course, every day, tens of millions of Americans in 48 states pump their own gas and — miraculously — manage to avoid setting themselves on fire or drowning in gas. And anyone who doesn’t want to end up like one of Derek Zoolander’s friends can turn to Lifehacker or Wikihow for guidance.

    Yet as hysterical as those reactions are, unfortunately, they’re actually not that far off from the state’s official justifications for the ban. As part of the Oregon law, legislators listed a staggering 17 different reasons to defend the state’s “prohibition on the self-service dispensing of Class 1 flammable liquids at retail.” According to the legislature, pumping your own gas is a “health hazard,” whereas requiring “properly trained” attendants to pump gas “reduces fire hazards.” In addition, self-service stations expose customers to “the dangers of crime and slick surfaces,” while leaving small children in the car to pay for gas “creates a dangerous situation.”

    Good, Old-Fashioned Rent-Seeking

    Meanwhile, established businesses are more than happy to fuel and exploit public panic for their own gain. For instance, New Jersey’s ban on self-service was heavily backed by the Gasoline Retailers Association, which faced greater competition from rival gas stations that allowed their customers to pump their own gas.

    Since those newer stations had no need for attendants, they cut costs, and passed on the savings to consumers in the form of cheaper gas. That threatened the bottom line for incumbent gas station owners, who lobbied the state legislature to ban self-service in 1949. (Oregon’s ban arrived two years later.) As Star-Ledger columnist Paul Mulshine recounted, any feigned concerns for public safety were merely a “cover story” for something “a lot more devious and corrupt.”

    A combination of fear-mongering and rent-seeking is one reason why many regulations that seem so obviously silly or pointless persist. A new book by the Institute for Justice details how “bottleneckers” thrive on regulatory bottlenecks, particularly in the field of occupational licensing.

    It’s Not Just Gas Stations

    Take Louisiana, which is the only state in the nation that requires a license to arrange flowers. When the Institute for Justice sued on behalf of several aspiring florists, the Retail Florist on the Louisiana Horticulture Commission (yes, that’s a real position) testified that the law was necessary to protect customers from the menace of exposed picks, broken wire, and infected dirt. Incredibly, a federal judge bought that argument, and ruled that the florist license was “rationally related to the government interest of public welfare and safety.”

    Or consider Florida’s license for interior design, which requires six years of education and training to obtain. When the state legislature considered a repeal bill, one licensed interior designer testified that using the wrong fabrics could spread infectious diseases in hospitals.

    “What you’re basically doing,” she told lawmakers who backed deregulation, “is contributing to 88,000 deaths every year.” Ultimately, the reform failed, meaning Florida is still one of just three states to license the practice.

    Perhaps not coincidentally, Oregon’s licensing laws rank as the eighth most burdensome in the country. In the Beaver State, licenses to paint nails, cut hair, or install drywall all require vastly more experience and training than a license to become an emergency medical technician, who provide life-saving care to those who may need it (like people terrified of pumping their own gas).

    Reprinted from Forbes

     

    This article was originally published on FEE.org. Read the original article.




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  • You Can’t Regulate Away Crony Capitalism

    Posted on by Azrael Comment

    In a time of political polarization, it can be reassuring when the left and the right agree on an issue. One such area of consensus is the recognition of crony capitalism where big business and government work together for their own interests through systems of reciprocal favors.

    The Taxi Industry Is a Prime Example of Crony Capitalism

    An example of crony capitalism can be seen in the conflict between rideshare companies, like Uber and Lyft, and the taxi industry. Because Uber poses a competitive threat to the taxi business, the taxi industry has pushed hard to ban Uber from cities across the country by lobbying local governments with varying degrees of success.

    The taxi industry has enjoyed a monopoly for a long time thanks to their close relationship with government. By creating occupational licenses and charging what is often several hundred thousand dollars for a medallion, the taxi industry posed massive barriers to entry on their competition. Now, this government-sanctioned monopoly is facing an inevitable dissolution because of the innovation of ridesharing companies.

    Although both sides of the political spectrum may agree that relationships like the one between the taxi industry and local governments are a problem, they often disagree on the solution.

    The Solution of Increased Regulation Is No Solution at All

    The solution usually proposed by the left is to give the government more power to regulate business. The theory is that if we can increase the scope of the government, then government can clamp down on big business. But although this may sound good initially, it ignores the incentives created by government regulations.

    When government has more power to regulate business, businesses will respond by shifting more of their resources towards influencing the government to intervene in their favor. Businesses are incentivized to twist the law to their own advantage. Put simply, when the government has the power to control businesses, businesses will end up controlling the government.

    Increasing the scope of government over business accelerates the problem of crony capitalism in a cyclical manner which resembles a positive feedback loop. The government is given more power to regulate business, so businesses shift more resources towards gaining advantages using government power, and on and on it goes. Although many people who want the government to regulate business may have good intentions, in reality, this proposal ends up contributing to the very problem it seeks to solve.

    Another costly effect of regulations is that they disproportionately harm small businesses. Bigger businesses often have the resources to deal with costs from regulations (or to twist regulations to their own advantage), but small businesses frequently do not. Regulations impose costs on businesses in the forms of both time and money, neither of which small businesses can afford to re-allocate if they want to remain competitive in their market.

    Zero-Sum, Rent-Seeking Behavior

    Regulations, then, decrease competition and shift the market towards monopoly in two ways. Not only do they incentivize companies to use government power to their own advantage and to the detriment of competitors, but regulations also bury small businesses in compliance costs.

    Government regulations lead to what economists call “rent-seeking.” Rent-seeking, in this case, is when businesses divert their resources towards capturing a bigger portion of the existing wealth in a market instead of using their resources to create new wealth.

    One of the defining characteristics of a free market is that it allows for the creation of wealth instead of merely the spread of existing wealth. In a free market, people can trade resources in a way that is mutually beneficial and produces a net gain for each party. But the introduction of government force into the equation shifts things towards a zero-sum game where one party benefits at the expense of another.

    Government force in the form of regulations incentivizes this zero-sum, rent-seeking behavior. What this then leads to in a market is inefficiency, corruption, and less competition.

    Economist Frederic Bastiat may have summed it up best when he said, “As long as it is admitted that the law may be diverted from its true purpose—that it may violate property instead of protecting it—then everyone will want to participate in making the law, either to protect himself against plunder or to use it for plunder.”

    The solution to crony capitalism that logically follows from all of this is quite simple. The solution is to decrease and limit the scope of government power. The less power the government has to regulate businesses, the less incentive businesses have to get in bed with the government. If government intervention is decreased and limited to only what is absolutely necessary, we will see the problem of crony capitalism radically diminish in both frequency and severity.

    Proposals for government regulations are a classic case of why policies must be based on more than merely good intentions. If one wants to evaluate a proposed policy, one of the best ways to do so is to consider the incentives that it will produce and the effects those incentives will have. Government regulations are a case where, although unintended, the results are very often negative.


    Sam Dugan

    Sam Dugan is a fourth-year undergraduate student at West Chester University of PA, studying economics and philosophy.

    This article was originally published on FEE.org. Read the original article.


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