The burden on businesses — and particularly smaller businesses — of wrongheaded enforcement of civil-rights laws should not be ignored on “Regulation Day.” I’m not talking about prohibitions of actual discrimination; I mean the federal government requiring politically correct discrimination, either through overt preferential treatment or through regulations and lawsuits that challenge practices which are nondiscriminatory in their terms, intent, and application but have a “disparate impact” on some group (racial, ethnic, gender, etc.).
As for overt preferences, it is obviously expensive and unproductive to require that a contract (or subcontract) be awarded to someone other than the lowest bidder, simply because of the bidder’s skin color or what country his ancestors came from. (As of this year, by the way, such “disadvantaged” folks in U.S. Department of Transportation programs can have a personal net worth of $1.32 million.) It is likewise a needless burden to require companies to hire and promote, not on the basis of who will most help the company, but on who will help meet the Department of Labor’s “goals” and “timetables.”
I write frequently here about the wrongheadedness of the “disparate impact” approach to civil-rights enforcement, and lament the Obama administration’s insistence on ramping up the use of this approach. One of the silliest applications of the doctrine has been “environmental justice,” which expands its use to environmental law pursuant to a Clinton-era executive order. (See page 7 of this monograph.) Thus, for example, a company that wants to build a new factory can be sued by the feds if the adjoining neighborhood is heavily minority — even if the company had no racial motivation (and even if the members of that community would like the accompanying jobs). The Washington Legal Foundation reports that, although this approach had been “largely moribund for the past ten years,” the Obama administration is, unfortunately, resurrecting it.
Using the civil-rights laws to force employers and others to make decisions with an eye on “diversity” rather than merit and productivity is not only divisive and unfair but economically costly. But the head of the Justice Department’s civil-rights division, Thomas Perez, gave a speech last week that included a loud promise to continue bringing “disparate impact” housing cases and an explicit criticism of the past administration for not bringing them. This is the same approach by which, in the employment area, Perez’s division had succeeded the day before in getting the Dayton police department to announce that it will ignore the written test scores (of those who passed) and hire new policemen based entirely on a “subjective oral interview.”
So perfectly reasonable standards for making home loans will be challenged if they lead to politically incorrect racial imbalances, just as perfectly reasonable standards for hiring policemen will be challenged. Just what the financial-services industry and public safety need. Something to be borne in mind on Regulation Day.