Quote of the Day: “From where I sit, the government’s message is unmistakable: Creating a new job carries a punishing price.” — Michael P. Fleischer, President, Bogen Communications Inc., as reported in the Wall Street Journal
In this message . . . an explanation for the “jobless recovery,” and a cure for the problem.
Unemployment is still officially at 9.6%.
As the letter below indicates, we believe a large part of the reason for this is that federal regulations are constantly changing. Business owners don’t know what their unelected regulatory overlords will do next. This creates uncertainty about the future costs and benefits of hiring a new employee. We think this is why . . .
* Businesses aren’t hiring
* Congress should pass DownsizeDC.org’s Write the Laws Act (WTLA).
Please send your elected representatives a letter, telling them to introduce WTLA.
You may borrow from or copy this letter . . .
The Write the Laws Act would require Congressional approval for all regulations. This is a needed reform, because the unelected bureaucrats who today write and implement regulations are causing high unemployment by creating uncertainty.
You can begin to see how this is happening by comparing this recession with the one in 2000-2001. As James Sherk of the Heritage Foundation notes, the 2008-2009 recession led to a peak unemployment rate of 10.1%, whereas the 2000-2001 recession led to an unemployment high of just 6.3%. http://www.heritage.org/research/reports/2010/03/the-cause-of-high-unemployment-still-due-to-dwindling-job-creation
But here’s the most startling fact: Even though total unemployment was lower in the earlier recession, jobs losses were actually 2.6 million HIGHER than in the current downturn! The reason for this is very instructive . . .
The earlier recession had both more job losses and a lower unemployment rate, because more businesses back then were doing new hiring at the same time that they were cutting other jobs. By comparison, during this recession, businesses have stopped hiring, so all we have are the job losses, resulting in a “jobless recovery.”
This is happening because business owners don’t know what the government will do next. The exact same thing happened during the Great Depression. Back then GDP rose, but unemployment remained high because the New Deal’s laws and regulations were constantly changing. This made hiring risky. The economist Robert Higgs calls this problem “regime uncertainty.” http://www.independent.org/publications/tir/article.asp?a=430
Imagine that Congress passed a tax bill that gave unelected bureaucrats the power to set tax rates, industry by industry. Do you think any business would expand or hire people before they knew how much they had to pay in taxes? Of course not. Well . . .
The same principle applies when Congress gives unelected bureaucrats the power to write their own regulations. In this year’s healthcare and financial “reform” bills, Congress gave unelected bureaucrats vast new powers to create new regulations that will impact most of the economy.
These regulations will increase the cost of hiring, but business owners don’t yet know how big the costs will be, because the new regulations haven’t been written yet. This is why businesses are waiting to hire new people.
As John Stossel points out . . . http://www.realclearpolitics.com/articles/2010/08/25/where_are_the_new_jobs_106876.html
New intrusive rules for health insurance are yet to be written, and those rules will affect hiring, since most health insurance is provided by employers.
Thanks to the new 2,300 page Dodd-Frank finance regulatory act, The Wall Street Journal reports, there will be “no fewer than 243 new formal rule-makings by 11 different federal agencies.” These as-yet unknown rules will govern lending to business and other key financial activity. . . . few employers will commit to a big investment with those clouds hanging over our heads.”
Would you hire new employees under these conditions?
If, on the other hand, the Write the Laws Act was in force, all the regulatory details would already be published as law. I believe these regulations would be harmful, but at least businesses could analyze and adapt to them sooner.
This is why the Constitution places legislative power – including regulatory power – in the hands of Congress instead of in the hands of Executive Branch bureaucrats. Honor your oath of office. Oppose any further empowerment of the bureaucracy and, instead, introduce the Write the Laws Act.
END LETTER
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Thanks for being a DC Downsizer!
James Wilson
Assistant Communications Director
DownsizeDC.org