Why businesses aren't adding employees

www.washingtonmonthly.com

October 14, 2011 12:30 PM A thorough debunking
By Steve Benen

Credit where credit is due: several major media outlets have done a pretty good job of knocking down the top Republican talking point on economic policy. The latest is a good piece from CNN.

The story goes like this: Thanks to the Obama administration, a wave of new government regulations are strangling business to the detriment of hiring and economic growth.

But in an economy with serious structural problems, a crippled housing market and slack demand, is government regulation really holding back the labor market?

Not so much, according to government data and surveys of business owners and economists.

Only a small percentage of employers report regulation as a reason for laying off workers.

In the first two quarters of this year, only 2,085 new unemployment claims were attributed to government regulation, while 55,759 were tied to insufficient demand, according to Bureau of Labor Statistics data on mass layoffs.

The CNN report cited, among other things, BLS data, surveys from the National Federation of Independent Business, and Brookings Institution scholarship. They all said the same thing: government regulations are not responsible for holding back the economy.

The New York Times, the AP, the Economic Policy Institute, the Wall Street Journal, and McClatchy newspapers all did their own research and reporting on this in recent weeks, and all came to the exact same conclusion. At this point, it’s safe to say anyone insisting that regulations are the driving factor behind the weak economy is a fool or a hack.

What is holding back the economy? In every instances, all of the reporting pointed to a lack of demand. Republicans may not care for the rules of supply and demand, but they’re not subject to GOP filibusters.

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The problem, of course, is that the GOP agenda desperately hopes to make demand worse by taking capital out of the economy, laying off more public-sector workers, imposing austerity measures, and scaling back economic activity by cutting off unemployment benefits and food stamps.

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