Pelosi and regulation

To file in the Hell Freezes Over column, CEI issued a press release last week praising House Minority Leader Nancy Pelosi for advocating a deregulatory position. While Pelosi has stood foursquare against free-market policies such as tax cuts, Social Security private accounts, and free trade, the new “Innovation Agenda” she unveiled on behalf of House Democrats goes further than many Republican have gone on reining in Sarbanes-Oxley. It commits House Democrats to support legislation that will “require specifically-tailored guidelines for small public companies to ensure Sarbanes-Oxley requirements are not overly burdensome.”

While modest, this is further than most Republicans have been willing to go. For the most part, they have failed to challenge House Financial Services Committee Chairman Mike Oxley (the Oxley in Sarbanes-Oxley), who has said there will be no legislative changes to the law. Given the billions in compliance costs and many thousand of productive manhours these accounting rules have cost American business, it is smart politics for Pelosi to come out with her position. It’s a way of arguing to the business community that Democrats are reasonable, and Sarbanes-Oxley reform is not an issue that will particularly anger her Democrats’ base.

This should not be taken as a wholehearted endorsement of Pelosi’s Innovation Agenda either. There are many bad spending increases in there, most notably the proposal to double funding for the Advanced Technology Program, a corporate welfare boondoggle. Then again the “competitiveness” agendas put forward by President Bush and House Republicans  (though this one does contain some good things about tort reform and banning Internet taxation) also propose spending hikes, but contain nothing about Sarbanes-Oxley reform. Something, provided that it’s in the free-market direction, always beats nothing.

P.S. Not every Republican is proposing nothing. Ron Paul and Jeff Flake, R-Texas and R-Ariz., prophets of honor who cast two of the three dissenting votes in the House against Sarbanes-Oxley in 2002 (the other dissenter being former Rep. Mac Collins, R-Ga., in case this is ever a Jeopardy! question) have introduced bills to substantially scale the law back. Paul’s Due Process and Economic Competitiveness Restoration Act, co-sponsored by Rep. Lynn Westmoreland, R-Ga., would repeal the costliest part of the law, the “internal” controls Section 404. Flake’s bill, the Competitiveness Enhancement and Opportunity Act would make Section 404 voluntary. These would go a long way toward reducing the law’s burden on entrepreneurs, and members of both parties should take heed.

--John Berlau