The “Other” Cliff Comes With Heavy Price Tag For Economy

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As the Fiscal Cliff has garnered a great deal of attention, another cliff is waiting on the horizon in the shape of vast regulations that President Obama will try to push through in his second term.    This wave of far reaching regulations could pose a bigger threat to the US economy that appears to finally be turning the corner from the financial crisis of 2008.

In fact, some observers contend that cost of newly proposed regulations could compound the damage of the big bad fiscal cliff and potentially cost more than $100 billion, according to a report published by American Action Forum.

Besides aggressive regulation of financial industry by way of the Dodd-Frank reforms, there are other sectors of the economy that may also be restricted by new regulatory rules that hamper their bottom line.

For example, the health care sector is now under the umbrella of the Affordable Care Act.   Recently, the Health and Human Services Department has submitted an array of rules that the Obama Administration temporarily set aside in the run up to the election.    In sum, insurers will soon have clarity on how to design and set coverage costs regarding essential benefits that must be provided.

Meanwhile, the financial services sector has long been grappling with the costs of the Dodd-Frank reforms, and there is still a lot to learn as a mere 130 or so rules have been finalized.   Regulators are now finalizing rules on bank stress testing and capital and margin rules for the swaps markets, but there are still many big ticket items that need to be rolled out.

Furthermore, in the energy field the EPA delayed rules for ozone air quality and industrial boilers, and deferring carbon standards.    Now the agency is ready to resume its anti-carbon agenda through so called new source performance standards that will set greenhouse gas emissions for new power plants very low and this will ultimately prevent their construction.

On top of all this, the Labor Department is crafting a new rule that would increase the cost of retirement planning for middle-class workers.     The so-called Fiduciary Rule would tighten restrictions and increase litigation risks for businesses that offer investment guidance on a commission basis.    The bottom line: the Fiduciary Rule could result in higher retirement account minimums and cause $7.2 million individual retirement account (IRA) holders to lose access to investment advice.

Finally, a new Department of Transportation rule will increase the costs of new cars and trucks by mandating expensive new technology.     The Rear-View Camera Rule would require that all cars and trucks be equipped with a rear-view camera and video display on the dashboard, at a cost of some $2.7 billion to auto makers and car buyers.

While the long term effect of all this regulation remains to be seen, but the long and short of it is that the myriad of new regulatory laws could have a more drastic effect on the economy than the dreaded fiscal cliff.

Anna Timone (195 Posts)


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