Simpler Is Better

On Saturday, The Wall Street Journal ran one of its trademark editorials making fun of government red tape—the massive regulations required to implement the Affordable Care Act; the 398 different rulemakings necessary to carry out the Dodd-Frank Act, and a great deal more. 

I seldom agree with the Journal’s editorial page, but it makes an unintentional point: Government regulations have become so complex that they can’t do their job. Or at best, the sheer complexity makes the government sitting ducks for the mischief of industry lobbyists looking to further complicate the rules with loopholes.

But where does the complexity come from? It comes from the metastasized abuses of the private sector and the success of the business elite in getting government to pass laws with plenty of room for industry to maneuver.

The Glass-Steagall Act of 1933, by contrast, was simplicity itself. It ran just a few pages and didn’t need 398 different rulemakings to carry it out. The act provided that you could either be a government-insured commercial banker or a risk-taking investment banker. Full stop. It drew a nice, simple bright line. The trouble crept in when industry lobbying succeeded in blurring the line.

And nations fortunate enough to have single-payer, universal health insurance don’t have libraries full of regulations to keep private insurers from fleecing doctors and patients alike—middlemen for the most part don’t exist. Simpler is better.

By the same token, the Home Owners Loan Corporation of the Roosevelt era, which refinanced one mortgage in five and saved a million homes from foreclosure, did not require the Byzantine rule book of the Obama mortgage-relief programs channeled through the private sector. The HOLC used the Treasury’s borrowing rate and made direct loans to homeowners. No securitization, no Wall Street middlemen, no scandals, no reams of regulations. End of story.

Pop quiz: Which part of America’s pension system is a complete mess, unraveling as large corporations like American Airlines abuse the bankruptcy system to walk away from pension obligations? Which part requires endless regulation that never seems to be sufficient to prevent the latest corporate scam? That would be the private part.

And which part is simple, elegant, scandal-free, and reliable? That would be Social Security.

Where are the gross abuses in student loans? In the private, government-guaranteed part of the system, of course. Where is the system simpler, fairer, and more cost-effective? In the direct-loan part.

Does there seem to be a theme here? It’s not just that simpler is better. It’s that public is better, and public is usually simpler and more efficient.

So the next time you read a Wall Street Journal editorial decrying all that government red tape, ask where the complex abuses came from that required all those rules. The answer is pretty simple.

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