The unemployment rate just recently fell to 8.6%, but this largely reflects people dropping out of the labor market. Approximately 350,000 fewer Americans sent resumes out than in months before. There are millions of Americans who are out of work and their government has largely failed them. The Republican Party ought to provide a realistic alternative to the Obama administration's mostly unsuccessful policies.
First, we need to understand what is preventing a full economic recovery. The short answer is an unprecedented collapse in demand. Conservatives are right to worry about the effects that regulations can have on job creation, but we need to have a more precise understanding of what is ailing the economy. I can think of 7 reasons why regulations are not the chief problem.
1. The average hour work week has remained the same. If employers were concerned about meeting demand but were prevented from hiring new employees because of regulations, then we would see them ramping up the hours of the workers that they already have. This has not happened. There are currently 5.6 million workers who have part-time work but are looking for a full time job.
2. Comparing the current recovery to past recoveries shows that business investment as a percentage of the GDP has increased more now than in the past two recoveries. If businesses were not hiring due to overbearing regulations, we would see that reflected in their investment.
3. Small business surveys conducted by the National Federation of Indepedent Businesses reveal that 29.6% of business owners cite poor sales as their chief problem as opposed to 13.9% who cite regulations. If that survey is not enough, you can check out other surveys conducted by the Bureau of Labor Statistics, Small Business Majority, the Wall Street Journal, and McClatchy newspapers that all show the same thing (links here).
4. American exports are at a record high. This suggests that American businesses can sell their products when they have an available pool of customers. The problem with exports is that it is not enough to bolster the recovery. The Euro Zone receives 16% of American exports and one could logically conclude that this number is going to decrease in the coming years.
5. In industries where regulations have increased, the unemployment rate in those sectors has been below the national average.
6. Surveys of business and academic economists reveal that the vast majority believe that the current regulatory environment is good for American business. A majority of economists surveyed by the Wall Street Journal in July also said that lack of demand, not uncertainty, was the chief cause of a weak recovery.
7. Obama has instigated fewer new regulations in the first 33 months of his administration than President Bush did in his first 33 months, although Obama's regulations have been more costly. One could argue that given the economic circumstances, President Obama should have enacted fewer regulations, but it simply is not true to suggest that his administration is killing the economy because of excessive regulations.
Again, our problem is a collapse in demand, not too many regulations. The goal of the conservative movement should be to address this problem without creating vast lands of new government and without driving our national debt to out of control reaches.
How to do that?
More to come...
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