Taking the Mask Off The Regulatory Boogeyman

...and he regulates too.

“Supply side economics.” “Trickle down economics.” “Voodoo economics.” Call it what you may, but the theory is that if you put more money into the hands of the wealthiest Americans, they will be empowered to create jobs to the benefit of the rest of us.

Since Ronald Reagan started marketing this theory, America has doubled down on it. Literally. As we saw this week, over the last three decades we have more than doubled the income share of the top 1% of Americans, recently rebranded “Job Creators.”

So, how’s supply siding going for us? Despite the fact that we have armed the Job Creators with massive infusions of new resources – exactly what the supply siders said we must do – the Job Creators obviously aren’t creating jobs.

Given that embarrassing reality, the new explanation served up by the Job Creators and their political allies is that regulations are just too darn burdensome to allow the Job Creators to work their job creation magic.

For instance, Wisconsin Congressman Paul Ryan (R-WI) had me choking on my Cheerios this morning during this NPR interview:

NPR reporter Ari Shapiro: …we asked Ryan why that wealth isn’t translating into new jobs.

Ryan: I have toured over 200 business in my congressional district asking this very question, and I get the same answer these days. Uncertainty on taxes, uncertainty on regulations… Over 4,200 regulations are coming out of the federal government this year. Over 3,500 came out of the federal government last year. So to me businesses need to have some degree of certainty if they’re going to plan or take a risk.

If the Packer’s underachieve this weekend, or there is inclement weather in Janesville, expect Representative Ryan to blame it on the regulations in our midst.

Just as with the claims about the wonders of supply side economics, the mainstream news media has not sufficiently questioned the “regulations kill business” claims. They usually report the “jobs kills business” claim as if they are noting that “the sun rose over the horizon this morning.” Self-evident.

But if reporters looked at the industries that have been the subject of the most regulations in recent times, health care and energy, they would see that they have among the highest earnings per share in the S&P 500.

If reporters asked Bruce Bartlett – conservative economic guru to Ronald Reagan, George H.W. Bush, Jack Kemp and Ron Paul – he would tell them that there is “no hard evidence” to support the claim that regulations are the principal factor holding back the economy.

If reporters asked economists about the regulatory environment, they would learn that 80% of economists surveyed by the National Association for Business Economics rated the regulatory environment for business and the overall economy as “good.”

To be fair, the Wall Street Journal did survey economists about the principal factor holding back the economy, and learned that 65% said “lack of demand,” not government policy. But the Journal then proceeded to continue skapegoating regulations in their subsequent reporting and editorializing.

Finally, if reporters checked Bureau of Labor statistics, they would see that employers say that less than 00.03% of mass layoffs in the most recent quarter were due to government regulations or intervention. The number one reason, according to employers, was “lack of demand.”

Lack of demand. Not lack of resources in the hands of the wealthy few. Not too much regulation. Lack of demand from the people whose income is stagnating compared to the Job Creators.

The evidence completely discredits the de rigueur skapegoating of regulation. This evidence argues for a long overdue end to the failed trickle down experiment, and a move to demand side stimulation, policies that put more money into the pockets of consumers who buy stuff and less money into the pockets of wealthy people who can afford to horde cash.

It also argues for better reporting of economic evidence.

- Loveland

About these ads

30 Responses

  1. Polls of small business owners (the business owners who actually create jobs–because they’re on their way to becoming rich [they hope]. You can tell when a businessperson really is rich. That’s when they stop creating jobs and focus on consolidating their wealth and using it to extract from the rest of us what little wealth we still have.) tell us that there’s another aggravating factor: no credit.

    The banks, perched atop mountains of cash, won’t give the little guys business loans. Again, nothing to do with taxes or regulations.

  2. One of the primary arguments against a millionaire tax is that it would destroy small business owners. But it would not even touch 97% of small business owners.

  3. “The United States is the fourth-easiest place in the world to do business, according to a new World Bank report measuring business regulation. Trailing only Singapore, Hong Kong, and New Zealand, the U.S. has performed well in terms of basic measures of business entry, expansion, operations, and insolvency.”

    http://www.washingtonpost.com/blogs/ezra-klein/post/its-still-relatively-easy-to-do-business-in-america/2011/10/25/gIQAifweFM_blog.html

    The one place that the report cites as a problem is the complexity of the US business tax code(s–because of the different states)

    But regulation is a canard.

  4. Oh, and while we are at it. let’s get off this small business bandwagon.

    http://www.newyorker.com/talk/financial/2011/10/31/111031ta_talk_surowiecki

    “But the truth is that, from the perspective of the economy as a whole, small companies are not the real drivers of growth. One can see this by looking at the track record of the world’s economies. The developed countries with the highest percentage of workers employed by small businesses include Greece, Portugal, Spain, and Italy—that is, the four countries whose economic woes are wreaking such havoc on financial markets. Meanwhile, the countries with the lowest percentage of workers employed by small businesses are Germany, Sweden, Denmark, and the U.S.—some of the strongest economies in the world.

    This correlation is not a coincidence. It reflects a simple reality: small businesses are, on the whole, less productive than big businesses, and though they do create most jobs, they also destroy most jobs, since, while starting a business is easy, keeping it going is hard. This is true around the world. A recent study by the World Bank that looked at ninety-nine developing countries found that large firms had significantly higher productivity growth. And in the U.S. the connection between size and productivity is, as a 2009 study showed, especially close. In part, this is because big businesses are able to enjoy economies of scale and scope. Big businesses are also better able to make investments in productivity-enhancing technologies and systems; in the U.S., for instance, big companies account for the vast majority of R. & D. spending.”

  5. “Lack of demand” doesn’t happen in a vacuum, Joe. It’s a byproduct of much larger systemic economic dysfunction.

    The tax-the-rich campaign has nothing to do with economic growth or balancing the budget. We all know it does nothing to achieve either goal.

    It’s about getting a pound of flesh out of a subsegment of our population under the guise of feeling better if we’re all equally miserable.

    I don’t think class warfare is a sustainable or plausible campaign platform. It’s in place to take our eyes off the ball – Obama’s aimless and ineffectual presidency. It’s the only card he has left to play, but I strongly doubt it’s enough to sway the masses.

    In the end, liberalism is a doctrine of relativism: If someone is doing better than me, it’s due to injustice and, therefore, I live in a state of perpetual unhappiness and agitation. As such, all my energies must be devoted to pulling others down to my level.

    What a way to go through life.

    • Cutting payroll taxes in half for 160 million workers, reemploying laid off teachers, firefighters and cops, employing unemployed workers on infrastructure modernization projects, extending unemployment insurance…all of those things create demand, as economists and employers say we must do. But the Republican controlled Congress is refusing to create demand through those actions because of a blind partisanship and stubborn fealty to the failed trickle down economics theory. Republicans are refusing to give the economy the medicine economists and employers say it needs.

      For three decades the data clearly show there has been class warfare and redistribution of wealth in America, from the bottom and middle to the top. While that was happening, there were no screams of “class warfare” and “redistribution” coming from the right. Only now, when there is a modest move to shift things the other direction, do the cries of “class warfare” come from the right.

      By the way, it’s not just liberals who see it this way. By a 7-to-1 margin, Americans think Republicans favor the rich over the middle class (69% say they favor the rich, 9% say they favor the middle class).

      Newt, are the 68% of millionaires who support the millionaire tax also motivated by class envy, or might they be motivated by fairness and sound economic policy?

    • Newt:

      your first paragraph makes perfect sense, but after that you again descend into party line talking points, before you have a chance to develop your one good starting point.

      Even David Frum (former Bush speech writer) says that Republicans have got to stop this “protect the rich at all costs” program:

      http://www.frumforum.com/who-burned-the-gop-brand

      There is no reason that republicans can’t be concerned about equality as an issue–I even heard David Brooks talking about that as well–it is a critical issue for our society, as the sense of legitimacy and fairness are deeply intertwined. Both parties need to seriously address the issue of poverty, social mobility (the US has gotten much worse on this issue recently–worse than many European countries) and a safety net. And repubnlicans just are not doing it.

      http://www.frumforum.com/an-idea-for-republicans

  6. Your definition of “fairness” takes a meaning not rooted in logic or English usage… Already half of all Americans pay NO federal income tax. And your solution is to enlarge that portion?

    I don’t care what polls say. You know (and I know) that taxing the rich achieves neither economic growth nor does it balance the budget. Only one justification remains: punishment.

    http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html

    P.S. The Senate is controlled by Democrats – the same ones that refuse to vote on Obama’s “jobs” programs. Nice try.

    • Newt:

      again, you are being disingenuous. Paying no federal income taxes is a silly standard against which to measure. We have had this discussion before, exhaustively, and i will continue to point out just how stupid your argument is as long as you are stupid enough to bring it back up. Those who are not paying income taxes are not paying because their income is too low–they are poor. It was a republican Policy (under Bush and his predecessors) to expand the Earned Income tax credit as an efficient way to provide a social safety net for the poor, and the result is that a large number of people do not pay income taxes–but they still pay plenty of other taxes to state, local and federal governments.

      Further, you clearly misstate joe’s argument–it is not to have fewer people pay income taxes, but to increase the rates at which the wealthiest pay income taxes. this is what most people in the US want Congress to do–including republicans. It is what the Republicans in the Senate are threatening to filibuster, and what House Republicans have ;labelled a nonstarter with respect to the deliberations of the Supercomittee.

      • Theyre not too poor. The income tax is exempting a lot of people who should be paying. My income had been consistent for several years. In 2009 (everyone’s bad year) business was down. My gross and taxable each went down by 2/3. On a gross of 44k and a taxable of 29k, I had no income tax liability but very well could have afforded to pay something.

        This is as good example as any. The larger point is, you can’t fix the budget problem with a tax increase on “the rich”. The middle class are going to have to pay.

      • Well, the best way to solve the budget problem is through growth–which requires a fiscal stimulus See this for an example of what kind of a difference stimulus, even though small and inadequate, can mean to growth:

        http://andrewsullivan.thedailybeast.com/2011/10/life-without-stimulus.html

        Longer term, we do need to tackle spending (not immediate spending cuts, which will slow growth), particularly in places like entitlements and defense–and especially we need to do something about health care spending increases.

        And tax reform would always be a good idea–cut deductions, play around with rates, maybe include a VAT, but also keep a progressive element in the tax mix.

        The problem is that those avenues are blocked by republican opposition. So what is left?

      • I don’t give a shit about what “most people” think. That’s called mob rule. And the more people receiving exemptions and handouts, the bigger the mob. Witness your friends in Greece and California.

        Again, for the last time, raising income taxes neither aids the economy nor fixes the deficit. It might feel good to liberals, however.

        The poor pay a higher percentage of their income THAN ANYBODY, ALL THE TIME, FOR ALL THINGS. It’s called simple math. It’s called reality.

        Unlike you, PM, I don’t care to live in a country where “success” is defined by the portion of the citizenry living on the public dole.

        When half the country has no skin in the federal game, we’re at the tipping point.

      • Ahh, the populist masks falls, and we get a glimpse of the elitism and naked greed that resides underneath.

        Remember that first Tuesday in November? The one when “most people” will determine our leaders?

        Sorry, Newt, but that isn’t “mob rule”, rather, it is called “democracy”. It is what we do in this country, it is what is enshrined in the Constitution, what is an integral part of the “rule of law”. Your utter contempt for the laws, traditions and people of this country are truly breathtaking.

        What a patriot you are. A true conservative. A proud republican!

      • Erik, I’ll make a deal with you. If we make the payroll tax significantly more progressive, I’ll go along with you about making poor people pay some income tax. But right now, it’s ridiculously unfair that the woman who makes my McRib pays payroll taxes on every single dollar she earns, while so many pay nothing on most of the dollars they earn. The only way to correct the gross unfairness of the regressive payroll tax cap is either by removing the cap or easing the income tax burden on the poor. We’ve opted for the latter to this point, but the former is fine with me too.

        Newt, on a continuum where 0 = communism and 10 = laissez faire capitalism with no safety net, we’re probably at 8 in America. Your helpful advice for me seems to imply that you think that I want it at or near 0, when in fact I’m wanting something more like 7. But the reason I cite polls is that neither you nor I get to pick the place on the economic continuum. In a democracy, the majority’s representatives gets to pick the point on the economic continuum, and it sure looks like the majority is not with you about moving to a 9 or 10. Public opinion matters because that is how we peacefully resolve Newt-Joe type disputes in a democracy.

      • No, Joe. Your premise is baloney. What the payroll tax buys is a set of defined benefits. Even though its ostensibly regressive (and it isn’t, actually), this regressivity is made up for by the poor getting better a deal in terms of what they paid to what they get. Their premiums buy more benefits than the rich.

        No doubt there is some inequality worth chasing in the tax code, but the problem with arguments like yours is it’s completely postmodern. In the absence of literal disparities, these inequalities are anything you (et al) say they are.

  7. It turns out it’s a zero sum game. Kevin Drum has up a post, http://motherjones.com/kevin-drum/2011/10/price-plutocarcy-0, which begins with a claim from the CBPP that “Virtually all of the decline in the bottom 80%’s share of the nation’s income is reflected in an increase for the top 1%.” He summarizes a longer term study: “every year about $700 billion in income is being sucked directly out of the hands of the poor and the middle class and shoveled into the hands of the rich.”

    Leaving aside any concerns for equity, morality, or political stability, simply as a matter of economics, it would be better if the money went the other way.

    If the basic problem is demand, then it is much better that a 100,000 families each have $1,000 more to spend than that one family has an extra million. If the economy is to function somebody has to buy the goods and services, and the poor and middle class are just more likely candidates to buy the hundreds of thousands jackets and corn flakes and hair cuts and oil changes and orthodontia and all the rest of the stuff that keeps the economy going.

  8. For Newt and any others who might doubt that inequality hurts societies and ALL of their members, watch this TED talk:

    What is really interesting is that this guy takes the same social indicator statistics and maps them (by country and again among the 50 US states) first by GNP per capita and then by relative inequality. There is no correlation between GNP per capita and social indicators, but there is a strong correlation between inequality and these social indicators.

    Bottom line, if you really are an American patriot, then you need to be concerned about growing inequality in the USA.

    • Inequality isn’t remedied by making all people equally miserable. That’s where Obama and his ilk have it wrong.

      • Funny, i sort of got the impression that your concern was to make certain that the poor paid income taxes, just like the rich. what is your motivation for that, if not to make the poor even more miserable?

        Oh, i get it–you motivation is not to make the poor equally miserable, but to make them far more miserable than the rich, in addition to being more miserable than they are now.

      • Run Forest. Run.

  9. Looks like the American people are seeing thru the “flat tax” gimmickry:

    http://www.nytimes.com/2011/10/31/opinion/flat-taxes-and-angry-voters.html?_r=1&hp

  10. Here, Newt, are the types of arguments that you would be making if you really wanted to oppose tax increases on the rich because you cared about the well-being of our country, as opposed to the well-being of the rich:

    http://www.nytimes.com/2011/10/30/opinion/sunday/douthat-what-tax-dollars-cant-buy.html?wpisrc=nl_wonk

    • One key excerpt: “Our entitlement system, meanwhile, is designed to redistribute wealth.”

      I don’t want to live in a country that emphasizes this. If I did, I’d move to Cuba.

      • Based on the CIA’s calculation of the Gini Index, where 0=a country where family incomes are all equal and 100=a country where one family has everything, you would prefer to live in Namibia (70.1), Lesotho (63.2) and Botswana (63) to Sweden (23), Norway (25) and Finland (26.8). The U.S. incidentally is 45.

      • Interesting John, thanks for that. The current U.S. Gini is very similar to our neighbors in Mexico.

        It looks like the U.S. was in the mid-30s from the 1950s through the 1970s, then shot up into the mid-40s. I know there isn’t the political will to join the Scandinavians in the mid-20s, but I’d be content just moving back toward the mid-30s of the 1950s through the 1970s.

        http://en.wikipedia.org/wiki/Gini_coefficient

  11. Commercial banks caused the real estate meltdown. Yeah right …

    WASHINGTON (AP) — Government-controlled mortgage giant Freddie Mac has requested $6 billion in additional aid after posting a wider loss in the third quarter.

    This quarter’s $6 billion request from taxpayers is the largest since April 2010.

    Taxpayers have spent about $169 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. The government estimates it could cost up to $51 billion more to support the companies through 2014.

    Freddie and Washington-based Fannie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.

  12. PM – no need to google Krugman. You can use your head for these matters …

    When government incentives uncreditworthy lending on a massive scale, it makes things that much worse.

    When government “guarantees” everything, it’s the taxpayer that’s on the hook.

    And without mountains of bad loans, there would be no credit default instruments.

    Of course government catalyzed this mess.

    Don’t be a retard.

    • Newt: here is a great post on various republican delusions about economic policy (from a republican website, no less–although i am sure you will counter with the RINO excuse):

      http://www.frumforum.com/to-govern-better-gop-should-admit-reality

      Here is the excerpt about the CRA and the housing crisis:

      Conservatives think the Community Reinvestment Act (CRA) caused the sub-prime mortgage crisis.

      It would be a great narrative if the entire financial collapse could be blamed on laws that congress passed which encouraged bad loans to be made. Yet the data shows that the loans that can be traced to the CRA just weren’t the bulk of the loans that caused the 2008 crisis.

      According to former Fed Governor Randall S. Kroszner:

      the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.

      There is a discussion to be had over how the CRA changed the housing market and created unintended consequences for how credit was rated. But as a matter of factual record, conservatives should be focusing instead on the derivatives market which was responsible for the crisis, and not in any way part of the CRA.

      Are you planning on coming back to reality before or after the 2012 election, Newt?

    • More for you, Newt:

      ”More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions….Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.”

      from:

      http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html

      Bottom line: the problem in the housing market was due to predatory lending practices among the banks that made huge profits from writing and then selling those repackaged mortgages. Fannie and Freddie were generally bystanders whose troubles were caused by the housing crash–they did not cause it. The loans held by Fannie and Freddie were not subprime–until the underlying value of the houses fell, due to the price collapse.

Comments are closed.

Follow

Get every new post delivered to your Inbox.

Join 2,894 other followers

%d bloggers like this: