‘It’s so meager,” proclaimed House Minority Leader Nancy Pelosi on March 9, the day after the House passage of the Jumpstart Our Business Startups (JOBS) Act, a bill to reduce regulations on businesses that raise capital. Though Pelosi had voted for the bill, as had 157 other Democrats and all the Republicans who were present, she belittled the accomplishment as a “little king” and at most a “jobs bill lite.” A few days later, the bill — which also garnered the support of such staunch liberals as Barney Frank (D., Mass.) and Maxine Waters (D., Calif.), and was supported by the Obama administration — suddenly became “radical.”
“Democrats have belatedly woken up to the act’s radicalism,” statedThe Economist. The usual suspects who treat regulation as religion — the AFL-CIO, the New York Times editorial page, etc. — came out in full force against the bill. When the bill came before the Senate, Jack Reed (D., R.I.), Carl Levin (D., Mich.), and Mary Landrieu (D., La.) spearheaded an amendment that would have weakened or gutted every measure of regulatory relief in the House bill. The amendment got the vote of every Senate Democrat and Senator Scott Brown (R., Mass.), but fell short of the 60 votes it needed to move forward. Eventually, 25 Democrats — nearly half of the party’s Senate caucus — joined the unanimous Republicans to pass a bill that contained almost all the provisions of the House version.
In truth, the JOBS Act, which President Obama is set to sign today, is neither meager nor radical. It will reduce some significant regulatory barriers to job creation, most notably the accounting mandates of the Sarbanes-Oxley Act of 2002. The IPO Task Force — an Obama-coordinated gathering of entrepreneurs, investors, and academics — found that the regulation-induced decline in the number of U.S. initial public offerings over the last decade may have cost the economy as many as 22 million jobs.
Is election-year politics playing a role in the Obama administration’s sudden concern about red tape? Certainly, and Sarbanes-Oxley regulations are a politically smart choice as a target, since the act burdens the high-tech and “green tech” companies Obama champions, as well as many other firms. Also, whereas several other major regulatory efforts were signed by Obama himself — such as Obamacare and Dodd-Frank — Sarbanes-Oxley was signed in 2002 by George W. Bush. (In fairness, the JOBS Act does contain a modicum of Dodd-Frank relief as well.)
But politicians’ mixed motives should not detract from the fact that this bill, which does not spend a dime of taxpayer money, will do more to create jobs — by getting out of the way and letting the private sector create jobs — than most every so-called stimulus package that Congress has passed over the last few years.
The JOBS Act is based on the finding — from the IPO Task Force, and from respected research institutions such as the Kauffman Foundation — that young firms, the “emerging growth” companies responsible for the bulk of American job creation, are being hobbled by loads of red tape from Sarbanes-Oxley and other mandates.