The vast thicket of federal (and state) rules holding back the economy is costlier than ever before. Even before the pandemic, estimates outlined by the Competitive Enterprise Institute suggest that Washington, D.C. mandates cost consumers nearly $2 trillion per year, or approximately $15,000 for every household. And now, regulations exact an even greater toll as red tape makes beating the pandemic all the more difficult. President Biden has a unique opportunity to roll back the restrictions hobbling the recovery effort. But this feat can only be accomplished by reaching across the aisle and rejecting the economic orthodoxy of his own party. The 46th president can, and must, be a deregulator-in-chief.
Needless to say, Biden hasn’t done much to keep the administrative state in check. In his many years in the Senate and as vice president, Biden regularly championed initiatives strengthening the power of the federal government. Fortunately, even traditionally liberal presidents have embraced regulatory reform in the past. Hardly a proponent of laissez-faire economics, former President Jimmy Carter led the charge in deregulating the airline and beer industries, paving the way for affordable plane tickets and, yes, home brewing. As The Skeptical Libertarian executive editor Daniel Bier notes, airline tickets plummeted and craft breweries surged following Carter’s war on price-fixing and strict rules on the industries.
Meanwhile, the financial deregulations signed into law by former President Bill Clinton helped avert financial collapse during the last economic meltdown. Without long-overdue rule changes, Bank of America and J.P. Morgan Chase would not have been able to acquire Merrill Lynch and Bear Stearns. If not allowed to proceed, a costlier bailout would’ve likely resulted. With rising partisan hostility, these surprising political moves may seem more unlikely now. But Biden should have little issue pursuing regulatory reform while painting a contrast with the previous Republican administration. President Trump, after all, was hardly a consistent champion for pro-growth regulatory changes. Even while removing costly rules that held back the digital domain, Trump tried price-fixing medications, all-but-froze high-skilled migration, and ramped up antitrust enforcement against big tech and e-commerce companies. If Biden is pitching unity and a return to normalcy to voters, he could score some easy points by doing away with these Trump-era half-baked policies.
Undoing the mistakes of the past, though, should just be the first part of an ambitious, wide-ranging regulatory reform agenda. One area long overdue for reform is the fintech regulatory apparatus. One might assume financial services have already been fully or mostly digitized, but the problems posed by small businesses in quickly procuring Paycheck Protection Program loans online last year show significant hurdles remain. Greater technological innovation in financial services would mean a faster, more efficient lending process and fewer cases of fraud. But as American Banker contributor Brendan Pedersen notes, regulatory culture and decades-old laws result in the underutilization of fintech. The Administrative Procedure Act makes it difficult to quickly cut out needless rules, while regulatory examiners are rewarded for overzealously enforcing regulations.
Biden can also step up to the challenge of fixing the U.S. Postal Service (USPS) by embracing regulatory reform. European nations such as Germany and the United Kingdom improved service quality and lowered costs by relaxing postal monopolies and allowing private players to compete on letter deliveries. These regulatory relaxations ensure that national posts such as Royal Mail continue to deliver to everyone while opening up stagnant mail markets to competition and innovation. Market-deepening reforms could bode well for the struggling USPS, which has seen strong institutional resistance to reforms and cost reduction.
There are, of course, limits to regulatory reform under the new administration. Biden’s top legislative allies are usually in favor of more rules and restrictions and generally oppose market reforms. But Biden has a rare opportunity to shake things up and prove that he isn’t beholden to one party or ideology.
Now is the time for bold, comprehensive regulatory reform.