How many does it take?

Government never furthered any enterprise but by the alacrity with which it got out of its way. Henry David Thoreau

The number of bills that became law in Colorado in 2011: 330. Average number of pages of new rules issued by Colorado per year: 15,000. The 2010 Federal Register, which contains federal rules and regulations, is 81,405 pages long – you can buy a copy for $929.

 

How many laws does it take to create jobs? We keep hearing politicians talk about creating jobs. Unfortunately, too many politicians don’t really understand how jobs are created, or who creates them. Nor do they understand what prevents job creation. Here’s a hint: see paragraph one, above.

 

There is a pervasive idea that businesses are unwilling to invest because of uncertainty about taxes and regulations. But it’s not uncertainty that prevents business investment and hiring - it’s the certainty. We know with absolute certainty that federal, state, and local governments will continue to write more laws, rules and regulations that limit economic and personal freedom, and require us to beg favor from government officials just to make a living.

 Over 96,000 pages of new state and federal law, rules and regulations, and that doesn’t even include local governments. How many will you violate today? How could anyone possibly know?

 
Although I’m a registered Republican, I’m not particularly optimistic about the ability or willingness of either party to curb the appetite for more control. In 2010 when Democrats controlled both Colorado houses, 454 bills were signed into law. With Republicans controlling one house in 2011, one would hope for a 50% reduction in passed bills, but we got only a 28% reduction. Republican politicians tend to favor legislation that “favors business,” but that generally means favoring big business at the expense of small business. This is called “economic development,” Orwellian doublespeak for corporate welfare.
 
Democrats add more regulations to “help the little guy,” claiming to be the “party of the people,” but regulations almost always benefit larger businesses, and help only workers who are lucky enough to find and keep their jobs. For example, every year we see legislation advanced by Colorado democrats that would require businesses to provide paid time off for workers. Large businesses already do this, so it’s of no consequence to them. But small businesses and start-ups may not be able to afford it. This type of legislation from democrats hurts “the little guy.”
 

The cost of complying with regulations is astounding. A 2010 report from the US Small Business Administration estimated that in 2008, US businesses spent $1.75 trillion in order to comply with federal regulations. The Colorado Senate Republican Caucus extrapolates from that to conclude Colorado businesses’ cost of compliance with federal regulations was over $30 billion in 2008. That’s enough to pay for 500,000 good paying jobs, or 100,000 jobs in the top 1% of wage earners.

 

When I started my first small business in 1990, I was shocked at the cost of compliance. But I was thankful for Adams County government, who demonstrated common sense and flexibility in allowing me to build that business.  In 2008 however, it was entirely different. I was preparing to start a new business and found that government officials now strictly adhered to codes and regulations that added unnecessary costs, and were unwilling or unable to predict what other problems I might encounter.

 

My plans to start a small business that would have kept me working at something I love, would have employed six or eight people to start, would have filled one or more of those many empty retail spaces, and would have provided a valuable service for my customers, have been scrapped. As I contemplate whether to take on another business venture, I look at the regulatory landscape and have to wonder why anyone would bother trying to combat government to create a business. I applaud those who do, but I fear that fewer are willing or able to do so.

Private Sector Jobs - Our Only Salvation

“I will not be satisfied until everyone who wants a good job that offers some security has a good job that offers security”. President Obama said that, speaking recently at an energy-efficient lighting plant.

Whew. I feel better. And more secure. Who wouldn’t want a good job with security? After all, with job security you don’t have to work. You just have to show up. And Obama is setting the bar pretty low - you only have to want the job.  

It seems like a nice sentiment, but it is neither achievable nor desirable. 

There was a time when people had to work to make an effort to get and keep a job. They did that because they had needs and wants.  If you needed food or shelter you got a job that would allow you to pay for food and shelter.  Need a car? Get a job.  Want a better car? Get a better job. Whatever you needed or wanted, working was the way to get it. 

Government likes to give to those who have needs. During the Great Depression the government created jobs through the Work Projects Administration (WPA) and gave them to needy people. During its eight years, nearly eight million Americans received paychecks from the WPA. This was part of the “New Deal,” a huge expansion of the federal government that was intended to end the Depression. 

It failed. As Henry Hazlitt writes in his classic and highly recommended book, “Economics in One Easy Lesson”:

For every public job created by [a] bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. . . . But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers.  

The Depression was prolonged by government-created jobs and excessive government spending. In 1939, Roosevelt’s Treasury Secretary Walter Morgenthau said, “We are spending more than we have ever spent before and it does not work. . .I say after eight years of this Administration we have just as much unemployment as when we started. . . And an enormous debt to boot!” 

As money wends its way through the economy it generally ends up in one of two sectors – government or private. In general, government does not produce. It does not create things and sell them for profit. It does not seek a profit on its employees. It does not save money to invest in a capital project that will generate a profit. Simply put, money that ends up in the government’s coffers does not grow. Only in the private sector does money create more money. Advocates for more government spending claim that each dollar spent by government grows the economy, a “multiplier effect.”  That may be true, but private sector spending has a much greater multiplier. Private spending, savings, and investment turned America into the wealthiest nation in history. Excessive government spending threatens to destroy that wealth. 

Obama will not be satisfied until everyone that wants a good secure job has one.  My fear is that he will keep trying.  The stimulus plan started by Bush and put on steroids by Obama has been an abysmal failure. Obama laughed when he pointed out that stimulus projects were not as “shovel ready” as he thought. His arbitrary and capricious administration has prolonged this recession. Now Obama wants to spend more and tax more. That might work in the short term, but only until the economy collapses further under the weight of an incomprehensively large national debt.  

Government’s role, particularly during this recession, should be to provide the conditions (not incentives) necessary for expansion of the private sector. Get out of the way and leave the wealth and spending to us.