Once upon a time, government made rules and companies made money. Now these two key players are trading places. After a rulemaking decade book-ended by Sarbanes-Oxley and Dodd-Frank, many businesses are focusing on compliance, with less time for returns on investment. Conversely, with tax revenues down and debts mounting, regulators are all about ROI— they are reviewing past rules to make them more efficient.
Associated Press
Here’s a quick update on what’s happening around the Capital City in the executive, legislative and judiciary branches.
On September 6, the Securities and Exchange Commission issued a call for public comment on a “Retrospective Review of Existing Regulations.” The agency wants to hear how often its rules should be reviewed, what factors should be considered and how to improve public participation in the rulemaking process. Comments were due October 6.
SEC Streamlining
This efficiency kick by government has been developing over the past year. On Jan. 18, President Obama took a page out of the Bush-Quayle era (remember the Council on Competitiveness?) when he sent out a streamline challenge to federal agencies called “Improving Regulation and Regulatory Review.”The definition of “agency” at the time excluded the independents such as the SEC. [See 44 U.S.C. 3502(10) for a list of independent agencies.] But on July 11, President Obama broadened the scope of his reforms when he released an executive order on “Regulation and Independent Regulatory Agencies.”
The timing of Obama’s executive order was good. That month a federal district court defeated the SEC’s proxy access rule. In Business Roundtable v. SEC, the court said that “the SEC’s adoption of proxy access rule violated the Administrative Procedure Act” because the SEC, among other problems, “inconsistently and opportunistically framed the costs and benefits of the rule” and “failed adequately to quantify the certain costs or to explain why those costs could not be quantified.” (The Administrative Procedure Act is a post– New Deal law passed in 1946 to contain the power of federal agencies.) SEC Chairman Mary Schapiro says that the agency will not appeal the court’s decision.
Many Bills, Few Laws
Congress has not stopped passing laws, but it’s got more bark than bite when it comes to business regulation. The 112th Congress may be setting a record this year for most bills introduced and fewest enacted, according to GovTrack.us, a website founded by civics vigilante Joshua Tauberer. Business bills introduced in the House in September tended to be low-cost, highreturn, “mom-and-apple-pie” measures focused on job creation rather than business restrictions. For example:
- H.R. 2855 To amend the Budget Control Act of 2011 to reduce the deficit and restore the middle class by creating jobs, introduced by Rep. Keith Ellison (D-MN).
- H.R. 2858 To amend the Internal Revenue Code of 1986 to allow a business credit for investments in rural microbusinesses, introduced by Rep. Ronald Kind (D-WI). Note: This bill’s first cosponsor was Republican Walter Herger of California.
- S. 1522 Introduced by Sen. Richard Blumenthal (D-CT) to establish a joint select committee of Congress to report findings and propose legislation to restore the nation’s workforce to full employment over the period of fiscal years 2012 and 2013, and to provide for expedited consideration of such legislation by both the House and the Senate.
All this new work is occurring under a cloud: the downgrade of the country’s long-term sovereign credit rating by Standard & Poor’s. Based on the S&P report, the drop from AAA to AA+ reflects pessimism about not only the economy but also about Washington itself. The report explains that S&P lowered the credit rating because “the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges…”
It’s no secret that for years the federal government under both parties has been spending more than it is making—and borrowing to make up the difference. When the U.S. hit a borrowing limit, it had to choose whether to default or to pay, and it chose to pay. To do so, Congress had to raise the debt limit, reduce expenditures or increase revenues (i.e., raise taxes). The Budget Control Act of 2011, signed into law on August 2, did two out of three. It allowed the government to borrow at least another $1.2 trillion (or $1.5 trillion if Congress passes a balanced-budget amendment to the U.S. Constitution for states to ratify), and it launched a process for reducing government expenditures by a commensurate amount over time.
In September, debt-reduction efforts continued via a Joint Select Committee on Deficit Reduction established by the Budget Control Act of 2011, and chaired by Sen. Patty Murray (D-WA). The goal is to reduce the deficit by $1.5 trillion before 2021. The House and Senate committees had until October 14 to send suggestions to the Joint Select Committee, which has until November 23 to deliver its report to Congress.
The buzz now is about conflicts of interest on the big panel. A bill proposed in Congress (H.R. 2860) would “amend the Budget Control Act of 2011 to require members and staff of the Joint Select Committee on Deficit Reduction to disclose lobbying activities and campaign or member-designated political action committee contributions.” And a Washington Post front-page story claimed: “K Street Has Close Ties to the Debt Panel.”
Supreme Court: Two to Watch
Meanwhile, as the gavel pounds in a new session, it seems that very few business cases are making it up to the nation’s highest court. Of more than 50 cases so far docketed for the 2011–2012 Supreme Court year, only a handful pertain to business, and only two have direct relevance to all industries—one a securities case, the other a labor case.
- Credit Suisse Securities v. Simmonds. Docket No. 10-1261. Petitioners will ask the Court to decide about tolling (delay of application) for insider trading laws. Is the two-year time limit for bringing an action under Section 16(b) of the Securities Exchange Act of 1934 subject to tolling, and if so, does the tolling continue even after the receipt of actual notice of the facts giving rise to the claim?
- Huber v. Walmart Stores. Docket No. 07-480. The Court will decide what the Americans with Disabilities Act means when it assures “reasonable accommodations” via job referral for a person with disabilities who cannot perform a current job. Does it mean: a) that the employer reassigns the employee to a vacant, equivalent position for which he or she is qualified, or b) that the employer merely permits the employee to apply and compete with other applicants for the vacant, equivalent position for which he or she is qualified?
We can’t venture a guess as to how all this will turn out. Will the SEC streamline its rules? Will a jobs bill pass? How will the Supreme Court balance the issues before it? What can be said with certainty is that Washington continues to defy easy description.