The defanging of US watchdogs #NewsMarket

A note to readers: Edward Luce’s Swamp Note will appear on Monday. Rana Foroohar is away.

Most political junkies have been focused on Chicago this week, watching Democrats Kamala Harris and Tim Walz set out their stall for the November presidential campaign. The convention was big on flag-waving and boldfaced names (both Obamas, both Clintons, Oprah Winfrey, Stevie Wonder and Spike Lee, among others) but light on detailed policy. Anti-Donald Trump jibes vied for airtime along with the usual promises to make America fairer, stronger and more prosperous.

But another piece of news underscores the limits on what a Harris-Walz administration could hope to accomplish. On Tuesday, a federal judge in Texas blocked the Federal Trade Commission’s bold effort to reshape the US employment market by making it easier for workers to change jobs. US district judge Ada Brown ruled that the regulator “lacks statutory authority” to ban non-compete agreements nationwide.

The FTC said it was “seriously considering an appeal” and noted that a judge in Pennsylvania ruled the opposite way on a similar challenge there.

The cases are part of a sustained legal onslaught mostly from big business which is tying the hands of progressives who want to use regulation to rein in big business and tackle social, economic and environmental problems. Over the past couple of years the conservative majority on the Supreme Court has constrained the ability of regulators to impose rules unless they are explicitly authorised by Congress, and has made it easier for critics to challenge existing regulations.

That has emboldened industry groups to go after some of the Biden administration’s signature regulatory policies at the FTC, the Securities and Exchange Commission and other watchdogs. These groups are also strengthening their chances of success by filing in Texas and the Fifth Circuit Court of Appeals, which is dominated by conservative judges.

“There’s been a complete reset,” says Brian Daly, a regulatory lawyer at Akin Gump. “Industries have discovered that the world doesn’t end when you sue your primary regulator.”

The challenges are working. A federal appeals court threw out the SEC’s new rules for private funds in June, while both its climate disclosure requirements and the FTC’s crackdown on car dealers’ misleading sales tactics are on hold while legal challenges move through the courts.

“We’re updating our rules to benefit investors and issuers alike within the laws and how the courts interpret those laws. If a court rules one way, I adjust,” said SEC chair Gary Gensler.

No matter who wins in November, US watchdogs will almost certainly have to pull in their horns. Republican candidate Trump, who pushed for lighter regulation in his first term, has explicitly promised to do the same again.

It isn’t clear whether Harris wants to continue Biden’s tough policies on financial regulation and competition. Her first economic speech drew attention for promising to tackle food and grocery price-gouging. Some saw that as a nod towards price controls that would almost certainly be challenged in court. But Ken Chenault, the former chief executive of American Express, told the Democratic convention that Harris is “pro-business”, and her Wall Street and Silicon Valley backers contend that she would be more open to working with industry than Biden’s team has been.

Either way, her options are going to be squeezed by aggressive industry litigation and hostile judges. Agencies that want to tackle new problems will face pressure to prove their actions are explicitly authorised by Congress and justified by a detailed cost-benefit analysis. Most analysts think that will prompt the watchdogs to focus on their core functions, such as policing markets and approving drugs — and become cautious about writing new rules.

A Harris administration would have more room to manoeuvre if Democrats manage to keep control of the Senate. That would allow them to push through her agency appointees and new federal judges without Republican votes.

Under Biden, Democrats had some success at rebalancing the lower federal courts. The Senate has confirmed 205 of Biden’s choices to the main federal courts. If all of Biden’s pending nominees get pushed through, his appointees would slightly outnumber Trump’s total of 234.

The downside for the Democrats, of course, is that Biden has appointed just one Supreme Court justice to Trump’s three and the 6-3 conservative majority will not change until someone retires, dies, or (improbably) Congress musters the votes to change the rules. The Democratic platform talks vaguely about “structural court reforms to increase transparency and accountability” but don’t hold your breath.

Ed, you were at the Democratic National Convention this week and have a better sense than I do about how the party is talking about business and the economy. Is it good or bad for Harris’s election chances that she won’t be able to replicate Biden’s gigantic regulatory push?

Recommended reading

• If it feels to you like everyone in the US has their hand out, you’re not alone. My column this week is on the problem of “tip fatigue”. A post-pandemic explosion in requests for gratuities is testing customer patience, but service workers can’t make ends meet without them. If Trump or Harris comes through on promises to make tips tax-free, expect the problem to get worse.

• I was really fascinated by this Atlantic piece about algorithmic price-fixing. A lawsuit claims that many landlords are illegally feeding information about their properties to the algorithm which then “recommends” what rent to charge. How many other industries are trying the same trick?

• Much has been written about the contrast between the vice-presidential candidates, from their clothing and finances to their rhetorical styles. But Washington Post columnist Matt Bai makes a strong case that Republican JD Vance and Democrat Tim Walz stand for different conceptions of America, asking voters to decide whether it is first and foremost a place or an idea?

Edward Luce responds

Brooke, that’s a good question and many people are posing variations of it. To be blunt, Harris is a bit of a blank slate on the economy. Until last week when she rolled out her controversial measures to tackle price-gouging, all we had to go on was her ill-fated 2020 presidential bid. But she has since disavowed many of the stances that she took then, including Medicare-for-all and a fracking ban.

My sense from how she talks is that she is far less focused than Joe Biden on reviving US manufacturing employment. Partly, this might be generational. Biden is nostalgic for the era when a single-earner blue-collar household could put kids through college. My impression — and I’m deliberately using vague terms here — is that Harris is more focused on the realities of today’s economy. The one topic where she has spoken with some regularity and conviction is on her plans to fortify the care economy. This includes parental leave, renewed child tax credits and a focus on the precarious situation of marginalised, part-time service sector workers.

Her plans to tackle price-gouging felt rushed and the Harris-Walz campaign was surprised by the backlash. It would not be hard to imagine this Supreme Court striking out parts or all of any such legislation. It would make more economic sense for Harris to double down on Lina Khan’s efforts at the FTC to tackle market concentration, including in the meat packing industry. But that would alienate business, which already sees Khan as an adversary. And it would be a leap of faith to imagine that Khan would have better luck at winning big court cases in the next four years than she has since 2021.

The answer to your question is that the growing reality of a regulatory rollback won’t have much of an impact on Harris’s election prospects. People don’t vote on the details of a candidate’s plans. They go with their feelings. If Harris can convince middle-class Americans that she has their backs, she will win.

Your feedback

And now a word from our Swampians . . .

In response to “Chicago matters hugely for Kamala Harris:”
“The Democratic party’s donor class is the most neoliberal and neoconservative in its history. Right now it looks like Ms Harris is going to pitch aspirational change to the party base and ‘the more things change the more they stay the same’ to the party’s super-rich donor class that really calls the shots here.” — Paul A Meyers