Democrats' crisis: Regulations are choking their support

In an important New York Times op-ed last week, Democrat Steven Rattner argued that former President Joe Biden alienated the entire business community during his term in office and drove them firmly into Donald Trump’s arms.

Indeed, despite their strong concerns about President Trump’s tariffs and immigrant deportations, most business leaders are buoyed by his likely tax cuts and especially the deregulation he offers them.

Among other concerns, business leaders were most upset by the strong spike in new economic regulation brought about by Biden — often on labor and environmental issues. Sometimes the regulations even stifled the accomplishments of his own agenda. For instance, Biden’s laudable federal investments in computer chips, infrastructure and green energy were delayed and made more costly by various “Buy American” provisions and labor standards.

But, even without those, they were likely hampered by a variety of existing regulations and practices that make federal construction of any kind very difficult. As an example, after tens of billions of dollars had been invested, only 58 electric vehicle charging stations were completed before his term ended, thereby denying the Democrats the ability to point to these accomplishments and claim credit for them in the 2024 election.

But regulatory barriers on construction at the state and local level might be even more serious, and more harmful to Democrats’ electoral fortunes. It is well-known that there is a steady population flow away from big Blue states, such as California, New York and Illinois, and towards Red states like Texas and Florida. Why? The very high cost of housing — heavily inflated by strict zoning and environmental regulation as well as high taxes — are driving population away, as people vote with their feet.

Millennials and Gen Z are increasingly gloomy about their abilities to ever own homes or achieve solid middle-class lifestyles in these areas. And the population flows will hurt the Democrats politically, as they lose seats in the House and Republican advantages in the Electoral College grow.

Of course, not all regulation is bad. Sensible regulations enable Americans to enjoy safety in food and transportation, in their workplaces, and in the clean air they breathe and water they drink. The ongoing march of climate change suggests we need more limits on carbon, here and abroad, not less.

At the same time, there are more and less economically sensible ways to regulate. For instance, increasing the market price of carbon is the more efficient way to fight climate change. But, given the political unpopularity of the latter, politicians find it easier to fall back on the former, with little regard for their economic costs.

The Biden administration’s adoption of new regulations requiring a majority of new automobiles sold in the U.S. to be electric within the next decade, despite their cost, was a striking example of how cavalier they were about imposing new costs on consumers. It likely hurt them in states like Michigan where cars are built.

And the economic costs of regulation rise over time as we simply add new regulations which are needed on top of older ones that are more obsolete. Although the benefits of the regulations are spread broadly across consumers and workers, their cumulative costs on business (and indirectly on workers) grow. While an analysis of any new regulation might meet a cost-benefit test, the cumulative effects are much more rarely considered.

So, if we want our young people to gain hope in their futures, and the Democratic Party to have more hope in its future, we need to confront our overextension of regulation. Any new regulations must be at least matched by the elimination of older and obsolete ones, while those that contribute heavily to high construction costs need to be streamlined.

Democrats must once again offer the promise of a better economic future to a majority of voters, if they want their flagging electoral prospects to improve.

Harry J. Holzer is the John LaFarge SJ Professor of Public Policy at Georgetown University and a fellow in Economic Studies at Brookings. He is a former Chief Economist of the US Department of Labor.

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