Regulations: Jobs-killing AND jobs-preventing | Business Roundtable


  • General Inquiries
  • Mailing Address
    300 New Jersey Avenue, NW
    Suite 800
    Washington, D.C. 20001
  • Media Contact
    Rayna Valenti
    Director, Communications

Membership Contact
LeAnne Redick Wilson
Senior Vice President


What is Business Roundtable

Business Roundtable (BRT) is an association of chief executive officers of leading U.S. companies working to promote sound public policy and a thriving U.S. economy.

More Than Leaders. Leadership.

Business Roundtable is an association of chief executive officers of leading U.S. companies working to promote a thriving economy and expanded opportunity for all Americans through sound public policy.

About BRT

Regulations: Jobs-killing AND jobs-preventing

Apr 26, 2012

Washington Post columnist Ruth Marcus took issue this week with arguments that regulatory excess can be "jobs-killing." But don't delays in investment have consequences?

Marcus' column, "Sledgehammer Politics," or online, "Bad science around ‘job-killing regulations’," protested the use of studies to argue that regulations will "kill" millions of jobs, saying that the claims are based on models designed to achieve the desired results.

Sure. Activists and associations shape their arguments and studies to buttress their policy positions. Marcus is incensed at business groups that point to the employment consequences of excessive regulations, while failing to mention the environmental, "consumer," and left-leaning organizations that generate biased reports based on selected statistics. The anti-market version of "kill jobs" is "save lives."

Of course overregulation and permitting delays prevent hiring or force layoffs. Business Roundtable just issued a report, Permitting Jobs and Business Investment: Streamlining the Federal Permitting Process, that offered five case studies of how an inept and unwieldy regulatory process caused multi-year delays in major infrastructure and energy projects. In discussing the report with reporters, BRT President John Engler responded to a question about whether an administration that gave business its lead would inspire more activity independent on return on investment. Independent of ROI? Well, no, Engler responded:

But, it would inspire them and encourage them to go forward. Remember, there's an old saying, "Time is money," and if suddenly I get my return five years earlier, then sure.

Marcus' column draws heavily on a new study from Institute for Policy Integrity at the New York University School of Law, which she asserts "attempts to bring some economic rationality to the regulatory discourse." The example of some "rationality" is economic fatuousness.

The report is titled “The Regulatory Red Herring: The Role of Job Impact Analyses in Environmental Policy Debates.” Yet somewhat surprisingly, Michael Livermore, the institute’s executive director, does not oppose factoring job impact into the cost-benefit analysis. Rather, he argues for adopting a more sophisticated approach than the prevalent knuckleheaded assumption — my words, not his — that increased regulation inevitably results in fewer jobs.

If an employer’s costs increase as the result of a regulation, Livermore notes, that is another way of saying that the employer has to hire workers to, say, install new technology while other employers hire workers to produce the new equipment.

This is the "broken window" theory, disproved by French economist and politician Frederic Bastiat in the 19th century. Journalist and historian Amity Shlaes described Bastiat's case in a 2011 Bloomberg column:

In the summer of 1850 ... Bastiat laid out the now-famous parable. Disaster happens. A thief breaks a man's window, or a storm does. The man has to pay the glazier to fix it. The glazier spends his money at the store. When enough windows are smashed, voila: a visible benefit, new jobs for the glass industry.

True enough, noted Bastiat. The window replacement is what is seen. What about that which is not seen? "Since our citizen has spent six francs for one thing, he will not be able to spend them for another. It is not seen that if he had not had a windowpane to replace, he would have replaced, for example, his worn-out shoes or added another book to his library."

Since a business spends six billion dollars to comply with one unreasonable regulation, that business will not be able to spend those billions on other things: Expansion or a new plant that leads to additional hiring, research and development that creates new products, or dividends to stockholders that spur economic growth. Dollars are being shifted from more productive purposes.

Are jobs "killed?" Perhaps not, but they're prevented.

UPDATE (12:50 p.m.): News coverage of the release of BRT's permitting report: