Patterico's Pontifications

12/7/2011

David Brooks: Wrong on Regulations

Filed under: General — Karl @ 6:06 am



[Posted by Karl]

In his latest column, David Brooks argues that Obama’s regulations aren’t crushing jobs and the economy.  However, to reach that conclusion, he has to engage in a lot of single-entry accounting.

Brooks relies on a report from the Center for Progressive Reforms (gee, I wonder what ideology might be at work here) to note that “Obama has certainly not shut corporate-types out of the regulatory process.”  Incidentally, the thrust of the CPR report is to claim that regulatory policy is driven more by raw politics under Obama than it was under George W. Bush — a conclusion Brooks prefers to overlook.  But the big flaw is the subtext that regulatory capture somehow means that the resulting regulations do not hurt businesses or the economy.  I would suggest the prior regulatory regime for the financial and housing sectors ultimately proved disastrous to the economy and employment (lefties and righties would have some different culprits for this, of course).  More generally, the entire history of progressivism is marked by regulatory capture in which big businesses extract competitive advantage over small business.

That Brooks does not understand the effect of regulations on small business is evident here, too:

The Bureau of Labor Statistics asks companies why they have laid off workers. Only 13 percent said regulations were a major factor. That number has not increased in the past few years. According to the bureau, roughly 0.18 percent of the mass layoffs in the first half of 2011 were attributable to regulations.

There are a number of flaws with this argument:

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.

***

The BLS figures are also incomplete, including only mass layoffs of 50 workers or more at a time. Those are the layoffs that make headlines, but such mass layoffs are only a small part of the job-loss picture. Many, if not most, layoffs affect fewer than 50 workers at a time. Most small businesses, in fact, do not even have 50 employees in total.

In contrast, according to Gallup, small business owners are most likely to say complying with government regulations is the most important problem facing them today.  On top of that 22%, another 5% cite “new healthcare policy” and another 9% cite “poor leadership/government/president.”  Similarly, a Chamber of Commerce survey found small business owners still find economic uncertainty to be their most-pressing concern (53%), but also worry about uncertainty from what Washington will do next (39%), and the healthcare law (33%).  Nor does Brooks take into account the degree to which policy uncertainty creates a drag on small business hiring, particularly during the Obama administration.

Brooks also claims that “industries that are the subject of the new rules, like energy and health care, have actually been doing the most hiring.”  Here again, Brooks seems ignorant of the product of regulatory capture and government that believes in the broken windows theory of economics.  Promoting the hiring of paper-shufflers to meet regulations that depress the creation of more productive jobs is no way to help the economy.

And yet Brooks, being Brooks, buries this mid-column:

Over all, the Obama administration has significantly increased the regulatory costs imposed on the economy. But this is a difference of degree, not of kind.

I’m sure that’s very encouraging to the unemployed, including those who have completely dropped out of the labor pool.  Maybe they can get through the winter by insulating their homes with copies of the Federal Register.

–Karl

26 Responses to “David Brooks: Wrong on Regulations”

  1. So as the “regulatory water” gets hotter, then it’s only a difference in degree? Tell that to the frog who got boiled to death as the water temperature was raised. It’s only a difference in degree(s) after all.

    Comanche Voter (0e06a9)

  2. Mortimer Adler, is just ramming his head against the wall, where did I go wrong (Brook is a Chicago grad)

    narciso (87e966)

  3. Faulhaber and Farber analyzed the results of an important and controversial 2008 FCC auction for radio spectrum freed up by the digital television conversion. In the midst of the auction, Google asked the FCC to impose open internet requirements similar to the new net neutrality rules on the winning bidders—a condition Google demanded if the company was to bid on some of the valuable spectrum. Despite protests from other bidders, the FCC complied, but only for the so-called C block, which was ultimately awarded to Verizon and now forms the basis of its leading-edge 4G LTE network.

    The authors found that the last-minute addition of net neutrality rules seriously compromised the C block auction results. Since the A and B blocks of the 2008 auctions were unencumbered, they wrote, the C block conditions offer a “perfect natural experiment of the effect on the value of a telecoms asset of imposing network neutrality regulation.”

    The authors evaluated the auction results using a standardized measure of population covered by the particular spectrum offered, known as the MHz-Pop. The result of that experiment? While Verizon paid .76 per MHz-Pop for the C block, winning bidders paid $1.89 per MHz-Pop on the A and B blocks.

    As the authors conclude: “Network neutrality regulation thus decreased the value of the spectrum asset by 60%. The evidence speaks loudly and eloquently: Imposing network neutrality regulation reduces the value of the affected telecommunication asset and thus reduces the incentive to invest in such assets.”*

    happyfeet (3c92a1)

  4. Was that this paper, pikachu;

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1894286

    narciso (87e966)

  5. I saw this interesting article yesterday that speaks of “Sunshine Conservatives”:
    http://spectator.org/archives/2011/12/06/the-demonizing-of-conservative/
    (Saw it on a link at PowerLine)

    It is a somewhat “simple” look at a great divide in US politics, but “simple” is good as long as it is also not “simplistic”

    MD in Philly (41d33b)

  6. Obama doesn’t understand capitalism or how business works. If he is somehow re-elected, there will be a steep rise in capital being invested elsewhere… anywhere but in America.

    General Malaise (b19539)

  7. Whatever happened to sensible regulations?

    Dohbiden (ef98f0)

  8. You could have stopped with “David Brooks: Wrong”. Or make it a tag. You’ll re-use it often.

    d(^_^)b
    http://libertyatstake.blogspot.com/
    “Because the Only Good Progressive is a Failed Progressive”

    LibertyAtStake (9617f5)

  9. And no Gorebull warming is not real.

    Dohbiden (ef98f0)

  10. ___________________________________________

    I saw this interesting article yesterday that speaks of “Sunshine Conservatives”:

    A variation of that is when George W Bush felt he had to qualify “conservatism” with “compassionate conservatism.” I guess the ideological counterpart to that is when a liberal feels he or she needs to emphasize the phrase “common sense.”

    I wonder how many people like Bush or out-and-out “sunshine conservatives” feel they have to, in effect, soften the concept of rightism not just because of their falling for the subtle propaganda from the media and the “I love mommy” emotions (ie, nurturing and enabling) found in many folks in general, but because they themselves aren’t aware of the dynamics of human nature? That’s why I’ve often posted excerpts here that reveal the ironic nature of liberalism. Namely, that a larger percentage of those on the left actually exhibit behavior they attribute to their political opposites. IOW, a greater number of liberals compared with conservatives is more likely to be selfish, greedy, unkind, intolerant and racist.

    So the correct response to those who feel they must accentuate the notion of “compassionate conservatism” is for them to highlight the dynamics of “limousine liberalism.”

    BTW, the American Spectator piece shouldn’t be too comfortable in using Richard Nixon to make a point that reflects well on conservatives. And that’s not just because Nixon was actually full of ideological squish (Hi, David Brooks!—and such squish, btw, likely made the unethical nature of Watergate far more likely to blossom), but because he could be oddly (and ultimately self-destructively) thin skinned. I recall reading that in the early 1960s, Nixon became enraged at the LA Times not because its coverage of his campaign for the Calif governorship was unflattering towards him, but because it wasn’t blatantly biased in favor of him.

    Mark (411533)

  11. Well he had a Democrat Congress, re the EPA, the NEA, et al, but the point was, he wasn’t squishy enough for them, and yes, the era of Kyle Palmer
    was too far in the other direction, but the pendulum has broken,

    narciso (87e966)

  12. not sure I just remembered the article is all

    happyfeet (a55ba0)

  13. Brooks is the poster-child for the “Credentialed, but not Educated” movement.

    AD-RtR/OS! (1103d7)

  14. I’m amazed no one is pointing out the obvious flaw in the quoted statement re: layoffs. Let’s assume that the numbers given are correct, that layoffs are only slightly driven by over-regulation. The unasked question (at least in this post) is, “Have you foregone HIRING anyone, or delayed or cancelled expansion plans due to regulatory costs?”

    That, I suspect, would have a very different answer.

    alanstorm (cb237b)

  15. Well, that would upset the “jobs saved/created” meme.
    Just as in the EduCrat world, where they underreported drop-outs for years due to “incomplete data”, there is/was no pressure to collect accurate data as that would reveal the truth that they did not wish to bring forth.

    AD-RtR/OS! (1103d7)

  16. With friends like David Brooks …

    Living proof that not all on the ‘right’ are created equal. Of course, the same case can be made on behalf of the Dems … http://bit.ly/qVdDUt

    ombdz (2a81ef)

  17. alanstorm,

    Hence my reference to single-entry bookkeeping.

    K (205415)

  18. Brooks’ opinion pieces get more ridiculous every week.

    SPQR (26be8b)

  19. Karl can I ask you a question? What hasn’t Brooks been wrong on?

    peedoffamerican (ee1de0)

  20. And Frum doesn’t do much better, he acknowledges
    the analysis was correct, facepalm, yet he doesn’t
    see Obama providing the solution,

    narciso (87e966)

  21. ODB/narciso…
    Perhaps Brooks and Frum could agree to a mutual suicide/homicide pact?

    AD-RtR/OS! (1103d7)

  22. David Brooks : wrong. Sorter, more succinct title.

    JD (9cf3ee)

  23. Eating a fajita bowl with extra hot sauce right before getting on a plane is a bad idea. Especially if you happen to be borderline phobic of public restrooms.

    JD (9cf3ee)

  24. some days there’s just not enough purell

    happyfeet (3c92a1)

  25. The proper use discerned abotu three years ago;

    http://rsmccain.blogspot.com/2008/11/george-freaking-will-again.html

    narciso (87e966)

  26. Not only are Obama’s regulations killing American jobs, his vacation travel plans aren’t helping our bottom line much either. Once again, he and Michelle will be traveling separately to their Hawaiian vacation destination. It cost an extra $63,000-$100,000 when they did this last year.

    DRJ (a83b8b)


Powered by WordPress.

Page loaded in: 0.5124 secs.