Regulation Nation

Destroying Jobs, One Rule at a Time

November 29, 2011
[R]ules have gotten out of balance, placing unreasonable burdens on businessburdens that have stifled innovation and have had a chilling effect on growth and jobs. President Obama, Wall Street Journal op-ed, January 18, 2011 Last weeks Regulation Nation highlighted some of the economic fallacies in a recent Washington Post story that attempted to belittle House Republicans concern that government over-regulation is impairing the economic recovery and inhibiting job creation. Another key point from the article meriting further attention is the mention of this piece of Bureau of Labor Statistics (BLS) data: In 2010, 0.3 percent of the people who lost their jobs in layoffs were let go because of government regulations/intervention. Indeed Senate Majority Leader Harry Reid (D-NV) keyed on this factoid in a floor speech two days later as he propounded the Republican myth that regulations affect jobs, saying, only a tiny fraction of layoffs have anything at all to do with tighter regulation. But the survey data on which Sen. Reid and the Washington Post relied does not fit so neatly into the Democrat narrative when explored more deeply. As Heritage Foundation Senior Research Fellow James Gattuso explained: In each case in which such a mass layoff is identified, state authorities interview the employers involved, asking them (among other things) the reason for the layoffs. For the third quarter (not the past year as Reid stated), BLS reported that 0.3 percent of respondents listed governmental regulations/intervention as the reason. The most common reason given for layoffs was Slack work/insufficient demand/non-seasonal business slowdown. This might appear to be a straightforward process, but it is actually quite tricky. The first problem is that economic hardship does not come with labels. Employers know if their costs are rising, but not necessarily whether it is due to new burdens imposed on their suppliers or other factors. They may know that they did not obtain the capital they needed, but not whether it was because investors had better opportunities or because of government financial rules. They will know if demand has slumped, but it is not so clear whether it was because their product is valued less by the marketplace or because government rules choked off demand from customers. Despite the orderly and specific categories provided by the BLS, the real-world causes are likely to be mixed, rather than fit neatly into one column or another. Not only is the BLS data underlying the Democrat argument that regulations do not destroy jobs tenuous, the flip side of that coin is completely ignoredexcessive rule-writing and regulatory uncertainty can prevent job creation by stifling economic growth.

Recall a recent Gallup survey asking 604 small business owners what they think is the most important problem facing small business owners today. Participants leading response was, complying with government regulations. Gallup included this in its summary of the results: Small-business owners' assertion that government regulations are the most important problem facing them today is consistent with another recent Gallup poll (Oct. 6-9) in which 14 percent of Americans volunteered that reduced government regulation is the best way to create jobs in the U.S. Interesting how this perspective eludes the Washington Posts article and the narrative of Senator Reid. WHAT ARE HOUSE REPUBLICANS DOING? House Republicans are focused on continuing efforts to turn around the Obama economy by passing major elements of the House Republican Plan for Americas Job Creators. This week the House is expected to consider two pieces of legislation to rein in federal regulations. As part of the agenda to restore regulatory accountability, H.R. 3010, the Regulatory Accountability Act, would require agencies to assess the costs and benefits of regulatory alternatives and, in most cases, to adopt the least-costly alternative to achieve the regulatory objectives of Congress. Additionally, H.R. 527, the Regulatory Flexibility Act, would require federal agencies to identify and reduce the costs new regulations would impose on small businesses. Both bills were introduced by Rep. Lamar Smith (R-TX) and were approved by the House Committee on the Judiciary.

For questions or further information contact Jon Hiler at 6-2302.