I am fascinated by ripples – whether from stones thrown into a pond or ocean waves crashing on a rocky seashore. If you’ve ever observed them, it’s easy to see why the “ripple effect” is a metaphor for how a single event or action can have far-reaching and unforeseen effects. In the field of public policy, that ripple effect can have devastating results when combined with the law of unintended consequences.
In the case of Obamacare and the Dodd-Frank financial regulation overhaul, which just celebrated its fourth anniversary, the effect has been a tsunami of destructive and burdensome regulatory costs upon America’s economy. But the public’s focus on Obamacare these last few years has, unfortunately, obscured an important reality.
Health care is a large sector of the U.S. economy and the president’s plan is having a negative effect on it. This much we know. But Dodd-Frank poses an equal if not worse economic threat. Left unchecked, it could alter the fundamental relationship between government and the private sector and shift control of the economy away from private actors to unelected overseers. It is never good when the hub of economic power is no longer New York, Chicago, or Charlotte, but Washington, D.C.
Dodd-Frank and Obamacare cover two very different areas of public life, but they are more similar than many would think. Both statutes ran to about 2,500 pages of new regulations and got the EZ Pass treatment through the Democratic-controlled House and Senate. As a result of this length and swift passage, many of the lawmakers who voted for both bills did not understand what exactly they were voting for, as many didn’t even have the chance to read them.
Another major similarity between Obamacare and Dodd-Frank is that, in the way they’ve been implemented, they constitute severe cases of executive overreach. One notable section of Dodd Frank created a new regulatory body called the Consumer Finance Protection Bureau (CFPB), the idea for which unfortunately launched Elizabeth Warren’s political career. Part of its mission is to determine which non-bank financial firms are “too big to fail” and subject to additional regulation. However, the CFPB really represents a massive overreach by the federal government, one without any checks and balances to assure accountability.
Congress exercises no power of the purse over the CFPB, because the agency’s budget – administered essentially by one person – comes from the Federal Reserve, which already benefits from virtually no congressional oversight. That amounts to around $400 million that Congress cannot touch or regulate. It’s like something out of Mission Impossible: an untouchable entity housed within another untouchable entity. This is consistent with a federal system of checks and balances how?
Moreover, the President cannot carry out his constitutional obligation to “take care that the laws be faithfully executed,” because the President cannot remove the CFPB Director except under limited circumstances. And the CFPB’s current head, Richard Cordray, was placed there in an illegal “recess” appointment by the president, at a time when the Senate had not adjourned. He was appointed – I’m not making this up – the same day as the NLRB recess appointments that have already been deemed unconstitutional.
Finally, judicial review of the CFPB’s actions is limited, because Dodd-Frank requires the courts to give extra deference to the CFPB’s legal interpretations.
But there’s another, more hopeful similarity between Obamacare and Dodd-Frank. Both laws are so complicated and so poorly written that they’ve practically invited legal challenges to them. And in both instances, CEI has joined the fray. This fight is far from over.
In our Dodd-Frank case, State National Bank of Big Spring et al v. Geithner et al, a small Texas community bank is the constitutionality of these provisions and asking the U.S. District Court for the District of Columbia to invalidate the law on the grounds of the massive, unprecedented, unaccountable, and unrestrained power it gives to unelected bureaucrats over the daily lives of the American people.
As my colleague John Berlau points out, “It has been said that, under Obamacare, health insurance companies are no longer insurance companies but public utilities. With Dodd-Frank, many insurance companies face regulation as if they were banks.”
This has led to the rise of a Dodd-Frank compliance industry, because companies now must prioritize hiring compliance officers to help them stay within the bounds of an overly complicated law over providing goods and services people actually want to buy.
Once again, we face the reality of government’s dependency strategy, as it forces private enterprise to direct resources away from wealth creation and instead pay the Paternalistic Piper in order to stay alive.
Last week we managed to create our own ripple with the Halbig decision. There are many nervous people in the White House and Department of Health and Human Services. They should be. We’re going after the CFPB next.