Mutiny? Obama holdovers at Labor in “open rebellion” against Trump
posted at 8:01 am on April 14, 2017 by Jazz Shaw
All is not well at the Department of Labor these days. There were early signs that the Democrats were going to try to hang on to Obama era policies at Labor when they put up an intense fight to keep Andy Puzder from taking over and those efforts don’t seem to be slowing down. The Wall Street Journal is reporting this week that the department, still ripe with management from the last administration, is in “open rebellion” against policies being put in place by President Trump.
Now we know one reason Democrats blocked President Trump’s first nominee to be secretary of Labor: The bureaucracy is in open rebellion against the new President’s directives. The casus belli is the fiduciary rule, the attempt by Obama Labor Secretary Tom Perez to rewrite the rules for offering investment advice. The rule was supposed to go into effect Monday.
Proponents argued that the new rule would raise the standards for advice given to retirement investors. In reality, it would make that advice more expensive while opening up another lucrative vein for the plaintiffs bar. In anticipation of the rule, some financial firms have already announced they are dropping their business for these small investors.
That’s one reason President Trump last month directed the Labor Department to review the rule. Specifically, the President asked Labor to investigate whether the rule is likely to reduce access to retirement-savings vehicles or related financial advice, whether the rule has caused disruptions in the industry that may harm retirees and investors, and whether it will lead to more lawsuits. If a review determines any of these things had happened, the department is to propose revising or abolishing the rule.
So there’s probably a much larger pool of resistance at Labor in terms of general regulatory theory, but for the moment everything seems to be focused on the fiduciary rule. You may recall that the President put out an executive order on this subject shortly after taking office. Here’s the key portion of the memo that went out to the Labor Department:
Section 1. Department of Labor Review of Fiduciary Duty Rule. (a) You are directed to examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. As part of this examination, you shall prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Duty Rule, which shall consider, among other things, the following:
(i) Whether the anticipated applicability of the Fiduciary Duty Rule has harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
There were other details included, but that was the main selling point. The Department of Labor was supposed to review the rule and, if they found that any such negative impacts on customers might come from it, they were to propose either modifications or a full withdrawal of the rule. But rather than taking that directive, the staff at Labor decided to go a different way. They responded by saying, “the Department has concluded it would be inappropriate to broadly delay application of the fiduciary definition and Impartial Conduct Standards.”
As the WSJ described it, this pretty much translates to saying that they’re not terribly interested in what the President has to say on the subject.
One of the problems inherent in the process of a new broom sweeping clean is that the federal bureaucracy is so massive that there’s simply too much sweeping to do. In previous times this has seemed like something less of an issue. Now, however, there’s pretty much open warfare over any issue which can be successfully politicized. The folks at labor have had most of a decade to stagnate, with Obama supporters running the show over there. They’ve seemingly forgotten that their job is to carry out the mission of the department. But it’s an executive branch office and the details of the mission are defined by the President. We’re running into the same thing at the EPA and will no doubt see more of this as we go.
This is one reason that we need to get the department staffed up with people who are onboard with the current agenda. If you take a look at their staffing chart you will see that most of the top positions remain vacant. This leaves something of a vacuum of power and the career drones who are primarily left over from the Obama administration are still running the show. But unless the President and Congress can get their act together and start filling those vacancies we’re going to see more and more of this stonewalling going on.