May 2, 2016 | Commentary on Regulation, Financial Regulation

Obama's New Rules Will Hurt Businesses and Workers

As his time in office winds down, President Barack Obama continues to enact economically harmful and counterproductive policies, mostly through his use of executive power.

Recently, he unleashed a wave of financial rules that will hurt the very people he intends to help.

The president has long been troubled by corporate inversions, the practice of large U.S. companies merging with foreign firms and reincorporating abroad. Businesses are going this route because the U.S. has the worst business tax system among developed nations and there has been no action in Washington to fix it.

Rather than fixing that system to keep businesses here, the president has instructed his Treasury Department to devise rules to stop inversions.

Earlier this year, the Treasury successfully stopped the pharmaceutical company Pfizer from merging with Allergan and moving to Ireland by issuing retroactive rules that fit the facts and circumstances of that specific deal. It was an egregious abuse of power and showed the lengths the Obama administration will go to get its way.

The end result won’t be a boon for the U.S. Instead, American businesses will continue to suffer under the poor business tax system, which will hurt job creation and wage growth for American workers.

The Treasury seems not to have realized that these new rules will suppress foreign investment in the U.S. This will further reduce jobs and wages for American workers, the opposite of what the Obama administration wanted.

On a similar note, the Department of Labor will likely soon finalize a rule making overtime pay mandatory for salaried workers who earn less than $50,440 a year.

Right now the threshold for mandatory overtime is less than half that amount. The motive for the new rule is to increase pay for middle-income earners. However, the economics of the case show a pay bump for families in this income range will likely not occur.

That means businesses will respond to this new rule by paying these workers more for the extra hours they work but will simultaneously reduce the amount they pay them for their standard time. That also means their employers will be less willing to let them work from home or take advantage of other flexible arrangements. This will reduce the flexibility many families need to meet commitments at home and the office. The new overtime rule will mean the same pay and less flexibility for those the Obama administration is supposedly trying to help.

A third controversial new rule, this one also from the Labor Department, requires financial advisers to account for the fiduciary interests of their clients.

This is a legitimate problem, but one the new rules will not combat. As my Heritage colleagues have pointed out, the rules will instead make it harder for smaller investors and small businesses to acquire the financial assistance they need to better invest their savings. This is yet another example of an Obama rule hurting those he intends to help.

A hallmark of the Obama years has been a lack of understanding about how economic policy works in the real world. The recent imposition of counterproductive rules continues this trend.

-Curtis S. Dubay is a research fellow in tax and economic policy in the Roe Institute for Economic Policy Studies at The Heritage Foundation.



About the Author

Curtis S. Dubay Research Fellow, Tax and Economic Policy
Thomas A. Roe Institute for Economic Policy Studies

Related Issues: Regulation, Financial Regulation

This piece was originally distributed through the Tribune News Service