New rules will hurt both 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 that 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.
As my Heritage Foundation colleague James Sherk explains, businesses and employees don’t care how much they pay and earn per hour.
They care about total hours worked and how much they earn for that work.
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.
‘Will President Barack Obama’s recent string of new business rules hurt the economy?’
Most salaried workers don’t track their time. Under the new rule, those newly eligible for overtime pay will have to start doing so.
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 in- tends to help.
A hallmark of the Obama years has been a lack of understanding about how economic policy actually works in the real world. The recent imposition of counterproductive rules continues this trend.
It’s too late for President Obama to change his ways. The economy and American families can only hope the next president has learned from this president’s mistakes.