Saturday, July 26, 2008

Front page of yesterday's Wall Street Journal:

Amid Turmoil, U.S. Turns Away From Decades of Deregulation
July 25, 2008; Page A1

WASHINGTON -- The housing and financial crisis convulsing the U.S. is powering a new wave of government regulation of business and the economy. Federal and state governments alike are increasingly hands-on in their effort to deal with failing businesses, plunging house prices, worthless mortgages and soaring energy prices. The steps add up to a major challenge to the movement toward deregulation that has defined American governance for much of the past quarter-century since the "Reagan Revolution" of the early 1980s. In fact, some proponents today of a bigger oversight role for government are Republican heirs to the legacy of President Reagan....


The debate over Washington's hand in the economy is at the heart of the presidential campaign. Both major-party candidates are endorsing proposals to create new, Federal Reserve-style commissions to limit greenhouse-gas emissions and decide how to spend billions of dollars on energy-efficient technology....Public opinion is shaping the response. By a 53%-to-42% margin, Americans want government to "do more to solve problems," according to a Wall Street Journal/NBC News poll released Wednesday. A dozen years earlier, respondents opposed government action by a 2-to-1 margin....


The degree of change will depend on who occupies the White House next January. Sen. Barack Obama, the presumed Democratic candidate, has talked about a sharp increase in taxes on wealthy Americans, and a windfall-profits tax on oil companies. Republican rival Sen. John McCain would cut taxes on corporations.

Still, powerful industries are facing greater pressure for regulation than they've seen in a generation because of concerns about the safety of the products. Drug makers are being pressed by congressional Republicans and Democrats alike, who want stricter oversight by the Food and Drug Administration and new regulations that would mandate tougher safety standards and import controls. In the case of the food industry, the food processors and other companies -- fearing a public backlash -- have been urging Washington to ratchet up its oversight of imported foods and ingredients, reversing the industry's usual hands-off approach....

The bigger role for government is being driven in part by fallout from the housing crisis. The beating suffered by financial institutions has required the kind of quick, large-scale financial intervention that only the Federal Reserve can provide. At the same time, the success of the Fed in recent years at whipping inflation and limiting the depth of recessions has had the side effect of enhancing the reputation of government agencies. That's prompting politicians to try to use that model to solve other problems....


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