When Obamacare passed after nearly a year of grueling debate, the Democratic faithful popped open the champagne and celebrated a hard-fought victory. Eight short months later, that success turned to ashes. Republicans delivered a “shellacking” to the Democrats in the midterm elections, hammering them on a healthcare bill that has remained stubbornly unpopular despite predictions that Americans would “get used to it” with time. Obamacare looks less and less like a triumph of social engineering and more and more like a poorly drafted, poorly designed mess.Only two years later, it looks like a similar fate may befall the other signature piece of legislation to pass through Congress under the Obama administration: the 848-page Dodd-Frank Act, which aims to regulate the operation of the financial system and prevent another crisis like that of 2008. A recent piece in the often Obama friendly Economist presents a withering critique of the new law, which is exceedingly complicated, practically incomprehensible, and threatens to drown American industry in an ocean of red tape:
Take the transformation of 11 pages of Dodd-Frank into the so-called “Volcker rule”, which is intended to reduce banks’ ability to take excessive risks by restricting proprietary trading and investments in hedge funds and private equity (Paul Volcker, a former chairman of the Federal Reserve, has argued that such activity contributed to the crisis). In November four of the five federal agencies charged with enacting this rule jointly put forward a 298-page proposal which is, in the words of a banker publicly supportive of Dodd-Frank, “unintelligible any way you read it”. It includes 383 explicit questions for firms which, if read closely, break down into 1,420 subquestions, according to Davis Polk, a law firm. The interactive Volcker “rule map” Davis Polk has produced for its clients has 355 distinct steps. […]The overall cost of all this—both directly to public and private institutions and indirectly to the markets—is staggering. At the same time as banks are sacking employees in operating roles, they are adding swarms to cope with various requests from government agencies and other new filings, all to avoid violating rules that may never come into existence and temporary measures that may be rescinded. That is without looking at losses in terms of business not done. Loans that might not fit into a category favoured by regulators are being trimmed or withdrawn.
Though it has seen some policy successes, the Obama Administration and its Democratic allies in Congress seem cursed with a dysfunctional mess of large ambitions and poor skills when it comes to major legislation. Its two attempts at major reforms have created massive, bloated laws that will become a cash cow for lawyers and bureaucrats for years to come. In both cases, “repeal and replace” is the way to go; the medicine is worse than the disease.The GOP has problems of its own, but the Democratic failure to manage finance and health is disheartening to say the least.