JONATHAN COHN OCTOBER 4, 2011
The most important thing to understand about the Republican jobs agenda is that it's not really a jobs agenda. That sounds simplistic and harsh, but I think it's true, at least if you buy into the mainstream economic consensus.
According to that consensus, the only way to boost growth significantly in the short run is to increase demand. That requires some sort of stimulus -- that is, some combination of public works spending, aid to state governments, and targeted but temporary tax breaks. There's room for argument over what mix of these policies might work best, and what total size makes the most sense. But the Republicans, you may have noticed, want none of these things.
So what do they want? A centerpiece of their agenda is reducing regulation. As they tell it, the primary reason businesses are so scared to hire new workers is a fear of regulation, which raise the cost of doing business. The best solution, this argument goes, is to stop new regulations and start weakening the existing ones.
In principle, it's true that regulations can raise costs. Of course, it's also true that regulations can yield benefits. It really depends on the specific regulation. But is there evidence that, overall, fearof regulation is holding back the economy right now? Not really, according to a pair of pretty smart observers.
One of them is Larry Mishel, an economist at the Economic Policy Institute. In a new report, he says
A simple review of investment and employment trends—what businesses are actually doing— reveals that employers are not behaving according to the narrative described in the uncertainty story: Employment and investment trends are what one would expect (or better) given the trends in the overall growth of the economy (i.e., the actual growth or shrinkage of gross domestic product).
The graph at the top of this item is part of his argument. It's based on a series of surveys from the National Federation of Independent Businesses (NFIB), dating back to the early 1970s, asking small business owners to name their top concerns. Concern over regulation rises and fall modestly, with concern today a bit higher than it was a few years ago but not significantly so -- and still lower than it was during the Clinton era. Meanwhile, worry over low sales has skyrocketed, surpassing not just regulation but also taxes, as well, for the first time ever. That suggests regulation, while not altogether irrelevant, is pretty far down on the list of forces businesses think are restraining growth.
Evidence supporting Mr. Cantor’s contention that deregulation would increase unemployment is very weak. For some years, the Bureau of Labor Statistics has had a program that tracks mass layoffs. In 2007, the program was expanded, and businesses were asked their reasons for laying off workers. Among the reasons offered was “government regulations/intervention.” There is only partial data for 2007, but we have data since then through the second quarter of this year.
The table below presents the bureau’s data. As one can see, the number of layoffs nationwide caused by government regulation is minuscule and shows no evidence of getting worse during the Obama administration. Lack of demand for business products and services is vastly more important.
Based on this and other evidence, including Mishel's report, Bartlett concludes "People are increasingly concerned about unemployment, but Republicans have nothing to offer them."
James Pethokoukis of the American Enterprise Institute responded to Mishel's paper, and those citing it. Conservatives who agree with the Republican leadership about regulation may have said more. (If you've seen anything, please post links in the comments.)
Maybe there's more to this story than I'm seeing. But the evidence Mishel and Bartlett seems awfully compelling -- and, not coincidentally, consistent with what most of the economics profession thinks right now.