Why Regulation Is Bad For Business

Question: How is the regulatory climate in Washington affecting businesses and Wall Street?

Ken Mehlman: I think that certainly today I think there’s a lot of folks in business that are sitting on cash, this has gotten a tremendous amount of attention—$3 trillion sitting on corporate balance sheets. Why is that?  I think one of the reasons is regulation.  One of the reasons is, if you’re the CEO of a company and you know that in the future, the cost of employing people is going to go up because of health care legislation, you know that, you’ve heard that your taxes are likely to go up, you know that the cost of capital is likely to increase for lots of reasons—Basel III is one of them, fin reg [financial regulation] potentially has that impact as well, the fact that there’s a wall of debt coming due also—for all those reasons, you’re certainly thinking: "I want to put some cash aside."

Otherwise, look, I think the different rules, different regulations, have an impact on different industries.  Certainly fin reg, a lot of the regulations are still being thought about and have not yet been implemented.  That’ll be key for the next several years.  But that clearly will have an impact on operations that used to be, for example, at banks, you know, that’ll now become independent or go into other institutions.  And clearly health care will have an impact.  There was an interesting article in the New York Times yesterday about the mergers that are occurring in the health care space, in part because health care reform was designed to encourage more collaboration within the health care industry and part of that collaboration is occurring through merger.  So, I definitely think that the recent legislative changes will produce significant regulatory impacts, which will then produce a business impact. 

Question: Do you see these impacts as mostly negative?

Ken Mehlman: Certainly I think that today, if your goal is maximum employment, the possibility that there will be a significant tax increase and the fact that the cost of capital could increase, and the fact that employing workers could be more expensive because of health care reform, all those things are likely to make a number of companies less likely to hire workers.

On the other hand, others might argue that there are societal benefits from all three.  That’s a fine argument to make, it’s just important to understand the realities from both perspectives. 

Question: Do you expect more regulation coming down the pipeline?

Ken Mehlman: I think that the reality is because of the legislation that’s already been passed, there’s likely to be a fair bit of regulation implementing that legislation, and that’ll happen going forward. You know, one of the things that often you see in government is, when you can’t legislate, you regulate.  And so I think that you might see in other areas too, increased regulation.

What I hope, though, and I think you’re seeing some of it, and you saw it in the last election, is that policy leaders will stop and think about the fact that they really do want jobs created in this country, which I believe they do. And they’ll think about what is the impact of uncertainty?  What is the impact of changing rules on people’s willingness to invest, versus leaving cash sitting on their corporate balance sheets.  And that’s something that I hope then could hopefully make that regulation, some of which we know is coming, more flexible, and more reasonable and less likely to have a negative impact on the economy.

Recorded November 22, 2010
Interviewed by Max Miller

American businesses are currently sitting on $3 trillion as they wait for new regulations to be implemented.

How to make a black hole

Here's the science of black holes, from supermassive monsters to ones the size of ping-pong balls.

Videos
  • There's more than one way to make a black hole, says NASA's Michelle Thaller. They're not always formed from dead stars. For example, there are teeny tiny black holes all around us, the result of high-energy cosmic rays slamming into our atmosphere with enough force to cram matter together so densely that no light can escape.
  • CERN is trying to create artificial black holes right now, but don't worry, it's not dangerous. Scientists there are attempting to smash two particles together with such intensity that it creates a black hole that would live for just a millionth of a second.
  • Thaller uses a brilliant analogy involving a rubber sheet, a marble, and an elephant to explain why different black holes have varying densities. Watch and learn!
  • Bonus fact: If the Earth became a black hole, it would be crushed to the size of a ping-pong ball.

Russian reporters discover 101 'tortured' whales jammed in offshore pens

Protected animals are feared to be headed for the black market.

(VL.ru)
Politics & Current Affairs
  • Russian news network discovers 101 black-market whales.
  • Orcas and belugas are seen crammed into tiny pens.
  • Marine parks continue to create a high-price demand for illegal captures.
Keep reading Show less

China’s artificial sun reaches fusion temperature: 100 million degrees

In a breakthrough for nuclear fusion research, scientists at China's Experimental Advanced Superconducting Tokamak (EAST) reactor have produced temperatures necessary for nuclear fusion on Earth.

Credit: EAST Team
Surprising Science
  • The EAST reactor was able to heat hydrogen to temperatures exceeding 100 million degrees Celsius.
  • Nuclear fusion could someday provide the planet with a virtually limitless supply of clean energy.
  • Still, scientists have many other obstacles to pass before fusion technology becomes a viable energy source.
Keep reading Show less