[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.