Supreme Court’s Chevron ruling poses existential threat to ‘American economic miracle’ and will make the US more like Europe, says Lazard chairman

The Supreme Court’s decision last month to overturn a decades-old decision that gave regulators more leeway in setting rules will hurt innovation and threaten the vitality of the U.S. economy, according to Lazard’s Kenneth Jacobs.

In an editorial for Project Syndicatethe executive chairman of the financial advisory and asset management firm said that the highest court ruling in the case Loper Bright Enterprises and others part Raimondo, Secretary of Commerce is actually anti-business, contrary to popular belief.

1984 case withdrawn Chevron, USA, Inc. part Natural Resources Defense Council means courts no longer have to defer to federal agency decisions when there is ambiguity from Congress about the principles interpreting the law.

“By limiting the executive branch’s ability to write and enforce rules, the Supreme Court has opened the door to the balkanization of the U.S. economy,” Jacobs wrote. “The vacuum of federal rulemaking means that important issues will increasingly be decided by the states. Instead of a large and cohesive economy of 330 million people governed by the same laws, the U.S. will likely end up with smaller regional and state economies, often organized around ideology and local business interests.”

Abandoning the so-called Chevron doctrine would deprive the economy and financial markets of the predictability they need to be healthy and stable, he added, because virtually any federal agency rule could be challenged, giving judges and juries without specialized training the power to decide.

Of course, regulators don’t always please companies, but at least their rules applied nationwide under the Chevron doctrine, Jacobs noted. Now, a patchwork of state laws could emerge.

He warned that innovation would suffer as litigation favors established companies over new, competing products. Economic growth could also slow because the Supreme Court decision would make the federal permitting process even less efficient and predictable.

“With more state regulation, the U.S. economy will start to look like Europe, where innovation is undermined from the start by the complexity of different standards and requirements,” Jacobs said. “Chevron’s reversal poses an existential threat to the foundational pillars of the American economic miracle: a unified rule of law and a cohesive national economy.”

His argument runs counter to what some industry groups say, namely that excessive regulatory interference has made doing business too burdensome and unpredictable.

For example, an amicus curiae brief from the U.S. Chamber of Commerce last year pointed to regulators’ sweeping rules and enforcement actions taken after the fact. Meanwhile, Congress has essentially outsourced key decisions to federal agencies, allowing them to change positions, expand their own authority and add regulations with relative ease, he added.

“Such a regime is harmful to businesses. Instability, uncertainty and lack of accountability in the law generate huge losses in productivity, investment and innovation,” the summary reads. “Businesses cannot effectively plan for the future when agencies can unilaterally change
basic rules at all times.”

For now, it could be several years before the Supreme Court’s decision is fully considered, but financial regulators could be the ones most affected.

These include the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau.

Banking industry groups praised the decision, with the head of the American Bankers Association saying: “This is an important victory for accountability and predictability at a time when agencies are unleashing a tsunami of regulations — in many cases clearly exceeding their statutory authority while making it harder for banks to serve customers.”

This story was originally published on Fortune.com