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How Regulations on Big Business Are Actually Profitable

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When he visited Rep. Frank Underwood (D-S.C.), natural gas industry lobbyist Remy Danton had a simple question about a bill to restore a watershed: “Why propose the legislation in the first place? You must have known [my client] would oppose it.”

“The regulatory restrictions are minimal,” Underwood said in a futile attempt to appease the lobbyist.

“There’s a bigger battle here, Frank,” Danton responded. “SanCorp is against any step toward regulation, no matter how small.”

This exchange above is fictional, taken from the recently released House of Cards series produced by Netflix. But the anti-regulatory sentiment it portrays is gospel within the business community. No matter how small, sensible or even critical a proposed regulation is, the business lobby will likely oppose it, often by putting forth dire predictions to make their case.

These forecasts inevitably prove misguided. But by the time the regulation has been implemented, we’ve moved on. We rarely look back at the outrageous things they said.

A Public Citizen report released today holds the business lobby accountable for its dismal record as a forecaster of policy outcomes, raising the natural question: why would we ever believe these claims in the first place?

Last week marked the twentieth anniversary of the Family and Medical Leave Act, which grants unpaid, job-protected leave to recover from a long-term illness, treat a sick family member, or care for a newborn child.  In 1993, judging by the reaction of big business and its allies, you’d have thought Congress has just passed a law outlawing capitalism. Rep. John Boehner (D-Ohio) said the FMLA would cause “the light of freedom to grow dimmer.” 

In the 20 years since, more than 100 million people have taken advantage of the FLMA without noticeable harms to businesses, let alone the “light of freedom.” California took the FMLA a step further by mandating paid family leave. Here too, the predictable ominous predictions were soon disproven as massive majorities of employers reported that the law had no impact on profits and productivity.

Paid family and medical leave is just one area in which industry’s fears about proposed regulations have proven unfounded. Relatively recent laws to require the credit card industry to act in good faith, provide paid sick time to workers in California and ban smoking in restaurants all have had benign impacts on businesses, all while substantially benefitting consumers.

The CARD Act became law in 2009.  Though its provisions were relatively modest, the American Bankers Association claimed it would disproportionately burden small businesses. However, recent survey data finds that small businesses support the CARD Act and want it expanded.  Further research shows small businesses have actually benefitted from its provisions.

Industry’s dire pronouncements persist at the local level as well.  In 2006, San Francisco passed an ordinance that mandated paid sick leave for all workers in the city. Predictably, business groups and their Republican allies argued that it would push businesses out of San Francisco and raise prices. What actually happened? Very little. In fact, total employment for San Francisco actually increased in the ensuing years. When asked in 2010 how businesses had responded to the policy, the California Chamber of Commerce explained that “it has not been a huge issue that we have heard from our members about.”

Over the last 20 years, smoke-free laws have emerged across the country, restricting smoking in businesses, bars and restaurants. One of the greatest myths that surfaced in the 1990s was the claim that implementing a smoking ban in a bar or restaurant would result in a 30 percent decline in revenues. But the economic impact that ensued from smoke-free regulations has been undeniably positive, despite Big Tobacco’s interference. Dozens of studies confirm the benefits generated by smoking bans.

Digging deeper into the past offers additional perspective on industry’s reflexive opposition to regulation. Beginning in the 1970s, lead was gradually phased out of gasoline until it was banned completely in 1986. Big oil industry lobbyists not only opposed the ban, but put forth preposterous claims that it would jeopardize 43 million jobs in the petrochemical industry.  In reality, the ban yielded enormous public health benefits. Moreover, the price of gas remained steady for nearly 20 years after the ban, suggesting that industry’s claims of higher gas prices were inaccurate at best and misleading at worst. Meanwhile, oil industry profits have continued to set records.

Most recently, industry groups have been pushing back against a proposed rule that would implement strict safety requirements for workers that are exposed to potentially deadly silica dust, and have managed to delay the rule for two years. The National Association of Manufacturers claims that the rule will cost industry billions of dollars a year and, as usual, suggests that it would also cost jobs. 

What will be the actual impact of the silica rule? If history serves as a guide, very little.  Except that workers will be better protected and industry again will have another bad forecast on its books. As lawmakers and regulators contemplate new regulations, they should remain skeptical of industry and business claims of lost jobs and profits, as they rarely come to fruition.

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