[sbskeeper]

No, deregulation did NOT cause the current economic meltdown. In fact in may be arguable if government deregulation has increased.

The Federal Register, which lists new regulations, averaged 72,844 pages annually during the Carter years from 1977 to 1980. These were presumably, by Pearlstein’s 25-year standard, the last time before now that Americans didn’t have “faith” in open, unregulated markets. Then the average fell to 54,335 during the Reagan years, rose to 59, 527 during the Bush I years, to 71,590 during the Clinton years, and, finally, to a record 75,526 during the administration of that great believer in laissez-faire, George W. Bush. It’s true that when governments deregulate, they must announce those changes in the Federal Register, too, and so some of the pages represent genuine deregulation. But most of the pages were new regulations, no matter what president was in power at the time. So, far from moving away from regulation, the U.S. economy became even more regulated during Pearlstein’s alleged 25-year era of light regulation.

Of course, the number of pages in the Federal Register is a crude measure of regulation. But it’s not the only measure we need rely on. Veronique de Rugy and Melinda Warren, in “Regulatory Agency Spending Reaches New Height,” an August 2008 report by the Mercatus Center and the Weidenbaum Center, found that between 1980 and 2007, roughly the years that Pearlstein labels “unregulated,” the number of full-time employees of U.S. government regulatory agencies increased 63 percent, from 146,139 to 238,351. During that same time, the U.S. population rose from 226.5 million to about 301 million, an increase of only 33 percent. Moreover, according to de Rugy and Warren, U.S. government spending on regulation alone (not including compliance costs, a much bigger number) tripled, from $13.5 billion to $40.8 billion (all in 2000-year dollars.) As a percent of GDP, spending on regulation rose from 0.26 percent to 0.35 percent, a 35-percent increase. Some deregulation.

One could argue that we need to distinguish here between different kinds of regulation. Often people refer to “economic regulation” when they mean restrictions on whether new firms can enter businesses or that require firms to get government permission before setting their prices. If this is what they mean, then there is a case to be made that, in substantial sectors of the economy, there is less government regulation now than before the late 1970s. There has been substantial deregulation at the federal level of airlines, trucking, railroads, oil, and natural gas, to name five large sectors. And indeed, as we shall see later, this deregulation
has had, on net, good effects.

What was the nature of this new regulation? The biggest growth came in so-called “homeland security,” where spending more than quintupled, from $2.9 billion in 1980 to $16.6 billion in 2007 (all in real 2000 dollars). The second-largest growth rate was in regulation of finance and banking, where spending almost tripled, rising from $725 million to $2.07 billion. Together, regulation of homeland security and of finance and banking now account for over half of federal regulatory spending.

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[matt787]

It is so hard to measure the impact of regulation, but I think many agree that the housing market was one (among many) of causes for the economic collapse. Banks were forced to make risky loans that holder's defaulted on. Barney Frank still won't admit that his program failed. I can't believe he still holds a seat.