Corporate Penalties Decline Dramatically, Will American Life Do the Same?

A report released Wednesday, August 1, 2018, by Washington-based watchdog Public Citizen, found a drastic decline in the enforcement of penalties against corporations that violate federal laws.

The Insurance Journal reports that during 2017:

  • In 11 of the 12 federal agencies, penalties imposed on corporate violators declined in most cases by more than 50%.
  • Penalties dropped at the Justice Department by 90%.
  • Penalties dropped at the Commodity Futures Trading Commission by 80%.
  • Penalties dropped at the Securities and Exchange Commission by 68%.
  • Penalties dropped at the Environmental Protection Agency by 94%.
  • Penalties at the Federal Communications Commission dropped overall by 85%.

However, what this dramatic change in law enforcement will have on life for Americans has yet to be determined. This is primarily due to a sudden halt in enforcement of laws that have been in effect for many years. Because such a lack of enforcement is unprecedented in American history, there is no track record that can be analyzed to predict the effects of these changes.

There is no doubt among experts that corporations are closely watching the dramatic decline in penalties that were previously imposed for infractions. Complying with laws that ensure the air is not chemically contaminated and water is safe for drinking can be very expensive. Another concern is that the drastic decline in imposed penalties will deter practices and systems that were designed to comply with the law, and will instead be replaced with a cost-benefit approach to decide when a company should and shouldn’t follow the law.

The decline in penalties and enforcement impacts many aspects of American life. Clean air and water are fundamental to our health and well-being. When the feds signal that they will not penalize misconduct, businesses conducting trades with vast amounts of money will be more likely to cheat, especially if it will hurt consumers and citizens instead of other institutions. Although Wall Street almost tanked the world economy in 2007-08, few if any fundamental reforms were enacted to protect your retirement and savings. The Federal Communications Commission sets rates for cell phones and internet access, as well as who gets broadcast licenses. The FCC is also charged with enforcing rules to prevent selling faster internet speeds to those few that can afford it, to the loss of everybody else.

Those who support the dramatic decline in penalties on corporations that do not comply with the law, argue that such practices will encourage more jobs. This may or may not be true. But past experience and studies suggest that such arguments have been supported by little, if any, evidence that excess cash will motivate a corporation to hire a larger work force. Look at the vast and still growing disparity in earnings between corporation officers and workers. These changes can lead to existing corporate departments and employees who are supposed to advise a company about how to comply with the law and avoid penalties, being downsized. Furthermore, if your children and grandchildren are deprived of breathable air and drinkable water, is this really a good way to try to increase jobs?

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