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EDITORIAL: Create jobs by cutting red tape
Radical reform is needed to improve the dire unemployment situation
Question of the Day
Finally some positive economic news: The official unemployment rate dropped one-tenth of a point to 9 percent. It would be cause for celebration, except the gains are far too modest to make any serious dent in the problem of joblessness in America.
There’s even less cause for optimism after considering the figures are for October, when seasonal hiring begins to inch up in anticipation of the holiday season. Sure enough, much of the increased employment is found in the service and hospitality industries, according to the Bureau of Labor Statistics (BLS). Anecdotal evidence suggests that in many cases when people lose jobs and are re-hired, they accept pay cuts. This is consistent with the broad data trends which show that wages and salaries grew only 0.3 percent in the last three months, using BLS numbers.
The third-quarter boost in gross domestic product (GDP) and the quasi-positive job numbers are keeping a double-dip recession at bay. It’s a sign of how far behind this country has fallen to rejoice with such low expectations. As of today, some 13.9 million Americans remain in the ranks of the officially unemployed, of which 5.9 million are considered to be long-term unemployed. A 2.5 percent growth rate is not sufficient to expand the economy enough to accommodate these lost millions. It’s also not enough to fund the staggering budget deficits coming out of Washington.
Nor is the American Jobs Act proposed by President Obama a solution. A new study by the Phoenix Center in Washington crunches some 50 years of data to conclude the regulatory burden imposed by the federal government has a severely adverse impact on private-sector GDP and job creation. Using sophisticated econometric techniques, the authors determined that a 5 percent reduction in regulatory burden - a small $2.8 billion cut - could result in an increase of $75 billion in private-sector GDP, freeing these companies to create 1.2 million productive jobs.
The effect works both ways. Increases in government regulatory burden cost the economy private-sector jobs. So Mr. Obama’s stimulus scheme, which is designed to create a lot of government jobs, would have a negative impact on private-sector employment. The authors provide a concrete example in terms of the new Consumer Finance Protection Bureau (CFPB), which has a budget of at least $500 million. Their simulation, assuming the CFPB will employ 2,200 bureaucrats, concluded that its regulatory toll would destroy 238,000 jobs per year in the private economy. That’s exactly the opposite of what America needs right now.
These results are consistent, at least in terms of direction, with a study from the Small Business Administration last year which found that economic regulation imposed a significant burden on businesses, and a disproportionately large burden on small businesses, which are the engine of job creation in the economy. If Congress and the Obama administration are serious about creating jobs, they need to start looking at ways of really reducing the regulatory burden - and implementing those cuts in red tape - now.
America will never escape the 9 percent unemployment trap if we only improve by a tenth here and a tenth there. The president tried government stimulus and it was a massive failure. Regulatory reform will give this economy the boost it desperately needs.
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