House majority leader Eric Cantor rolled out the JOBS Act at a press conference yesterday, and there is mild reason to hope that the White House might, possibly, be willing to work with him on the package. In a CNBC interview with Larry Kudlow, Cantor framed the JOBS Act this way:
Even Sen. Harry Reid says he will move a similar package of bills in the Senate? He’s not the only one to see benefit in this Act.
White House press secretary Jay Carney said of the legislation:
I think there is great opportunity to — and great overlap between this administration’s position on some of these issues, especially with regards to small businesses. I believe the House Majority Leader put forward on Politico some of his policy proposals and there’s real opportunity to work to get a lot of that done.
And it goes right to the point that I’ve been making that conventional wisdom holds that we can’t actually accomplish things that both the administration and a Congress controlled largely by the other party can agree on. But that’s not true. And I think that’s a perfect example of an area where we can find common ground and can achieve some of the things that — after all, a number of the items that the House Majority Leader put forward in that op-ed, I guess it was, in Politico are ones that the President first suggested back in September and he reiterated at the State of the Union address.
And the package got its share of props from former AOL chairman Steve Case:
“As we seek to jumpstart our economy, create jobs and ensure our global competitiveness, we need to double down on entrepreneurship. The Jumpstart Our Business Startups (JOBS) Act introduced today by Majority Leader Eric Cantor and Congressman Stephen Fincher does just that, combining a series of bills that have broad bipartisan support in the House into a single pro-entrepreneurship bill.
I usually get very nervous when Democrats and Republicans agree on policy, my default position being that bipartisanship is just another word for robbery. Here, though, it’s not the case.
The bills that comprise the JOBS Act are aimed at making it easier for small companies to gain access to start-up capital, or to go public. Traditionally, these high-growth start-ups have been the bread-and-butter of the economy.
But that’s not necessarily true any more. Regulations, largely as a result of Sarbanes-Oxely, have made it much more difficult for such companies to effectively tap the capital markets for continued growth.
Congress could seek to repeal Sarbox entirely. The late Bill Niskanen made that case in this 2006 piece:
A Congress that is both wise and brave would repeal the SOA – lock, stock, and barrel. The SOA adds no necessary authority to those previously granted, creates the potential for substantial harm, and does not address the major policies that lead to problems in the U.S. corporate economy.”
What are the most important lessons from the experience under the SOA? First, the costs of implementing Section 404 of the Act have been unusually high, especially for smaller corporations. Second, there are large incentives to avoid being subject to the Act; a significant number of smaller firms have delisted (withdrawn their stock from an exchange), and almost all initial public offerings are now on a European stock exchange rather than on an American exchange. Finally, and most important: the SOA promised “to restore investor confidence” in the financial accounts of corporations listed on the U.S. exchanges, an effect that should have increased the amount that investors would pay for a stock per dollar of reported earnings. In fact, the price-earnings ratio of the S&P 500-stock index has declined continuously beginning with the second quarter of 2002 when Congress drafted and approved this legislation. The Sarbanes-Oxley Act has not restored investor confidence, and this Act should be repealed.
But that’s hardly the sort of approach that would earn bipartisan support, let alone optimistic comments from the White House about “real opportunity.” Once regulations are put in place, they develop constituencies that are determined to preserve, if not expand, them. The JOBS Act chips away at the portions of Sarbox that have, intentionally or not, resulted in exactly what Niskanen warned would happen: small firms avoiding the public market entirely in order to avoid an expensive regulatory burden.
That needs to change. And if Cantor, Reid and the President all seem to be on, or close to, the same page on these bills, there’s reason to think something positive might — just might– come of it.
