The importance of financial reform in the wake of the 2007-2009 Financial Crisis cannot be overstated, as President Obama knew when he signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law (read more here).  Although Dodd-Frank has been successful by many measures — despite the Republican’s fierce sabotage efforts — from the beginning it was too cumbersome and complicated…which is a practice our politicians have taken to an art form. 

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Dodd-Frank started out being 848 pages long but, within five years, 22,296 pages of rules and regulations related to the legislation had been published in the Federal Register.

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To put this into perspective, the National Bank Act of 1864, a law that helped establish our entire banking system, was 29 pages long.  The Federal Reserve Act of 1913, which created the Federal Reserve system, was 32 pages, and the Banking Act of 1933 (a.k.a. Glass-Steagall), the law that separated commercial banking from investment backing and created the Federal Deposit Insurance Corporation (FDIC), was just 37 pages.

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Jonathan Macey of Yale Law School put it this way: “Laws classically provide people with rules.  Dodd-Frank is not directed at people.  It is an outline directed at bureaucrats and it instructs them to make still more regulations and to create more bureaucracies.”  To which The Economist brilliantly replied: “Like the Hydra of Greek myth, Dodd-Frank can grow new heads as needed.”

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We don’t imagine there were many tiny violins playing for Wall Street in the wake of the financial crisis, but between 2010 and 2016, implementing Dodd-Frank cost financial institutions an estimated 73 million hours in paperwork and $36 billion in actual dollars.

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Behold, one of the most fundamental problems in Washington, D.C.!  Even though the atmosphere in politics is already toxic — or probably because of that — politicians decide the best way to proceed with their legislative agenda is to cram as many issues (and earmarks) as possible into a bill, which does nothing but increase costs and inefficiency and create confusion and uncertainty.

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The examples are endless. Take the Patient Protection and Affordable Care Act (a.k.a. Obamacare), legislation that ended up being thousands of pages of text essentially written in Klingon. The sheer breadth and depth of the bill led former Senator Jay Rockefeller (D-WV), one of the primary authors of the legislation, to say it’s “probably the most complex piece of legislation ever passed by the United States Congress” and “just beyond comprehension.”

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It’s tricky to pin down exact numbers, but USA Today estimates that, within three and a half years of the ACA being signed into law, almost 11,000 pages of regulations had been added.  Unsurprisingly, at the time, Republicans claimed the number of pages of regulations in the Democrat-backed bill was much higher.  Representative Richard Hudson (R-NC) proclaimed, “We’ve got 33,000 pages of regulations that they’ve already written.  If we stacked it up here, it would be seven feet tall” (he later revised the number of pages down to 13,000). Meanwhile, Senator Mitch McConnell (R-KY) said that “implementation had become a bureaucratic nightmare, with some 159 new government agencies, boards and programs busily enforcing the roughly 20,000 pages of rules and regulations already associated with this law.”

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Whether there are 11,000, 13,000 or 20,000 pages, we can probably all agree there are a lot!  Our point is that, to make significant progress, there is one thing we must do before all else: Simplify.  Legislation needs to be clear, precise and uncomplicated, the exact opposite of what happens today.

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Steve Jobs, the co-founder of Apple, once said, “We tried to make something much more holistic and simple.  When you first start off trying to solve a problem, the first solutions you come up with are very complex, and most people stop there.  But if you keep going and live with the problem and peel more layers of the onion off, you can often arrive at some very elegant and simple solutions.  Most people just don’t put in the time or energy to get there.”

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…but we must get there, fast!  Especially in light of legislation like President Biden’s Build Back Better Plan. When the Build Back Better Plan was originally introduced, it was divided into three parts: The American Rescue Plan, a Covid-19 relief bill; the American Jobs Plan, which was supposedly a physical infrastructure bill; and the American Families Plan, which was supposedly focused on social services. The original Build Back Better agenda called for $6 trillion in spending.

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Although President Biden signed the $1.9 trillion American Rescue Plan into law in March 2021, the American Jobs Plan and American Families Plan did not pass in their original forms. In the end, these two bills transitioned into three enormous bills that focused on infrastructure, semiconductors and science, and the climate.

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These three spending bills call for between $1.7 and $2.2 trillion in investments over the next ten years — $1.2 trillion for infrastructure thanks to the Infrastructure Investment and Jobs Act; $280 billion for the CHIPS and Science Act to help increase our semiconductor manufacturing capabilities; and $738 billion for the Inflation Reduction Act, a name that is suspect because multiple economic analyses, including ones from the Penn Wharton Budget Model and the Congressional Budget Office (CBO), show the bill has zero chance of reducing inflation. In fact, the CBO says it may even increase it.

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Although the Inflation Reduction Act includes drug price negotiation and reform, a Medicare prescription drug benefit, IRS tax enforcement, and an extension of Affordable Care Act subsidies, over half of the money is for climate-related investments. This includes climate change tax credits for green energy, nuclear energy, clean electricity, wind and solar, clean manufacturing and agricultural conservation. Plus, the legislation establishes a National Climate Bank to leverage investments in clean energy.

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Even though they didn’t pass in their original forms, we are still going to use the American Jobs Plan and American Families Plan as examples, just to make all of this less complicated (if that’s even possible!).  But please know, everything that we point out here about these two bills only got worse in the three bills that followed.

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Let’s start here: There are three reasons the American Jobs Plan and American Families Plan would have been at best counterproductive and, at worst, insanely irresponsible.