In one of the essays, James Madison underscored the importance of clarity and volume in a nation’s laws. He wrote, “It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read; or so incoherent that they cannot be understood.”
Clearly, Madison was someone who understood people, democracy and laws. We can only wonder what his reaction would be to the recent addition of the Volcker Rule regulation for banks. The new rule takes up 14 single-spaced pages in the Federal Register — enough to test most people’s attention span. Even better, the new regulation comes with a 1,089-page U.S. Treasury Dept. exegesis on what it means.
Taken together, the new regulation and its Treasury Department explanation certainly qualify as voluminous enough to belong in a TV weight-loss commercial. The goal of all those pages is to reduce the banks’ risk by limiting their securities trading for their own account. Like so many other products of Washington, D.C., though, the complete package — regulation and explanation — is a good idea gone terribly wrong.
Madison was right about laws, and the new Volker Rule regulation is far too complicated to be useful or effective. He was also right about the effect of such laws on democracy. It doesn’t really work if voters choose representatives who spend their time on things like writing laws that, as a practical matter, few can read and even fewer can understand.
Washington, D.C., used to be the place where ideas went to die. That is still true to some extent, but everything changes. Now it is becoming the nation’s pace-setter for misdirected effort.
The widely accepted reason for the federal government’s growing reputation for ineffectiveness is the adversarial nature of conservative vs. liberal, loosely tethered to the politics of Democrats vs. Republicans. The time has come, though, to consider the possibility that government’s behavior and misdirected effort is creating its own problems, and would do so even if the country’s political views were not so divided.
In a recent speech delivered at the Georgetown Law Center, for example, U. S. Attorney General Eric Holder argued that states should restore voting rights to convicted felons. At almost the same time, New York Gov. Andrew Cuomo was preparing to ask the state legislature to fund higher education for prison inmates.
What prompted the sudden interest in convicts at both the federal level and a leading state isn’t known, but transforming cell blocks into voting blocs does create a politician’s dream: a captive audience. It is easy to imagine a 2016 presidential campaign that includes a series of those fabricated-for-television “town meeting” events held in prisons across the country, starting with Folsom, Calif., of course.
Whatever the merits of restoring felons’ voting rights or creating their educational opportunities might be, the arguments presented thus far have not been very persuasive. More importantly, this is not a grass-roots issue that Americans are so concerned about that government was forced to act. This is the government’s own idea of what is important, another example of misdirected effort and the wacky logic that initiates it.
That logic was nowhere clearer, or wackier, than in the new regulations that instruct banks in how to process the financial transactions related to the marijuana trade. In these regulations the banks are told how to handle the money from their customers’ trafficking in what, under federal law, is an illegal drug.
Government logic was somewhat less visible but also present in the arguments it made in response to the Congressional Budget Office report on a minimum wage increase. The White House emphasizes the report’s conclusion that raising the minimum wage would increase the incomes of 6.5 million people.
The flaw is in confusing money with income. A president can create money with a stroke of a pen, but he cannot mandate the creation of real income without creating an equally real loss. The increased incomes of the 6.5 million people will come out of the pockets of people now receiving it and the funds that would have been invested by employers.
As government strays from its original purpose to pursue its own daffy priorities, there is a real risk that it will gradually transform itself from servant of the people to competitor for resources and, eventually, a hostile force. And to think that it all starts with wacky ideas and laws that nobody reads.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Herald Business Journal.
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