Why Government Fails So Often: And How It Can Do Better by Peter Schuck

Author:Peter Schuck [Schuck, Peter]
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2014-03-23T00:00:00+00:00

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* The ineffectiveness of highly touted government programs targeted at creating jobs and getting low-skilled inner-city residents into the workforce, as in the Oakland Project, above, is an all-too-familiar story. Although politicians differed sharply in their predictions about how many new jobs the 2009 stimulus would create, subsequent reports suggest that the actual number was relatively limited. See Ianthe Jeanne Dugan & Justin Scheck, “Cost of $10 Billion Stimulus Easier to Tally Than New Jobs,” Wall Street Journal, February 24, 2012 The research on these programs is briefly summarized later in this chapter.

* The Economist’s February 12, 2012, briefing on Dodd-Frank used some numbers to capture this complexity. The Glass-Steagall Act, which governed the banking system from 1933 to 1999, ran 37 pages; Dodd-Frank is 848 pages. Five agencies weighed in on the Volcker Rule, which will be almost 1000 pages! Under the rule’s then-version, firms were required to answer 383 questions, broken down into 1,420 subquestions, with compliance involving 355 distinct steps. The statute ordered the agencies to issue 400 rules; deadlines had already been missed for 40 percent of them; legal challenges to the rules were just beginning. It also mandated 87 studies, of which more than 40 percent had not been completed.

† The president of the Federal Reserve Bank of Dallas notes that Dodd-Frank gives the twelve largest banks—which account for only 0.2 percent of banks, hold 69 percent of bank assets, and are less accountable to shareholders—two immense and perverse advantages: a legal status of “systemically important financial institution” and taxpayer backing that make them in effect “too big to fail,” and the lower borrowing cost that this status confers. By impeding the transmission of the Fed’s monetary policy, these megabanks also reduce our economic growth. See Gretchen Morgenson, “How to Cut Megabanks Down to Size,” New York Times, January 20, 2013.

‡ Indeed, barely a week after the rule was finally issued, officials prepared to backpedal out of concerns about its adverse impact on small and midsize banks. Ryan Tracy, “Regulators Rethinking Rule on Bank Debt,” Wall Street Journal, December 19, 2013.

* Some verdicts are relatively clear. Thus, the Magnuson-Stevens Fishery Conservation and Management Act of 1996 succeeded in returning many fish species to earlier population levels by limiting catches. Regulation also reduced dangerous lead levels. On the other side, some regulation has utterly failed. The Environmental Protection Agency’s glacial pace in protecting endangered species is one example. See Michael Wines, “Coming Soon: Long-Delayed Decisions on Endangered Species,” New York Times, March 6, 2013. Its non-implementation of the Toxic Substances Control Act of 1976 is another. See John M. Broder, “New Alliance Emerges to Tighten Chemical Rules,” New York Times, May 25, 2013.

* Some of these costs have been exaggerated or misrepresented. For example, a recent review of drug policy finds that although the prisons and jails are full of people who use drugs and whose current sentence is not for a violent offense—the estimated number of drug offenders behind bars exceeded 525,000 in

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