Regulations are a Drag on the Economy

Nov 21, 2011

Dragging the economyA recent article by the Washington Post struggled to make the argument that regulatory overreach doesn’t affect jobs.  The Post distorted key facts and ignored others to reach a misleading conclusion.  The Post attempted to counter concerns about the impact regulations have on jobs by citing examples where jobs destroyed were partially offset by jobs created in order to comply with the rules.  In the cases cited, most of the jobs destroyed were permanent, while the jobs created were only temporary:  A temporary job to build a scrubber does not legitimately balance the loss of an operating plant job that a family depended on for a lifetime. 

The effects of regulations also spread wider than the immediately affected plant.  In the lead example of a coal-fired electrical generating plant facing regulatory shut-down, the Post only counted jobs lost in the generating plant itself, and ignored the much larger impact on thousands of American coal miners who will become unemployed by the loss of demand for coal.   In the BLS survey of layoffs the Post cited, the loss of coal mining jobs would be directly reported as the result of decreasing product demand, despite that the real cause of the falling demand was the EPA-driven shut-down of the generating plant.

The Post failed to mention the fact that the BLS survey covers layoffs of 50 or more workers in the same plant and a single month.  Small business are particularly hurt by regulations but their job losses are not counted in the BLS mass layoffs data. 

The Post also ignored the effect of regulations on future job creation.  In addition to directly destroying existing jobs, regulations interfere with the growth of jobs in the future.  EPA’s layers of permit regulations are currently stalling 351 energy projects across the nation which would generate 791,000 new jobs if the regulatory barricades were lifted.

According to the government’s own Small Business Administration’s study, the annual burden of regulations is $1.75 trillion – equal to $8,086 per employee.  The cost of regulations exceeds the $1.4 trillion collected by the federal government in personal and corporate income taxes.  Like higher taxes, increased regulation is a drag on economic growth, and slower growth means less job creation and continuing high unemployment.

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