Claim That Regulations Are Hurting The Economy Is Not Supported By Evidence

Gallup Poll Of Small Business Owners Found “Government Regulations” Low On The List Of Obstacles To Hiring. According to Gallup Economy:

U.S. small-business owners who aren’t hiring — 85% of those surveyed — are most likely to say the reasons they are not doing so include not needing additional employees; worries about weak business conditions, including revenues; cash flow; and the overall U.S. economy. Additionally, nearly half of small-business owners point to potential healthcare costs (48%) and government regulations (46%) as reasons. One in four are not hiring because they worry they may not be in business in 12 months.

[Gallup.com, 2/15/12]

National Association For Business Economics Economic Policy Survey: 80 Percent Of Members Say Current Regulatory Environment “Good” For Businesses. From the NABE’s August 2011 Economic Policy Survey: “Regulatory activity has gained a lot of attention, with many groups suggesting that American businesses are overregulated by the current administration. With that said, 80 percent of survey respondents felt that the current regulatory environment was ‘good’ for American businesses and the overall economy.” [NABE.com, August 2011]

Washington Post: Economists Find “Little Evidence” That Regulations Have A Significant Impact On Overall Employment. According to the Washington Post: “Economists who have studied the matter say that there is little evidence that regulations cause massive job loss in the economy, and that rolling them back would not lead to a boom in job creation.” [Washington Post, 10/19/11]

McClatchy: “Little Evidence” To Support Blaming “Excessive Regulation And Fear Of Higher Taxes For Tepid Hiring.” As reported by McClatchy: “Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy canvassed a random sample of small business owners across the nation. ‘Government regulations are not ‘choking’ our business, the hospitality business,’ Bernard Wolfson, the president of Hospitality Operations in Miami, told The Miami Herald. ‘In order to do business in today’s environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order.’” [McClatchy, 9/1/11]

• McClatchy: “Some Pointed To The Lack Of Regulation In Mortgage Lending As A Principal Cause Of The Financial Crisis.” As reported by McClatchy: “McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business. 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.” [McClatchy, 9/1/11]

ProPublica: “Mostly, [Regulations] Just Shift Jobs Within The Economy.” As reported by ProPublica: “But is the claim that regulation kills jobs true? We asked experts, and most told us that while there is relatively little scholarship on the issue, the evidence so far is that the overall effect on jobs is minimal. Regulations do destroy some jobs, but they also create others. Mostly, they just shift jobs within the economy. ‘The effects on jobs are negligible. They’re not job-creating or job-destroying on average,’ said Richard Morgenstern, who served in the EPA from the Reagan to Clinton years and is now at Resources for the Future, a nonpartisan think tank.” [ProPublica, 9/21/11]

Regulatory Expert: “Current Rhetoric About Regulation Killing Jobs Is Nothing More Than Not Letting A Good Crisis Go To Waste.” From ProPublica: “‘The issue in regulation always should be whether it delivers benefits that justify the cost,’ said [Roger] Noll[, co-director of the Program on Regulatory Policy at the Stanford Institute for Economic Policy Research]. ‘The effect of regulation on jobs has nothing to do with the mess we’re in. The current rhetoric about regulation killing jobs is nothing more than not letting a good crisis go to waste.’” [ProPublica, 9/21/11]

Former Reagan Adviser: “Regulatory Uncertainty Is A Canard Invented By Republicans” And Unsupported By The Facts. According to former Reagan adviser Bruce Bartlett: “These constraints have led Republicans to embrace the idea that government regulation is the principal factor holding back employment. They assert that Barack Obama has unleashed a tidal wave of new regulations, which has created uncertainty among businesses and prevents them from investing and hiring. No hard evidence is offered for this claim; it is simply asserted as self-evident and repeated endlessly throughout the conservative echo chamber. […] In my opinion, regulatory uncertainty is a canard invented by Republicans that allows them to use current economic problems to pursue an agenda supported by the business community year in and year out. In other words, it is a simple case of political opportunism, not a serious effort to deal with high unemployment.” [New York Times, 10/4/11]

Consumer Demand Is The Key To Job Growth

Wall Street Journal: “Scant Demand, Rather Than Uncertainty Over Government Policies,” Is “The Main Reason” For Slow Recovery In Jobs Market. From the Wall Street Journal: “The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey. […] In the survey, conducted July 8-13 and released Monday, 53 economists—not all of whom answer every question—were asked the main reason employers aren’t hiring more readily. Of the 51 who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing.” [Wall Street Journal, 7/18/11]

Wall Street Journal: Businesses Need “A Burst In Demand Strong Enough To Propel Hiring.” As reported by the Wall Street Journal: “Forecasting firm Macroeconomic Advisers, which sees growth at a 2.3% pace in the second half of this year and 2.8% in 2012, expects firms to keep banking strong profits. But even if businesses remain strong enough to make it through a slowdown, they may have to wait longer for a burst in demand strong enough to propel hiring. ‘The biggest problem is that their order books are thin,’ said Macroeconomic Advisers chairman Joel Prakken. ‘They need fat order books to add people. They need fat order books to buy machines.’” [Wall Street Journal, 8/29/11]

CBO Director Elmendorf: “Primary Reason” For Persistent Unemployment Is “Slack Demand For Goods And Services.” From a blog post by Doug Elmendorf on CBO.gov: “Slack demand for goods and services (that is, slack aggregate demand) is the primary reason for the persistently high levels of unemployment and long-term unemployment observed today, in CBO’s judgment. However, when aggregate demand ultimately picks up, as it eventually will, so-called structural factors—specifically, employer-employee mismatches, the erosion of skills, and stigma—may continue to keep unemployment and long-term unemployment higher than normal.” [CBO.gov, 2/16/12]

AP: “Most Economists Believe There Is A Simpler Explanation” For Slow Job Growth: “There Isn’t Enough Consumer Demand.” From the Associated Press; “Is regulation strangling the American entrepreneur? Several Republican presidential candidates say so. The numbers don’t. […] Labor Department data show that only a tiny percentage of companies that experience large layoffs cite government regulation as the reason. Since Barack Obama took office, just two-tenths of 1 percent of layoffs have been due to government regulation, the data show. Businesses frequently complain about regulation, but there is little evidence that it is any worse now than in the past or that it is costing significant numbers of jobs. Most economists believe there is a simpler explanation: Companies aren’t hiring because there isn’t enough consumer demand.” [Associated Press, 10/12/11, emphasis added]

Estimated Cost Of Regulations Relies On Problematic Study That Does Not Account For Regulatory Benefits

The ad features onscreen text stating that “The annual cost of federal regulations in the United States increased to more than $1.75 trillion.”

$1.75 Trillion Estimate Is Based On A 2010 Study Commissioned By Small Business Administration’s Office Of Advocacy. From study titled “The Impact of Regulatory Costs on Small Firms” by Nicole V. Crain and W. Mark Crain of Lafayette College, which was “developed under a contract with the Small Business Administration, Office of Advocacy”: “In the face of yet higher costs of federal regulations, the research shows that small businesses continue to bear a disproportionate share of the federal regulatory burden. The findings are consistent with those in Hopkins (1995), Crain and Hopkins (2001), and Crain (2005). The research finds that the total costs of federal regulations have further increased from the level established in the 2005 study, as have the costs per employee. More specifically, the total cost of federal regulations has increased to $1.75 trillion, while the updated cost per employee for firms with fewer than 20 employees is now $10,585 (a 36 percent difference between the costs incurred by small firms when compared with their larger counterparts).” [SBA.org, September 2010]

SBA Estimate Did Not Examine The Benefits Of Regulations. From a Congressional Research Service report titled “Analysis of an Estimate of the Total Costs of Federal Regulations”: “Crain and Crain said they did not provide estimates of the benefits of regulations, even when the information was readily available, because the SBA Office of Advocacy did not ask them to do so.” [Congressional Research Service via ProgressiveReform.org, 4/6/11]

CRS: Regulatory Benefits Generally Outweigh Costs. “OMB’s reports to Congress have generally indicated that regulatory benefits exceed costs.” [Congressional Research Service via ProgressiveReform.org, 4/6/11]

2010 OMB Analysis: Major Federal Regulations Saved $127-$616 Billion Per Year And Only Cost Up To $55 Billion. From Talking Points Memo: “But perhaps most importantly, the study didn’t factor in any of the benefits provided by regulations. OMB put out an analysis in 2010 that covered only major regulations issued from 1999 to 2009 and concluded they were a significant net gain for the economy on the whole. By their estimates, federal regulations cost around $42-55 billion per year, but saved taxpayers $127-616 billion per year at the same time.”  [TalkingPointsMemo.com, 9/6/11]

CRS Raised Questions About Reliability Of SBA Estimate. From a Congressional Research Service report titled “Analysis of an Estimate of the Total Costs of Federal Regulations”: “A September 2010 report prepared by Nicole V. Crain and W. Mark Crain for the Office of Advocacy within the Small Business Administration (SBA) stated that the annual cost of federal regulations was about $1.75 trillion in 2008. This cost estimate was developed by adding together the estimated costs of four categories or types of regulation: economic regulations (estimated at $1.236 trillion); environmental regulations ($281 billion); tax compliance ($160 billion); and regulations involving occupational safety and health, and homeland security ($75 billion). Some commenters have raised questions about the validity and reliability of this estimate.  For example, Crain and Crain’s estimate for economic regulations (which comprises more than 70% of the $1.75 trillion estimate) was developed by using an index of ‘regulatory quality.’ One of the authors of the regulatory quality index said that Crain and Crain misinterpreted and misused the index, resulting in an erroneous and overstated cost estimate. Other commenters have also raised concerns about using the index to estimate regulatory costs, and about the regression analysis that the authors used to produce the cost estimate.” [Congressional Research Service via ProgressiveReform.org, 4/6/11]

EPI Research And Policy Director: $1.75 Trillion Estimate “Contains Basic Conceptual Mistakes And Relies On Extraordinarily Poor Data.” From the Economic Policy Institute: “Claims by researchers Nicole and Mark Crain that government regulations cost $1.75 trillion are fundamentally flawed, says a new critique released today by the Economic Policy Institute. Flaws call for rejecting Crain and Crain model by research and policy director John Irons and Andrew Green, is a thorough critique of the deficient model Crain and Crain developed to estimate the cost of ‘economic regulations,’ which account for 70 percent of the large cost of regulations they found in the 2010 study they wrote for the Small Business Administration’s Office of Advocacy that is often cited by critics of regulations. ‘The Crain and Crain model contains basic conceptual mistakes and relies on extraordinarily poor data,’ said Irons. ‘Its results should neither be used as a valid measure of the economic costs of regulation nor as a guide for policy.’” [EPI.org, 8/21/12]

SBA Estimate Relied On Decades-Old Academic Studies, Old Estimates Of Regulations, And Cherry-Picked Upper Limits Of Cost Estimates. From a Congressional Research Service report titled “Analysis of an Estimate of the Total Costs of Federal Regulations”: “Crain and Crain’s estimates for environmental, occupational safety and health, and homeland security regulations were developed by blending together academic studies (some of which are now more than 30 years old) with agencies’ estimates of regulatory costs that were developed before the rules were issued (some of which are now 20 years old). Although the agency estimates were typically presented as low-to-high ranges, Crain and Crain used only the highest cost estimates in their report. The Office of Management and Budget has said that estimates of the costs and benefits of regulations issued more than 10 years earlier are of ‘questionable relevance.’” [Congressional Research Service via ProgressiveReform.org, 4/6/11]

NFIB Cites Itself

The ad features onscreen text claiming that “Today there are 4,257 regulations in the pipeline with 845 directly impacting small businesses,” citing “Small Business for Sensible Regulations” on November 1, 2011.

Small Business For Sensible Regulations Is A Project Of NFIB. From NFIB.com: “Small Businesses for Sensible Regulations, a project of NFIB, is a new effort dedicated to protecting small businesses and American jobs from the impacts of regulations recently proposed by the Obama administration.” [NFIB.com, accessed 8/21/12, emphasis original]

• Quote Referring To “4,257 Regulations” Is From A Letter Co-Written By NFIB President And Small Business for Sensible Regulation Coalition Chair. From an open letter to President Obama, written by Small Businesses for Sensible Regulations coalition chair Blanche Lincoln and NFIB CEO & president Dan Danner: “For decades, small businesses have worked to ensure workplace and environmental protections, and federal regulations have played a role. However in recent years, small business’ ability to grow and continue to create two-thirds of the net new jobs annually has been threatened by a growing number of burdensome regulatory requirements handed down from Washington.  Since 2005, there has been a 60 percent increase in the number of federal regulations defined as “economically significant” – each costing the economy $100 million or more.  Today there are 4,257 regulations in the pipeline with 845 directly impacting small businesses.” [SensibleRegulations.org, 11/1/11, emphasis added]