At a time when the economy is still reeling from the downturn, House Republicans released a spending bill that would severely cut the budget of the Commodity Futures Trading Commission, which would keep it from regulating potentially toxic swaps and other derivatives. It refused to give the Securities and Exchange Commission the extra money it needs to carry out the Dodd-Frank financial reform bill. And the bill would cripple the Internal Revenue Service, limiting its ability to detect tax avoidance, particularly by businesses and the wealthy. (The I.R.S. cut, designed to impede the agency’s role in health care reform, will inevitably increase the deficit.) The proposed cuts are the latest in a long series of efforts by Republicans to keep the government from tempering even the most economically dangerous desires of business. Having failed to prevent the enactment of Dodd-Frank and the new Consumer Financial Protection Bureau, they are imposing their will with what may be their most effective weapon — choking off the air supply of regulators by limiting the money they can spend. These agencies had already been hesitant to impose a real crackdown; the cuts will make the situation worse. The appropriations bills will have to be negotiated with the Senate, but House leaders have often shown a willingness to let agencies and even the entire government shut down if such negotiations do not go their way. With 710 employees, the C.F.T.C. staff is barely big enough for its current responsibilities, let alone its new mission under Dodd-Frank to oversee the huge over-the-counter swaps market. Its budget is $205 million, which President Obama proposed increasing to $308 million for 2013 to deal with swaps. The House Appropriations Committee has proposed slashing next year’s budget to $180 million. The agency’s chairman, Gary Gensler, said: “The result of the House bill is to effectively put the interests of Wall Street ahead of those of the American public, by significantly underfunding the agency Congress tasked to oversee derivatives — the same complex financial instruments that helped contribute to the most significant economic downturn since the Great Depression.” As Mr. Gensler pointed out, the market in swaps, at $300 trillion, is eight times larger than the futures market his agency has been regulating, and yet the House wants to cut the agency’s budget significantly. The House committee chairman, Harold Rogers, said the agency should return to its “core duties,” a statement that brazenly ignores a new set of duties Congress put on the books. The securities industry has already gone to federal court to prevent the C.F.T.C. from imposing limits on commodities trading that can lead to excessive speculation, which can drive up the price of oil and other goods. With good friends on the Appropriations Committee, however, the industry may not even need a favorable court ruling. For the Securities and Exchange Commission, whose role protecting investors was also enhanced by the reform law, the House provided only an extra $50 million (far less than the $245 million increase requested by the president) but limited the money to technology expenses. None of it can pay for new watchdog employees. The committee is clearly listening to Wall Street lobbyists who do not want the agency to enforce planned new regulations on money-market mutual funds. The I.R.S. said it needed $945 million more in 2013 to make sure people have health insurance beginning in 2014, and to keep up with tax cheats. (It already cut its staff by 5,000 last year.) The House provided none of that increase. It is hard to believe that Republicans are serious about reducing the deficit if they will not let the government’s revenue agency do its job. A few weeks ago, JPMorgan Chase, a too-big-to-fail bank, lost at least $3 billion trading in derivatives. Regulators might have halted that if Dodd-Frank were fully in place. The Republican response is to hobble the regulators even further — an invitation to another financial disaster.
