Congress last week passed the Dodd-Frank Wall Street Reform Act in the hopes of bringing to a close the abuses of a financial industry that has left the nation’s economy (if not the world’s) in a shambles since the end of the Bush Administration. Curiously however, the more than 2,300 pages in which this legislation resides apparently does little or nothing to curb the abuses of the mortgage industry (or Fannie Mae and Freddie Mac) to which most economists attribute the recent economic downturn. This is especially curious since the co-sponsors of this new law, Sen. Chris Dodd and Rep. Barney Frank (both Democrats), were in charge of congressional oversight of large parts of this industry during the rampant abuses this legislation claims to now prevent, and neither raised a red flag in the days leading up to the collapse it supposedly protects us from.

I would love to debate the logic behind legislation creating a $19 billion fund that will eliminate the need for future taxpayer assistance by assessing financial institutions for such funding, expecting that these institutions will not pass them on to the very taxpayers that are supposedly being saved from such burdens. I would also like to debate the legislative logic of banks being required by government to maintain more funding on hand to protect against potential bad loans, at a time when that same government is also pressuring the banking industry to lend more money out. I would really like to debate the Constitutionality of allowing unelected federal regulators to determine when and if the government (long known for its private sector business acumen) should seize banks or other companies they consider “failing” in order to save the economy.

Such debate is impossible however, since like most of what has been recently passed by Congress: we don’t really know all of what’s in this legislation, had to pass it in order to find out what was actually in it, and are now placed in the dubious position of it being years before we can discover all of the consequences (especially the unintended ones) that it will generate. It may well be weeks before real economists can even begin to wade through this ponderous document and attempt to digest all of its implications or do the math required in order interpret them. It is the math of legislation however, that I would like to address … at least indirectly.

Many of you cannot have helped but notice that the number of pages of regulation and legislation in this country seem to be increasing exponentially recently. Some cannot help but further understand that the more laws and regulations that exist, the greater the potential that any of us might be in violation of one or the other. One or two might even remember that Chinese philosopher Lao-tzu told us more than 2500 years ago that, “The more laws and orders are made prominent, the more thieves and robbers there will be.” (from Quotationspage.com) The logic that we apparently dare not use around this increasing legislative burden cries out that we might perhaps best limit its potential damage therefore by limiting its total number of pages.

The answer that I propose is to apply “Zero Sum Solution” thinking to the problem, a principle from economics understood to mean that any addition to one side of a situation must be met by a subtraction from another. The concept implies that by application of such principles, any and all participants can mutually benefit; and is one often used by both major political parties when discussing “revenue neutral” budget proposals and by countries when discussing “trade imbalances” (except apparently, when the US is having such discussions with China).

I therefore propose that no future pages of legislation or regulation at any level of government be added without removing a corresponding number from that same level. (Think of the benefit to taxpayers alone when considering current tax laws and IRS enforcement regulations!)

Apparently there are plenty of laws worthy of such sacrifice if such a legislative exchange must be made. Ohio alone has laws on its books that make it illegal: for women to wear patent leather shoes in public, to arrest anyone on a Sunday or the 4th of July, and to fish for whales on Sunday. Certainly legislators concerned with the welfare of citizens and sponsoring new laws can take the time required to find such corresponding nonsense and remove it.

If nothing else, the effort may reap the unintended benefit of simply slowing the increasing pace of the governments’ legislative and regulatory processes. Perhaps in fact, application of this “Zero Sum Solution” by legislators will provide far greater protection for their respective constituencies than any of the things that they otherwise do.

Tim Higgins blogs at Just Blowing Smoke.

Tags: Just Blowing Smoke, Tim Higgins

This entry was posted on Monday, July 26th, 2010 at 10:32 am and is filed under Just Blowing Smoke, Opinion.
You can follow any responses to this entry through the RSS 2.0 feed.
Both comments and pings are currently closed.