Why Companies Reject Trump’s Deregulation Theology

(Bloomberg Opinion) -- Here is a puzzle about some of the Donald Trump administration’s most prominent deregulatory efforts: The very companies that are supposed to benefit from those efforts do not welcome them. In some cases, they strenuously oppose them.

How can that be? There are several answers.

In some cases, companies have already invested significant resources in complying with existing regulatory requirements. For that reason, deregulation would save them little or nothing -- and would serve mostly to disrupt business planning.

That appears to be the case with the Environmental Protection Agency’s proposal to scale back its restrictions on mercury emissions. Energy companies have taken costly steps to do what the Barack Obama administration required, and have worked for years to do so. They aren’t particularly excited if the EPA suddenly says: Never mind.

In other cases, national regulation has an important advantage from the corporate perspective: It eliminates state regulation, and so provides a clear, stable and steady path for the future.

In these circumstances, sudden deregulation from Washington can open up a free-for-all at the state level. An especially aggressive state might end up setting what is effectively a national standard. In addition, there is a serious risk that companies will have to meet inconsistent or overlapping requirements. Planning can become far more difficult.

In the context of fuel-economy regulation, major automobile companies are firmly rejecting Trump’s effort to eliminate costly national requirements. A key reason is that California favors regulations that would equal or exceed current requirements from the EPA and the Department of Transportation. A number of companies have said that they would willingly comply with California’s requirements, partly to ensure a measure of regulatory certainty.

The Trump administration has said it will go to court to challenge California’s authority to do that, but it might well lose the case. Above all, automobile companies need to be able to plan for the long term, so the regulatory status quo, in the form of the Obama administration’s standards, has a lot of appeal.

In still other cases, big companies tolerate or favor regulation because they know that they can easily afford it and that small companies and startups cannot. As a result, regulation can help them do good. It can also help them do well.

Regulation of methane emissions is an example. Methane is a primary component of natural gas. It is also a major contributor to climate change. In the U.S., large energy companies accept or embrace regulation of methane emissions, partly because they have shifted to natural gas and want to be able to make a credible argument that natural gas is clean. By contrast, small companies are much less enthusiastic; they do not think that they can readily bear the cost.

In a number of cases, companies are genuinely committed, in principle, to efforts to improve social well-being, by promoting health, safety and environmental goals. Their leaders sincerely favor regulation for that reason.

Sure, they want to make money, but that is not the only thing they want to do. They also want to be good citizens.

Alternatively, they might think that in the long run, and possibly a lot sooner than that, improving social well-being is good for business. An attractive public image might well appeal to employees, investors and the public as a whole. If that’s what a company’s executives think, they might well argue vigorously against deregulation -- and announce that they are willing and able to comply with current and coming requirements.

There is a broader point here. It is unfortunate but true that on the left, some people favor regulation on purely expressive grounds. They want to make a statement or to punish companies, rather than to focus on the right question, which is whether regulation will do more good than harm.

The Trump administration is living proof that some people who favor deregulation are doing so on expressive grounds as well. Their opposition to regulation is a kind of theology. They want to eliminate existing requirements even if they are producing a lot in the way of good – for health, safety and the environment – and little in the way of harm.

That’s not only a serious disservice to the American people. It’s also a disgrace.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “The Cost-Benefit Revolution” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”

©2019 Bloomberg L.P.

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