MANHATTAN (CN) — Markets continued their upward march the day after the Trump administration announced it will slash regulations to speed an economic recovery from the Covid-19 pandemic.
Ignoring Tuesday’s dip in equities, Wall Street tried to recapture the momentum of Monday’s rally. By the closing bell, the Dow Jones Industrial Average gained 369 points, a 1.5% increase for the day. The S&P 500 and Nasdaq showed larger percentage gains, at 1.67% and 2%, respectively.
One action that likely kept some investors happy is Tuesday’s announcement by the Trump administration to push deregulation.
In an executive order signed on Tuesday, the president called for federal agencies to “identify regulatory standards that may inhibit economic recovery,” and to “temporarily or permanently rescind, modify, waive, or exempt persons or entities from those requirements.”
Several key Republicans praised the executive order, including Senator Ted Cruz of Texas who tweeted that it was a “critical step” to reinvigorating the economy and an opportunity to slash regulations permanently.
“Every regulation that was waived during the crisis should remain waived & we should begin repealing the most costly of the major regulations that have accumulated over the past decade,” Cruz wrote in the tweet.
The Heritage Foundation, which has called for permanent deregulation of several industries as a way to better prepare America for future pandemics, also hailed the administration’s push.
During a conference call with reporters, Paul Winfree, executive director of the Heritage Foundation’s coronavirus recovery commission, said permanently deregulating certain industries would better prepare America for the next pandemic or natural disaster.
There is “a bunch of stuff at the Department of Labor, at HHS, EPA, that all affects the ability for small- and medium-sized businesses to both get off the ground and access capital markets,” Winfree said, referring to federal health and environmental regulatory agencies.
Winfree also said recent regulations like the Dodd-Frank rules, which created a new regulatory framework for financial institutions in the wake of the 2009 financial crisis, restricted capital for small businesses. “The reality is, those folks are not the bad actors anyway,” he said.
Democrats and advocacy groups immediately slammed the idea as yet another move by Republicans to push pet ideological projects in a global crisis. In a similar vein, the idea of limiting tort liability for businesses and removing oversight over the executive branch has gained momentum in recent weeks.
“Step one: Remove the Inspectors General who keep an eye on wrongdoing at our federal agencies,” Representative Bonnie Watson Coleman, a New Jersey Democrat, tweeted. “Step two: Tell the agencies that it’s open season on measures that keep workers, consumers, and the environment safe.”
Even some conservatives who cheer the executive order worry it may set a bad precedent.
In an article published Wednesday on Forbes.com, Clyde Wayne Crews Jr., a senior fellow at the Competitive Enterprise Institute, wrote that “the use of aggressive executive power, however justified, does set up tensions for later.”
Crews added that agencies under Democratic control could issue interim final rules to obviate Congress in lawmaking. “Just as Trump is doing now, progressives will exploit IFRs to address their future contrived crises such as climate, or what they call food and housing insecurity,” he wrote.
Deregulation has been ongoing during the Trump administration, noted Rachel Augustine Potter, an assistant professor of politics at the University of Virginia, but the pandemic could quicken the pace. “When you put Covid-19 and say it is urgent, people might be not as willing to push back on this,” she said.
Others say deregulation would have a minimal effect on the economy. Consumer group Public Citizen vowed to “closely monitor” the Trump’s deregulatory moves. “If it fails to follow appropriate process or exceeds presidential authority, we anticipate suing immediately to block its destructive efforts,” Public Citizen President Robert Weissman said in a statement.
“The Trump deregulatory scheme will do nothing to get money back into the pockets of consumers, workers, and small business owners, or to put people back to work,” Weissman wrote.
One issue remaining on the mind of investors, and the Federal Reserve, is the possibility of a spike in Covid-19 cases later this year.
According to the Fed’s open markets committee hearing minutes from last month, the central bank’s staff noted that in the best-case scenario, with social distancing easing gradually throughout the year, gross domestic product would rise and unemployment decline during the second half of 2020.
In a worst-case scenario, however, a second wave of Covid-19 cases hit later in 2020, causing a “decrease in real GDP, a jump in the unemployment rate, and renewed downward pressure on inflation next year.”
More than 4.9 million people worldwide have been confirmed infected by Covid-19, according to data from researchers at Johns Hopkins University, and roughly 325,000 have died. In the United States, more than 1.5 million people have contracted the novel coronavirus and nearly 93,000 have died.