To the dismay and puzzlement of disgruntled liberals, the Dow Jones Index has soared nearly 9 percent since Donald Trump was elected president on November 8. The Russell 2000 Index of small-cap stocks has jumped 15 percent. That was not expected.
The day before the election – the day FBI Director Comey again cleared Hillary Clinton -- the market turned around a nine-day losing streak and jumped 400 points. CNN explained, “Monday's dramatic rally was the clearest evidence yet that Wall Street feels more comfortable with the idea of Clinton winning than Trump.” In October, Politico summed up expectations with this headline: “Economists: A Trump win would tank the markets.” Oops.
What has changed? Investors believe that Trump will not only cut corporate taxes but are also optimistic that he will “Drain the Swamp.” Just yesterday in a recorded message outlining priorities for his first 100 days in office, he vowed to pass an executive order demanding that for every new rule adopted, two must be junked. He explained, “Regulations have grown into a massive job-killing industry – and the regulation industry is one business I will absolutely put to an end on day one.”
Trump told the staff of The New York Times that on the campaign trail, he met numerous small business owners who said that the ballooning regulatory mess has made their lives impossible. They advised that if he really wants to goose economic growth, he must cut back the red tape that soaks up managers’ time and money.
Trump apparently intends to do just that, not only through his promised executive order but also through the people he has chosen for his cabinet. Rex Tillerson, Wilbur Ross, Andrew Puzder, Betsey DeVos, James Mattis, Mike Pompeo, Linda McMahon, Tom Price – these are people who know their material, who come with a plan. And that plan will focus on streamlining our rules and creating jobs – but not in D.C.
Remember in 2008 how Obama chose not one private sector graduate to serve in his White House? Trump is at the other end of the spectrum. We have moved out of the Ivory Tower and into the real world. Some are billionaires, some are politicians or generals, many are controversial, but they have this in common: they have real-life experience, they are willing to think outside the box and ready to buck the Washington establishment.
Why is challenging the status quo so important? Not only because voters have indicated a real appetite for change, but because the regulatory python is slowly squeezing the life out of our industries and businesses. The government’s rule book, the Code of Federal Regulations, has grown 13 percent under Obama’s presidency, to 179,000 pages. Since 1976 that collection of rules has more than doubled. Creating and overseeing new red tape has spawned the worst of cottage industries; it is not an accident that four of the wealthiest five counties in the country are suburbs of D.C. The blooming season for special interests is year-round.
At a conference convened by Common Good last week in Washington titled, “Drain the Swamp? Regulatory Reform Under President Trump,” one participant claimed that we are all “non-compliant.” That is, under the vast, complicated overarching dome of rules that govern our lives, we cannot avoid breaking the law in some way.
Another quoted a study by George Mason University concluding that between 1980 and 2012 the spewing of rules has cut the economy by 25 percent and cost 32 million jobs.
What can be done? Pessimists including The New York Times dismiss Trump’s ambitions about “draining the swamp,” noting that other presidents have tried and failed. For The Times, the Beltway Bureaucracy is more wetlands than swamp – protected turf.
But Trump is taking no options off the table. Nor should he. It is not only businesses that are suffering under the regulatory smog; as we embark on an infrastructure renewal program across the country the increased complexity of getting anything done will drive up costs and diminish outcomes.
Phillip Howard, head of Common Good, argued in an op-ed in The Washington Post last week that the permitting process has become a nightmare. It often takes more than a decade to acquire permits necessary to push forward on a new building project complicated by warring agencies and then subsequent lawsuits. Delays drive up costs and can harm the environment by allowing transportation bottlenecks, for instance, to persist.
Regulatory reform appears to have bipartisan backing, and at the Swamp conference, numerous proposals to break the logjam were put forward. Because we were in DC, some of the proposals actually recommended creating new federal agencies or committees to oversee the paring down of costly regulations. Some saw the irony. But it is true that the president has become the regulator-in-chief, spurred on by the agencies. Congress has done little more than sit back and occasionally lob in a protest when a new rule threatens a friendly beast.
Consequently, Philip Wallach of Brookings and Kevin Kosar of the R Street Institute have proposed a Congressional Regulation Office in order to restore some balance of power lost to the expanded executive branch. They argue that the CRO would operate like the CBO, but instead of reviewing budgets, they would be tasked with reviewing regulations.
Phillip Howard recommends the government pull back from micro-managing, and put people back in charge of decision-making. He argues that our problem is not too many rules but rather that we have decided that “human responsibility should be replaced by what is called “clear law.” By striving to prescribe every possible good choice, and proscribe every possible evil, U.S. regulation became an obsessive exercise in micro-management.”
Trump’s “two-for-one” approach has been adopted even more aggressively in Britain – one in and three out – and has had some success, according to Howard. The plan appeals, in that it would make lawmakers and regulators accountable for excavating the swamp.
Speaking to the Economic Club in October, Trump rejected the prevailing pessimism about the future growth of our economy. He vowed to hire people with proven track records to run the federal government who were ready, as he so colorfully puts it, to “drain the swamp.” It won’t be easy, but it’s vital to refreshing the country’s animal spirits, and the stock market loves it.