I was born during Ronald Reagan’s first Presidential term. I have only lived under the received wisdom that the nine most terrifying words are, “I'm from the government, and I'm here to help.” And yet, I can’t say I have ever lived under small government.
Regulations are the guardrails of our society and economy. A large and complex system will need institutions of similar sophistication to ensure good operation. The coin is two-sided: Businesses benefit from order, but decry the cost of compliance. Building codes add to construction costs, but guard against disaster. Vehicle safety regulations are frustrating for automakers, but life-saving for their customers. And the list goes on.
Predictably, the state of regulation has been a hot political topic during the U.S. election campaign. The U.S. federal regulatory apparatus is large and can be perceived as unwieldy. Spates of deregulation did lower the federal civil employment level by nearly 20% in the course of the 1990s, but it has only grown since. And the difficult questions our leaders are facing could make the case for bigger government.
Technology regulation is in the forefront. After a breakout run of growth, the tech sector is facing antitrust investigations across the markets for internet search, advertising and app distribution; global requirements around data privacy have also grown. Their market power can be defended as a free-market outcome of network economies, but their commanding positions could be stifling innovation and costing consumers. Questions of tech firms’ power are a point of bipartisan alignment, with scrutiny to persist under any election outcome.
Regulation is easy to criticize but often necessary.
Meanwhile, the newest technology, artificial intelligence (AI), is the subject of substantial regulatory attention. Though still in its formative stages, AI’s pioneers have warned of its potential to confuse and disrupt in unintended ways. Congress has not advanced federal AI legislation, leaving a patchwork of state rules. The United Nations has released a “Governing AI for Humanity” initiative to attempt a globally-cohesive approach to AI regulation, but the effort will be slow. Neither presidential candidate has made AI a focal point of the campaign, but its growing importance cannot be ignored.
Housing is also a focus of the presidential platforms. The Harris campaign has proposed incentives to support more development and down-payment assistance for first-time homebuyers; Trump advocates releasing federal land for development. But whatever these proposals’ merits, the residential market is complicated by layers of local control. Efforts to expand development will be frustrated by municipal, county and state laws governing land uses, lot sizes, occupancy, stormwater runoff, tree preservation and a host of other restrictions. National policies to support construction may conflict with local regulations to protect current property owners.
Under either party’s control, we expect the regulatory state to continue its growth. Presidents are elected to enact their agenda, whether by advocating for legislative changes or through executive orders. Using the number of pages in the Federal Register as a proxy for the extent of regulation, all modern party-changing presidencies have been marked by a sudden drop as old policies are repealed, and a rise as the new leader’s polices are enacted.
Former President Trump promises to deregulate, most vocally in the energy and education sectors, but his trade agenda is by no means laissez-faire. Vice President Harris would leave most Biden policies unchanged, with some marginal new regulation around housing and emissions.
Regulation can be strengthened or weakened at the discretion of the appointed leaders of federal agencies. However, either winner may be frustrated by a new convention that limits agencies' ability to act. The Supreme Court changed precedent this year by rejecting the doctrine of “Chevron deference,” which granted administrative regulators wide discretion to act as they deemed necessary. Now, enforceable regulations are meant to come only by act of Congress. At the legislature’s current pace of output, the prospects for new laws are diminished.
The push for a smaller state did not start with Reagan. As early as 1837, Henry David Thoreau wrote, “The best government is that which governs least.” Whatever the government’s size, portions of the populace will call for both more and less regulation. Whatever the election outcome, we will likely get more rules to live by.
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