Government Will Be The Problem.

Ezra Klein notes that the budget resolution approved by the Senate to keep the government running through March doesn't fund the implementation of health-care or financial reform.

Pat Garofalo
has been doing yeoman's work keeping an eye on the financial reform side of things, and what he's found ain't pretty: Both the SEC and CFTC won't see increases in their budgets needed to implement the new Dodd-Frank financial reform bill. It's particularly egregious, in the CFTC's case, because the agency needs over $100 million more to move it's critical work regulating derivatives forward, a relative pittance in federal budget terms. Some good news: The Consumer Financial Protection Bureau is insulated by the Fed and can't be de-funded without changing the bedrock legislation, a very smart move by its crafters, particularly Rep. Barney Frank.

There are two after-effects here: One is that, aside from lacking the budgetary power to hire the hundreds of new employees needed to enact the bill's authorities, halting implementation of the new rules will make it hard to attract top-quality appointees to these agencies. Someone like Gary Gensler at the CFTC, who applied his talents to push the financial reform bill will stay on to implement it, but if the next two years will be spent begging for money and being grilled at hearings rather than regulating the futures markets, it'll be hard to keep him -- and talented folks like him -- around.

The other, broader issue is that this is another victory in the continuing battle to discredit government. Defunding these programs will make them less effective, and the public will be suspicious of the efforts when the results aren't there. Somehow I don't anticipate many voters saying "That health care reform law was great, but it's too bad it didn't get properly implemented." They'll say "health care reform doesn't work!"

And when, say, there aren't enough folks at the CFTC watching credit-default swaps, and it turns out that a major bank's exposure to Chinese investments creates a systemic event after the hot-money fueled bubble in the People's Republic pops in 2013, people aren't going to say, "too bad the CFTC didn't get enough money to adequately do its job and prevent a financial crisis." They're going to say, "that financial reform bill was a disaster."

-- Tim Fernholz

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