Thursday, November 10, 2011

Republicans Mislead With “Regulatory Uncertainty” Theme

One prevalent Republican economic theme is that “regulatory uncertainty” is constraining businesses from investing and “creating jobs.” Just as tax cuts for the wealthy have not created jobs, regulations are also not a serious factor in job creation. Indeed, the very notion of “creating jobs” is dubious. Businesses don’t “create” jobs; they fill jobs in response to consumer demand for products–a demand that is currently not there. Catherine Rampell corrects the GOP presidential candidates on this misleading issue following yesterday’s debate:

Herman Cain suggested that the chief problem holding back companies was regulatory uncertainty. Other candidates, including Gov. Rick Perry of Texas, have made similar claims about regulatory burdens.

But if you look at surveys of small businesses conducted by the National Federation of Independent Business, a plurality of companies consistently say that the “single biggest problem” they face is low sales, not red tape or taxes.

The Labor Department’s data on mass layoffs echo this finding. For the last three quarters, “governmental regulations/intervention” have accounted for fewer than 1 percent of layoffs.

As for hiring, one reason to believe that lack of consumer demand, rather than regulations, is discouraging employers is that businesses are not even fully using their existing staff and equipment. If regulatory requirements were so burdensome but the demand was there, you’d think that companies would at least step up their use of what they already had on hand.

Image: Pat Bagley

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