The inherent danger of complex laws and regulations

We often hear big businesses complaining about regulations, but if those regulations are complex enough, they turn into giant opportunities for big business. All you need is a smart team of lawyers in order to drive a big truck through a tiny loophole or exemption, as explained by Kevin Drum of Mother Jones:

[N]o one should take too seriously Republican complaints about burdensome regulations strangling the economy. The truth is that most reformers prefer fairly simple rules. In the tax world, they'd prefer to simply tax all income. In the environmental world, they'd prefer to set firm limits for pollutants. In the financial world, they'd prefer blunt rules that cut off risky activity at its knees.

But businesses don't like simple rules, because simple rules are hard to evade. So they lobby endlessly for exemptions both big and small. This is why we end up with tax subsidies for bow-and-arrow makers. It's why we end up with environmental rules that treat a hundred different industries a hundred different ways. It's why financial regulators don't enact simple leverage rules or place firm asset caps on firm size. Those would be hard to get around and might genuinely eat into bank profits. Complex rules, conversely, are the meat and drink of $500-per-hour lawyers and whiz kid engineers. If the rules are complicated enough, smart lawyers can always find ways around them. And American corporations employ lots of smart lawyers.

In an earlier post, I had cited this quote: "One can make money only if there is real risk based on actual uncertainty, and without uncertainty there is no risk.' To the extent that we have simple and understandable rules, it is harder to hide unfair business practices. There is great value to uncertainty--to unwieldy and vague legislation--to those who have teams of savvy lawyers and accountants whose job it is to navigate and circumvent the purported intent of the legislation. That's because most of us don't have the time, attention, energy or political clout to rein in those who create these legislative monstrosities. We're too busy working 8 or more hours per day at the office, then trying to be good parents, trying to fix the house or car, and maybe relaxing for an hour or two per night. How many of us are interested or able of plowing through 2,000 page legislative packages or regulations in our "free time," or trying to make sense of complex court decisions that also struggle with these legislative morasses? As Kevin Drum writes:

We could probably cut the size of agency regulations by 10 times if we wanted to. But business don't want to. Sure, they'd prefer no regulation at all, but they know that's not in the cards. So in public they bemoan complexity, but in private they fight endlessly for more of it. To their lawyers, every single extra page is an extra opportunity to make more money.

It makes one think that we need a law to outlaw complex laws.  We need a law that all laws should be written in plain English and that they must be understandable by high school graduates.  Those who insist that they need something that is not reasonably understandable should be presumed to benefit a special interest and presumed to be opposed to the public good.  Complex laws are huge red flags, regardless of the title of the law or the way politicians assure us that these laws will benefit the public. Indigestibly complex laws almost always signal that ordinary Americans are getting screwed.

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Shock Doctrine: Take advantage of crises to ram through unpopular policies

Naomi Klein's "Shock Doctrine" is illustrated in this short video. The idea is that political leaders often take advantage of natural and manufactured crises--which cause many folks to become infantilized in response to the trauma--to ram through unpopular policies, quite often "free market" initiatives. Klein's idea has intrigued many, but also received mixed reviews from economists.

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Terrorist = a Muslim who commits violence

Glenn Greenwald points out that Americans are commonly persuaded and controlled through the use of vague terms. One example is the word "terrorism," which tends to be applied only where the person committing violence is a Muslim and not when non-Muslims commit comparable acts. A "militant" has come to mean any person who dies when an American weapon explodes. "Class warfare" and "Civil liberties" are other commonly used vague terms that are actually used as "tools for misleading political arguments." Another such vague term is "rule of law," which originally referred to the idea that "we are all equally bound to a common set of rules, regardless of power position, or prestige." It originally meant that "nobody is above the law or below the law." Citing the work of Thomas Carruthers, Greenwald noted that the biggest challenge is to prevent elites from living above the rule of law. The founding fathers, who personally "loved inequality," agreed that a central requirement for the new country is that everyone would comport with the law; without this requirement, they agreed that the country would not be "legitimate and just." Greenwald explained that with regard to "rule of law," things aren't working out so well in modern day America. The biggest problem is that "we no longer believe in the principle itself." With regard to journalists (see below), they now tend to be situated as insiders rather than outsider watchdogs who, in less dysfunctional times, embraced the motto: "Afflict the powerful, comfort the powerless." Greenwald has been out and about, promoting his new book, With Liberty and Justice for Some. For many additional videos of his talks, see here.

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The anatomy of a proposed settlement by Citigroup

Matt Taibbi dissects a proposed deal between the SEC and Citigoup, after Judge Jed Rakoff harpoons it:

In the deal, Citi made a $160 million profit, while its customers lost $700 million. . . . So to recap: a unit of Citigroup, having repeatedly violated the same laws and having repeatedly violated the SEC’s own cease-and-desist orders and injunctions, is dragged into court one more time for committing a massive fraud. And what does the SEC do? It doesn’t even bring up Citi’s history of ignoring the SEC’s own order, slaps the bank with a fractional fine, refuses to target any individuals, allows the bank to walk away without an admission of wrongdoing, and puts a cherry on the top by describing the $160 million heist not as a crime, but as unintentional negligence.

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