Parties Likely to Play Up Extremes In Debate Over Regulation

Regulation has made a comeback

Obama has increased regulation in health care, credit cards and other pocketbook issues

After three decades of steady, and at times, historic, deregulation, by Democrats and Republicans alike, Washington has slammed on the brakes and made a dramatic U-turn. Regulation is back—and with a vengeance, some would say.

Government Regulation
Government Regulation

The first two years of the Obama presidency touched major and pocketbook issues: Health care, derivatives, creditcards,energy, mortgages.

President Obama and Congressional Democrats worked hard to push through sweeping and tough legislation, usually with little Republican support, capitalizing on Americans' feelings of anger and helplessness in the wake of the 2008 financial meltdown. Regulation would protect them, so the argument went, and—in the future—compensate them.

Republicans resisted—often fiercely—saying the Democratic majority was both over-reacting and over-reaching, choking, if not suffocating the entrepreneurial spirit, hurting US competitiveness and raising the cost of doing business, most of which would backfire on consumers. The Credit Card Reform Actand its aftermath partly proved that to be true.

Of all the big regulatory initiatives, only financial reform presented some common ground, with both the GOP and Democrats committed to the idea of reform. The difference, however, was in a myriad of details, as well as the depth and breath of the measures.

Your Money Your Vote - A CNBC Special Report
Your Money Your Vote - A CNBC Special Report

Only time will tell about such landmark legislation as the Dodd-Frank Wall Street Reform and Consumer Protection Act; sweeping regulatory reform—whether it is an easing or a tightening—often yields unintended consequences, but between now and then, you'll hear plenty of predictions about the impact.

Here's where the two parties stand on the big three regulatory battlegrounds: health care, energy and financial reform.

Health Care

Democrats:TheAffordable Care Actwill lower the premiums paid by more then 10 percent of small business (firms with 50 full-time workers or less) by between 1 percent and 4 percent. Firms will receive a tax credit of 35 percent of the health care tab for employees provided the employer pays more than 50 percent of the overall cost. The tax credits will remain in place until 2014 and then rise to 50 percent over two years.

The Commonwealth Fundreleased a reportconcluding that the tax credits would potentially impact over 16 million workers, but that only 3.4 million of them would be offered insurance as a result.

Republicans: One of the GOP’s major complaints about the package is that is fiscally negligent, and will actually raise the cost of health care, while reducing choice.Republicans are opposed to annual fines for firms that fail to provide coverage for workers as well as a surcharge tax on high-income earners to help pay for the bill's provisions.

House Minority Leader John Boehner (R-Ohio) says the GOP will seek to turn back Obamacare in the next Congress, should the balance tip sufficiently, repealing the provisions in the bill and offer a completely new solution. That's likely to resemble parts of the alternative plan crafted by the GOP's rankings Ways & Means committee member Dave Camp of Minnesota and emphasize two areas deemed important to voters: reducing costs and accommodating pre-existing conditions.


Democrats: Having failed to push through cap-and-trade legislation, whose costs were partially offset by the job creation potential, they pushed clean energy development in the wake of BP oil spillin the Gulf of Mexico.

Democrats also focused on corporate liability and a proposal to remove the current $75-million cap on liability in the event of an accident and raising it to $10 billion per company, as well as greater scrutiny of offshore drilling permits.

Republicans: The party supported business in its opposition to cap-and-trade on the grounds it would be expensive to companies and consumers, seizing on aCongressional Budget Office reportestimated that the average American household would pay an additional $175 a year in energy costs by 2020.

They also resisted the the higher liability fees, saying smaller oil and gas drilling companies would find it impossible to obtain the necessary insurance. The GOP also opposed an open-ended moratorium on new deepwater drillingcontracts.

Financial Reform

While the a large majority of GOP members voted against the financial reform packageon party lines, it is doubtful that they will try to repeal Dodd-Frank. The public was strongly for financial regulation, and this does not seem to be a topic that will garner them voter support in the mid-terms.

If there is one provision that may not survive a GOP term, it is the Volcker Rule, because of the view it interferes with the functioning of the free markets. Republicans also took sharp exception to the creation of a new consumer protection agency for financial products, partly on the ground that its regulations could conflict with safety and soundness principle of the banking regulation.