President Barack Obama’s executive order requiring agencies to evaluate costs and benefits of their rules and regulations is welcome news, but comes too late for potential Facebook investors.
Goldman Sachs won’t allow Americans to invest in its private offering of $1.5 billion in Facebook shares, because the transaction might violate a Securities and Exchange Commission regulation.
So foreigners will be scooping up the shares of an American company, in a deal organized by an American investment banking firm, with Americans left out in the cold. With inefficient regulation, foreigners win, Americans lose.
Obama has waited two years to issue an executive order similar to those issued by President Ronald Reagan in 1981 and President Bill Clinton in 1993. Why wasn’t the administration following this cost-benefit calculation all along?
The new health care and financial regulation laws require burdensome regulations. And the administration continues to churn out many regulations, listed at reginfo.gov, that discourage employment and investment in America.
The health care law would require, beginning next year, that firms submit a Form 1099 to the Internal Revenue Service with names of vendors from whom they have purchased $600 or more in goods and services.
This will impose new burdens on companies, such as having to elicit tax ID numbers of suppliers, add up purchases, and submit multiple forms.
The financial regulation law sets up 29 Offices of Minority and Women Inclusion in the 12 Federal Reserve regional banks, the Treasury Department, the Securities and Exchange Commission, and other agencies to make sure that financial firms and their subcontractors practice “fair inclusion” of minorities and women.
“Fair inclusion” is to be defined by the offices’ directors. Firms could be guilty of breaking the law even if no minority or female applied for a job.
Firms in other countries don’t have these diversity quotas, so they can spend their time making profits and nudging their clients toward private offerings of Facebook shares.
Obama could start his cost-benefit regulatory analysis at the Interior Department, which stopped issuing permits for drilling in the Gulf of Mexico after the BP well blew out in 2010. Now, more than 23,000 workers are unemployed or underemployed, drilling has ground to a halt, more than 30 rigs are idled, and spending by oil drillers has declined by $1.8 billion.
Next, Obama could visit the Department of Labor, which has 99 rules in various stages of development. One proposed rule, Construction Contractor Affirmative Action Requirements, would set affirmative action quotas for minorities and women at on-site construction jobs. There’s a reason more women are not now represented in on-site construction — they’re not usually as strong as men, and may prefer working in the service sector.
The rule would mean that any project with even a small percentage of federal funds would have to grant affirmative action to women and minorities. It is already illegal to discriminate against qualified women and minorities, and firms that do that can be sued.
Just as Goldman has $7 billion in orders from foreigners for a $1.5 billion Facebook offering, so other countries are eager to siphon away American investment and jobs. If Obama is serious about more efficient regulation, he could foil their plans.
Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.