JONATHAN COHN OCTOBER 4, 2011
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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.
Bruce Bartlett, the longtime domestic policy adviser to Republicans, agrees. Writing in the New York Times, he says
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.
Update: More from Elon Green at Demos' Policy Shop, who thought of this title before I did!
13 comments
The meme about regulations was created and has been spread by the Ayn Rand religious cult (how else can one describe it) and its nominal governing body, The Ayn Rand Center for Individual Rights. One of its members, John Allison, the former president and chairman of BB&T, is traveling the country giving speeches about how regulations, and the fear of new regulations, have caused the current economic depression. When he ran BB&T Allison made Rand required reading for executives at the Bank. He also blasted the government bailout of banks. Shortly before taking $3.1 billion. It's a cult, which means its members will say anything no matter how preposterous or disconnected from reality. Such are the times in which we live.
- rayward
October 4, 2011 at 10:36am
Presenting Republicans with the facts on any issue and expecting a positive result if those facts aren't to their liking is as futile as Canute commanding the tide not to come in.
- DAVIDDREIER@EARTHLINK.NET-old
October 4, 2011 at 11:49am
True. But NOT presenting the facts, and letting the Republicans spout their pseudo-facts unopposed, and not laying their obstructionism at their feet where it belongs, doesn't let the public choose what they want. If all the public hears is that both sides are for jobs, they don't know that the Republicans don't really mean it. Unless it's pointed out again and again.
- AllanL5
October 4, 2011 at 12:19pm
Allan: Exactly. I was just taking about the possibility of ever getting the Republicans to agree to anything helpful to the nation because the facts warrant it. They don't need no stinkin' facts in setting their agenda. But perhaps the public can be shaken into an awareness of what a nest of scoundrels and thieves the GOP has become and to rise up against it. That's our only hope, really.
- DAVIDDREIER@EARTHLINK.NET-old
October 4, 2011 at 12:31pm
I'm entertained to find that on AEI's website, the comments on his response pretty much unanimously declare that Pethokoukis is full of shit. Even amongst their own, if you ask anyone who knows anything about actually running a business, all the frantic arm-waving about "uncertainty" and overregulation amounts to a pathetically weak argument.
- janus
October 4, 2011 at 2:09pm
I love that AEI purposefully misquotes the numbers in the study, too. They claim that 25% of business owners responded with "poor sales" instead of the actual number, which is 29.6%, and they also said that "regulation" came in at 19% and "taxes" 18% whereas the real numbers are 13.9% and 20.8%, respectively. I say it's purposeful because nobody misreads and mistypes three numbers in a row. With the fantasy figures, though, their analysis rings more true. They can then say that 25% of business think poor sales are the problem versus 37% who say taxes or regulation. This is in contrast to the real comparison, which would be 29.6% versus 34.7%, a difference of only 5.1%. In other words, businesses believe that taxes and regulation combined hurt their business as much as low sales, more or less. When you put it like that, AEI just seems silly in addition to being liars.
- tealeaves
October 4, 2011 at 2:16pm
My Comment from the AEI website: Since we are concerned about reversing the decrease in employment since the onset of the Great Recession in 2007, it should be enlightening to see the changes in the reasons given for not hiring. The EPI survey shows that the mention of taxes rose from roughly 19% to 21%; mention of regulation rose from roughly 10% to 14%, but mention of poor sales rose from about 13% to 30%. What does the suggests is the greatest cause of the change in hiring outlook? But there is another valuable insight to draw from the EPI data. From the first to the second Reagan Administrations the mention of regulation increased from roughly 7% to 12%. Did President Reagan become distinctly more pro-regulation in his second term? It seems unlikely. More likely, his, and others, constant speaking on the issue brought regulation to the consciousness of employers - just like constant repetition now by the AEI, US Chamber of Commerce and Republican leaders has put regulation on the minds of many business people. Given the incessant hectoring by these forces, the 4% increase in the mention of regulation since the 2nd Bush administration probably means nothing except that the propaganda campaign has been effective. (It is less than the increase from Reagan 1 to Reagan 2 after all.)
- aduncanson
October 4, 2011 at 2:38pm
'Uncertainty' as a talking point label actually cuts both ways, like 'Class war'.
- blairxy
October 4, 2011 at 2:41pm
Well-said, aduncanson.
- tealeaves
October 4, 2011 at 2:44pm
Back in 2001, the Republicans used reconciliation to enact the Bush Tax Cuts. The cuts, because reconciliation was used, would expire in 2010 and the 45% estate tax would disappear for one year only. Everyone expected this to be repaired and we tried to prepare for it for nine years. Suddenly, after nine years of tax uncertainty, I learn from the Republicans that tax uncertainty turns out to be the cause of unemployment! Did Republicans deliberately reduce employment with their tax uncertainty plan? Or did they just discover recently the damage they caused and they were reckless? Or are they just full of sh*t?
- Nusholtz
October 4, 2011 at 9:20pm
I find the whole "job killing regulations" theme of the right to be completely dishonest. Adhering to regulations is part of the cost of doing business--regulations apply equally to all vendors, producers, manufacturers, etc., and therefore, to the extent that they raise costs, they raise them equally across an industry. And, certainly, the costs of meeting regulations are passed on to consumers. It is ultimately we, the public, who pay for the costs of regulations. In fact, it is even possible that meeting regulations might cause some job creation, again ultimately paid for by consumers. Meeting regulations may be annoying, and no one would want regulations for their own sake, but still, they just can't be much of a real determiner of business profit and success because they affect all equally. Undoubtedly, the low rate of concern over regulations noted in the article relates to the fact that regulations are actually a non-factor in business success and profitability. It is also possible that some businesses may find less costly ways of meeting the regulations, and therefore have a price advantage over their competitors. And isn't finding a cheaper, better way one of the inspirational mantras of capitalism?
- apenny
October 4, 2011 at 10:16pm
Any perception of "uncertainty" in the market place is being caused solely by the GOP meme about creating uncertainty. If you have a psychopath who constantly takes insane positions and indiscriminately makes outlandish demands you would have a certain level of "uncertainty" when dealing with such a person. You ask yourself..."If I give into to their demand for roast beef, will they still hit me?" "If I cook the roast beef wrong, will they douse me in gas and light me on fire?" "If I say, we have no roast beef, will they kill me for saying we have no roast beef?" You then begin to think that no matter what action you take, it is the wrong one that will cause the psychopath to lash out at you regardless of what you do or what your intention is.
- singlspeed
October 5, 2011 at 1:28pm
Just to complete the "uncertainty is a canard that cuts both ways theme", note how they never point out the uncertainty that regular consumers deal with when they don't know whether health coverage will be rescinded or some past non-entity becomes a pre-existing condition. Regular people have to deal with uncertainty, too, and oftentimes it can wipe them out. Uncertainty over moving, over changing jobs, over going back to school to gain more skills. The right is intellectually bankrupt.
- chaitless
October 6, 2011 at 1:03am