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The Right Question About Government

SAN FRANCISCO — Many conservatives and most libertarians argue that every new law or regulation means that government is adding to the sum total of oppression and reducing the freedom of individuals.

This way of looking at things greatly simplifies the political debate. Domestic issues are boiled down to the question of whether someone is “pro-government” or “anti-government.”

Alas for the oversimplifiers, it’s an approach that misreads the nature of the choices that regulators, politicians and citizens regularly face. It ignores that the market system itself could not exist without the rules that government establishes, beginning with statutes protecting private property and also the various measures against the use of force and fraud in business and individual transactions.

More importantly, it overlooks the ways in which the steps government takes often empower citizens and expand their rights. Nowhere is this more obvious than in the realm of work.

The run-up to Labor Day this year brought a spate of news stories and commentaries on the actions of the National Labor Relations Board and other government agencies to strengthen the rights of workers and enhance their bargaining power relative to employers.

Last week, Noam Scheiber offered an important account in The New York Times of how the Obama administration has been “pursuing an aggressive campaign to restore protections for workers that have been eroded by business activism, conservative governance and the evolution of the economy in recent decades.”

Among the milestones Scheiber cited was a recent Court of Appeals decision upholding an Obama-era rule providing minimum-wage and overtime protections to nearly 2 million home health care workers. They certainly felt empowered by government, not oppressed. So did the employees of contractors and franchises who were granted collective bargaining rights by the National Labor Relations Board.

Fast-food chains provide the obvious example of how loopholes related to new work arrangements and franchise agreements can let employers out of their traditional obligations. In the case of purveyors of hamburgers and chicken tenders, the parent companies set all sorts of detailed requirements for how these businesses should operate — and then turn around and claim that when it comes to workers’ rights, their franchises are utterly independent.

One of the most fascinating struggles, still ongoing, is over new regulations that the Labor Department is trying to establish to ensure that those who give investment advice to people with 401(k)s and individual retirement accounts base their judgments on the best interests of their clients. Along with defined-contribution retirement plans, they involve some $13 trillion in investments.

The Labor Department proposal would require investment advisers to abide by a “fiduciary” standard — meaning that the best-interest-of-the-client yardstick should be their sole criterion in offering counsel to clients. If this seems obvious, that’s not what the current law requires. As Secretary of Labor Thomas Perez said in an interview, the standard now is only that an investment be suitable. “What the hell is ‘suitable’?” Perez asked, noting that he would hope for more than just “suitable” advice from his doctor.

The issue is whether some investment advisers might offer conflicted guidance influenced by “backdoor payments and hidden fees often buried in the fine print,” as the Labor Department put it in a document explaining why change is needed.

“I don’t believe that folks who provide advice wake up with malice in their hearts,” Perez said. But he added that it is only natural that advisers might lean toward investments from which they can also benefit. “Surprise, surprise, if you have four or five products that are suitable and one gives you a commission, guess where you will go?” The new rules, which are being heavily contested by parts of the financial industry, are an attempt to realign the incentives, Perez argued.

The investment-rule battle is a near-perfect example of how the government is plainly promoting free markets — what’s more market-oriented than building an investment portfolio? — but is also trying to make sure that the rules regulating the investments tilt toward the interests of the individual putting his or her money at risk.

As long as there are markets, government will have to establish rules determining how they operate. These necessarily affect the interests of market participants. Many of the choices are not between more or less government. They are about whether what government does provides greater benefit to workers or employers, management or unions, individual investors or investment firms.

“Which side are you on?” This question from the old union song is the right question to ask about government.

E.J. Dionne’s email address is ejdionne@washpost.com. Twitter: @EJDionne.

Photo: House Committee on Education and the Workforce Democrats via Flickr

Republican Jobs Plan A Wolf In Sheep’s Clothing

Jobs and unemployment remain voters’ top concerns — which ought to make fiscal stimulus for the ailing economy the main priority in Washington. But Congressional Republicans now insist that curtailing environmental and labor regulations, a perennial obsession of theirs, is the silver bullet for job growth.

In a Monday memo to his Republican colleagues, Majority Leader Eric Cantor outlined his party’s vision:

As you know, we released The House Republican Plan for America’s Job Creators earlier this year. While the debt crisis has demanded much of our attention, our new majority has passed over a dozen pro-growth measures to address the equally troubling jobs crisis, such as the Energy Tax Prevention Act and the Putting the Gulf of Mexico Back to Work Act.

Our regulatory relief agenda will include repeal of specific regulations, as well as fundamental and structural reform of the rule-making system through legislation like the REINS Act, the Regulatory Flexibility Improvements Act, and reform of the Administrative Procedures Act (all three bills are expected on the floor in late November and early December).

The following is a list of the 10 most harmful job-destroying regulations that our committee chairmen have identified, as well as a selective calendar for their repeal. These regulations are reflective of the types of costly bureaucratic handcuffs that Washington has imposed upon business people who want to create jobs.

Cantor goes on to cite a litany of Environmental Protection Agency (EPA) and National Labor Relations Board (NLRB) rulings in favor of workers and citizens and against business interests.

But while it might please the right-wing base, this legislative wish-list would hardly bring relief to the unemployed.

“For these guys, when your only tool is a hammer, everything looks like a nail. This strikes me as trying to adapt their anti-regulatory, anti-labor agenda into a jobs plan. And it’s pretty cynical. I’d be amazed if this kind of an agenda moved the needle one bit on unemployment,” said Jared Bernstein, who served as Vice President Joe Biden’s chief economist in the White House from 2009 through 2010 and is an expert on labor issues at the Center for Budget and Policy Priorities.

Indeed, it is remarkable that a financial crisis — born at least in part of insufficient regulation — has been seized by the Republican Party as an opportunity to roll back rules that still constrain the corporate sector’s excesses.

“I know that Americans have short memories but I think most of us can still remember what happened in 2007 and 2008 and how we got into a period when we have nearly one in 10 people who want a job out of work for years now,” said Heather Boushey, a senior economist at the Center for American Progress, a liberal think-tank. “A lot of that was because of the collapse of the housing bubble and what we had done in terms of deregulating Wall Street all coming home to roost. It doesn’t seem to make sense that if you give banks more lax regulations that that’s going to solve the problems that got us here in the first place.”

Both economists were more optimistic, though, about President Obama’s choice to lead the Council of Economic Advisors, Princeton Professor Alan Krueger, who served at the Treasury Department for much of Obama’s first two years in office.

“It’s an inspired choice,” Bernstein said. “Alan is a great guy for this job. First of all, he’s a labor market economist. It’s somewhat unusual to have the chair of the Council of Economic Advisors be a labor person. With the unemployment rate stuck around 9 percent, having Alan at the head of the CEA is something that should give us some hope. He’s an expert in unemployment and policies designed to help reduce joblessness, and I think he’s going to be a very strong advocate in the White House for more targeted jobs measures.”

Increasing demand in the economy is the surest way to boost employment, Boushey said, and that includes extending the president’s 2010 payroll tax cut — or some other tax credit for the working poor and middle class.

“A smart jobs agenda would focus on: how can we boost investments in infrastructure immediately. Both as an economist and an American taxpayer, I’d like to see our government dollars spent the best way with the best bang for its buck. That payroll tax cut got bipartisan support. If that’s the best we can do, by all means let’s do it. [But] there are more efficient ways to spend government resources. The Making Work Pay tax credit that we had a couple of years ago [as part of the Stimulus program] was a better targeted and more efficient and effective use of funds.”

With unemployment hovering at 9 percent and his approval ratings sagging, the president has every incentive to brighten the jobs picture. The same cannot be said of his Republican counterparts, whose overwhelmingly ideological, scatter-shot approach to easing burdens on business shows little promise for putting the millions of Americans without it back to work.