Economic Effects of the Abuse of Presidential Power

This is Richard Posner, writing at his blog:

Should a President use the prestige (one might even call it the “moral authority”) of the office, and his ability to command public attention, to obtain compliance with demands made by him on the business community that are not backed by law? I think not, apart from any distaste one may have for bullying. It makes business subject to two regulatory regimes. One is a legal regime, created by Congress and by the regulatory agencies to which Congress delegates a portion of its own constitutional regulatory power. The other is a kind of “people’s democracy” regime, in which government stirs up public anger to force businesses to comply with extra-legal government demands.

This second regulatory regime operates without rules, and so subjects business to potentially debilitating uncertainty in the sense of a risk that cannot be quantified. We know from Keynes and other students of uncertainty that a common and often the sensible response to uncertainty is to freeze, in the hope that the uncertainty will dissipate over time, or to take active steps to reduce the uncertainty. Both are options for business faced with the threat of presidential wrath. A business can hire less, invest less, and build up its cash balances as a hedge against adversity.

Here is Gary Becker’s view:

The general anti-business tone of the current Congress and presidency that is reflected not only in various discretionary acts by the president, but also in proposed and actual legislation, such as the health care law, controls over executive pay, and the Dodd-Frank bill, are already slowing down the recovery from the financial crisis and recession.

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