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The Growth Agenda and Its Enemies

What can the government do to promote real job growth? Quite simply, get out of the way.

by
Iain Murray

Bio

August 8, 2011 - 12:04 am
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Even President Obama now seems to realize that rescuing America from its financial crisis requires getting Americans back to work. What he doesn’t seem to realize is that rejigging government spending to promote employment is just an artificial, short-term solution. So-called “green jobs” and other subsidy programs will not help put American employment back on a stable footing.

So what can the government do to promote real job growth? Quite simply, get out of the way. We don’t need to teach the grass to grow; we just need to move the rocks off of it. The rocks weighing down on the economy are government rules and regulations — in other words, bureaucracy and overregulation.

According to the Small Business Administration, federal rules and regulations — from the Fair Labor Standards Act to the Polygraph Protection Act — cost small businesses $10,000 annually per employee in compliance costs. To put that in perspective: That would take a company with 10 employees from making a $100,000 profit to just breaking even.

Take away those rules and regulations and that firm could use those profits to hire another employee and reinvest the rest in the business (in raises or new office space, for example). With the bureaucracy in place, however, you might consider letting someone go in the current business environment.

The mere threat of new regulation — from the EPA’s new emissions regulations to the simple requirement to provide “free” birth control in health insurance plans — is enough to force any prudent business manager to think again about hiring new staff or even retaining all existing staff. The costs from new regulations are just as real as those from new taxes or restrictions on business.

Bureaucracy, literally, kills jobs. Therefore, it is vital that over the next few months legislators work to rein in the size of government. But they should not only focus on spending; they should rein in bureaucracy as well. A good place to start would be by pruning back some of the more egregious regulatory agencies like the Environmental Protection Agency.

Moreover, reining in excessive regulation can kill two birds with one stone, as it would provide real benefits in terms of government revenue, as increased economic activity leads to greater tax receipts.

For example, allowing more companies to mine vitally needed rare minerals on federal lands will increase not only corporate tax revenues, but also bring in revenues from lease payments and the like. In turn, the miners employed at these facilities will have higher incomes, and will spend more, stimulating local economies. Many people employed as a result will come off the unemployment lines, reducing government costs further.

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