Read These Articles!

November 22nd, 2011 at 7:37 pm

Here are two great pieces that I’ll bet you missed, both dispelling the myth of “job-killing regulations.”

The first is a particularly nice piece of work by MarketWatch’s Rex Nutting which starts with some historical perspective:

When Moses came down off Mount Sinai carrying the stone tablets, the Chamber of Commerce immediately fired off a press release denouncing the job-killing 10 Commandments.

And it’s been the same story ever since.

Whenever the people (that is, the government) propose some restriction to right some wrong, you’ll always find a businessman protesting that the costs would be too great and that, in the words of Charles Dickens in Hard Times, he would “sooner pitch his property into the Atlantic” than comply with the rules.

Nutting focuses on two often overlooked parts of this debate: first, certain regulations don’t just have costs—they have benefits.

You hear a lot of talk from the Republicans and the bosses in industry about the costs of regulations…but they never mention the benefits of regulations. We never hear about the jobs created in other industries, or about the lives saved, or the millions of hours of working time that weren’t missed, or the thousands of heart attacks Americans would forgo because they hadn’t been exposed unnecessarily to mercury.

And you never hear of the costs of inaction. Cleaning up a mess is much more expensive than preventing one: Ask BP, or Barack Obama.

Second, regulations often create jobs:

Smart regulations create new jobs in industries that make pollution-control equipment or that provide environmental services. They encourage businesses to employ the most efficient equipment and methods. They help other industries to flourish that couldn’t otherwise, such as fishing, agriculture and tourism.

And yes, there are of course regulations that, while they don’t kill jobs, are an unnecessary pain for employers to comply with, as often as not because the compliance procedure is clunky.  Waiting six months for a site approval that should take two hours is highly inefficient.  So sure, there’s room for improvement here.

But beware of perennial conservative arguments that tack the word “jobs” on the end.

The next piece underscores a point I think is increasingly important: the dominant small business lobby—the NFIB—does not represent its members’ interest.  It has devolved to a stalking horse for the conservative agenda.

That’s bad not just because I think that’s the wrong agenda for our economy.  It’s bad because small businesses do have some special needs—particularly credit and help accessing export markets—and when “big small biz” is busy working on deregulation and tax cuts, they’re not helping.

The piece describes a new survey of small businesses:

According to a summary of the survey, when small-business owners were asked to name the single biggest barrier to success, only 9 percent cited government rules and regulations. Just 2 percent cited “too many taxes or uncertainty related to taxes.”

But what really struck me (and Robb Mandelbaum of the NYT) was this:

Interestingly, the myth of the overregulated and overtaxed small business has such a strong hold over the public imagination that the survey’s authors appear to believe it themselves, despite their own findings. How else to explain this paragraph in a press release from the Hartford Financial Group:

“Small businesses are also challenged by government regulations, which result in greater administrative and accounting burdens. According to the study, small business owners identify economic constraints, such as government rules, regulations and taxes, as the single biggest factor holding them back (37 percent)…”

It turns out that this 37 percent also includes people who cited other factors beyond taxes and regulation, including a lack of paying customers and unspecified complaints about the economy. In fact, regulations and taxes were the two smallest of the four factors constituting the 37 percent, while lack of paying customers and those unspecified complaints were cited by 26 percent of all responders.

BTW, I think he gets me a bit wrong here:

The survey, which mostly concerns itself with how small-business owners view success, divides respondents by their ambitions — whether they wish to expand their businesses or merely maintain them. This has become an important distinction in the last few years, as more economists, like Jared Bernstein, pin their hopes for economic growth on so-called gazelles, and are sometimes dismissive of slower-growing businesses.

I’m not dismissive of any business.  It’s tough out there, and smaller firms are less insulated against economic weakness.   My point, in arguments like this one, is that older, smaller business are not the engines of job growth in our economy.  That doesn’t make them any less important (like you want a Kevlar balloon from Diversions, e.g.,–that’s a local shout out).

 

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3 comments in reply to "Read These Articles!"

  1. Phillip says:

    Jared,

    Remember Rahm Emmanuel’s line – “never waste a crisis.”

    Don’t you think the business lobby has just this thing in mind. It’s obvious that a lack of demand is the biggest hindrance to small business, but convincing enough politicians that it’s regulations will get them some friendly legislation.

    Even democrats like Harold Ford Jr buy into this stuff.


  2. save_the_rustbelt says:

    Government regulators often lack some important characteristics:

    1. any modicum of common sense

    2. any sense of cost-benefit

    3. consistency in their own interpretations and enforcement actions

    And then there is the hidden agenda, most regulatory law is (intentionally) a welfare program for lawyers, who of course dominate Congress.


  3. Foster Boondoggle says:

    “[B]eware of perennial conservative arguments that tack the word “jobs” on the end.”

    I’ve come up with a guide to understanding “job-killing regulations” arguments. Imagine a society where armed robbery is legal, so anyone who can afford it hires bodyguards for protection – and of course others make their livings as armed robbers. Then a law is proposed to make armed robbery illegal. Now see if you could substitute this proposal for whatever regulation is being used as the job-killer du jour. Instead of “this new law will destroy the jobs of coal miners and steam boiler makers” you’ve got “this new law will destroy the jobs of bodyguards and armed robbers”. I find it clarifies the issue.

    * Pollution from coal burning: check.
    * Clean water laws: check.
    * Dodd-Frank: check.


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