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The Republican "Job-Killing Regulations" Myth Gets Demolished

November 15, 2011

For years, what passes for Republican economic policy has been dominated by "necessary lies," that is, statements which conservative ideology requires to be true despite being demonstrably false. Despite decades of GOP mythmaking, tax cuts don't pay for themselves or increase revenue. Employment and the overall U.S. economy grew faster when America's so-called "job creators" were taxed at higher (even much higher) rates than they are today. And as a mountain of new analyses and surveys show, Republicans' rapid-fire repetition of sound bites about "job-crushing regulations" doesn't make them true.
That doesn't make the proclamations any less frequent. As a quick glance at recent Republican debate transcripts show, the 2012 GOP presidential candidates fight each other to out-repeal regulations "off the throat of small business operators." Dire warnings about "job-destroying regulations" are regularly regurgitated by Republican leaders including Mitch McConnell, John Boehner and Eric Cantor.
Sadly for the conservative tall tale tellers, overly zealous government regulation has little to do with the woes of America's businesses large and small.
Weak consumer demand is another matter. As the Washington Post recently explained:

Data from the Bureau of Labor Statistics show that very few layoffs are caused principally by tougher rules.
Whenever a firm lays off workers, the bureau asks executives the biggest reason for the job cuts.
In 2010, 0.3 percent of the people who lost their jobs in layoffs were let go because of "government regulations/intervention." By comparison, 25 percent were laid off because of a drop in business demand.

Last month, former Reagan Treasury official Bruce Bartlett hammered home the same point.

Evidence supporting Mr. Cantor's contention that deregulation would increase unemployment is very weak...The table below presents the bureau's data. As one can see, the number of layoffs nationwide caused by government regulation is minuscule and shows no evidence of getting worse during the Obama administration. Lack of demand for business products and services is vastly more important.

CNN recently reached the same conclusion. Asking "Is government regulation really holding back the labor market?", CNN answered, "Not so much, according to government data and surveys of business owners and economists.

Only a small percentage of employers report regulation as a reason for laying off workers...And a CNNMoney survey of economists conducted in the second quarter delivered similar results. Only a couple of the 16 economists questioned said government regulation was the biggest drag on the labor market.

The reliably Republican Wall Street Journal agreed. Its July survey of business economists concluded, "The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies."
Surveys of small business owners confirmed that assessment. In September, McClatchy found little evidence to support the GOP claims that "blame excessive regulation and fear of higher taxes for tepid hiring in the economy." Instead, its canvass of a random sample of small business owners across the nation revealed:

Their response was surprising.
None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.

Small Business Majority found the same dynamic at work this summer. As Bartlett summed up its survey which asked 1,257 small business owners to name the two biggest problems they face:
Only 13 percent listed government regulation as one of them. Almost half said their biggest problem was uncertainty about the future course of the economy -- another way of saying a lack of customers and sales.
In his demolition of the Republicans' regulatory uncertainty myth, Larry Mishel of the Economic Policy Institute produced the data and charts to debunk their bogus claim. "If one looks at what employers are doing rather than what the trade associations and their allies on Capitol Hill are saying, then recent employment and investment behavior is easy to explain--investment and employment/unemployment are what we would expect in a severe downturn followed by a slow growing economy in the recovery, Mishel concluded, adding, "There is no shift from historic patterns, and there does not seem to be any evidence that fears of future regulation are shaping the slow growth and weak employment gains we have seen." And echoing other recent polling on the subject, he found:

What businesses (and business economists) say in private surveys also does not support the "regulatory uncertainty" mantra one hears from the D.C.-based business trade associations.
The National Federation of Independent Business (NFIB), which describes itself as "the leading small business association representing small and independent businesses," does a regular survey of small businesses. One question that has been asked since 1973, is "what is the single most important problem your business faces?" The answer choices are inflation, taxes, government regulation, poor sales, quality of labor, interest costs, health insurance costs, the cost of labor, and other matters. Interestingly, the single largest response is "poor sales," the choice of 30 percent of respondents since President Obama was sworn in (averaging the 10 quarters between early 2009 and spring 2011). In other words, slack demand appears to be the key concern of small businesses.

The debunking hardly ends there. Two weeks ago, a World Bank report found that the U.S. ranked fourth is ease of doing business, behind only Hong Kong, Singapore and New Zealand. An analysis of the U.S. money supply by Moebs Services concluded:

The uncertainty plaguing the American economy has nothing to do with government regulations or taxes on millionaires. It's an uncertainty driven squarely by consumers and small-businesses who are worried about their short-term financial prospects. And it's been going on since well before Obama took up residence in the White House.

Even an October Gallup poll which reported that 22 percent of small owners put complying with government regulation at the top of this list of concerns, they also said that increased sales and broader job creation in the economy were their top two factors for success in 2012. And as Bloomberg explained three weeks ago:

Obama's White House has approved fewer regulations than his predecessor George W. Bush at this same point in their tenures, and the estimated costs of those rules haven't reached the annual peak set in fiscal 1992 under Bush's father, according to government data reviewed by Bloomberg News.

Taken together, the overwhelming evidence shows the Republicans' regulatory fraud is just that. As Bartlett aptly described it, the GOP's anti-regulatory jihad "is a simple case of political opportunism, not a serious effort to deal with high unemployment." The same is true of the GOP's tax cut mythology, which the record shows has only served to deliver yet another Treasury-funded windfall to the wealthy. At the end of the day, Republicans' claims about cutting taxes and regulations are obviously false, even if their ideology demands they be true.

One comment on “The Republican "Job-Killing Regulations" Myth Gets Demolished”

  1. If you tell the same lie over and over again every day, sadly there are enough ignorant people out there to believe it. It's the way of the GOP and Carl Rove!


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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