Letter to the editor: Regulation isn't the job killer
Thursday, January 05, 2017 8:01 AM
Did regulation destroy Carrier jobs?
Libertarian Steve Moore appeared on Dec. 4 on FOX News’ “Justice with Jeanine.” Judge Pirro was examining the question of what were the economic considerations at Carrier in the wake of President-elect Trump’s intervention that saved 1,000 jobs — after the free-market Republicans in Indiana had done nothing for the Carrier workers. During the interview Moore parroted the Libertarian catechism on regulation.
“If you cut that cost, these jobs are coming back. If you lower the regulatory and tax cost, America is a competitive place to do business again,” he claimed.
What is the consensus on the level of regulation in the U.S. economy among reputable economists? Writing in “The Great Deformation,” David Stockman said, “In short, the Republican mantra that the nation was overtaxed and overregulated was utterly disconnected from the economic facts.”
Larry Summers recently appeared on CSPAN (Nov. 4) and commented on regulation: “It is not hugely plausible to argue that the United States has had a major deterioration in its legal institutions over the last 8-10 years. The argument that somehow this has been a period of crushing and unprecedented burdens on business, from regulation, does need to confront the observations that corporate profits as a share of income are at near record highs, and the related observation that the stock market has tripled during the period when it was thought that these burdens were imposed.”
Simon Johnson, a professor of entrepeneurship at MIT, recently wrote, “In fact, their estimates of the benefits of deregulation are completely exaggerated. Serious independent analysis, for example by the world Bank or the OECD, finds that the U.S. does not have a high regulatory burden in the non-financial sector. In the World Bank’s widely used Doing Business indicators, for example, the U.S. ranks seventh in the world — and there is not alot of realistic room for improvement.”
What is the regulatory burden exactly, and how does it compare to alternatives? According to Moore during the interview, the average regulatory cost per manufacturing job in the U.S. is $18,000 per year. Suppose we had the most draconian reduction in regulation in U.S. history and cut this cost in half. Then the savings is $9,000. On Dec. 1, CNBC’s Phil Lebeau analyzed the wages in the two locations. The average worker in Indianapolis makes $16-21 per hour, while the average Mexican makes 3$-5 per hour. This is a difference of about $15 per hour, or $30,000 per year. The gain to Carrier per employee from regulation reduction is $9,000. The gain to Carrier from firing Americans is $30,000.
The notion that regulation is the dominant factor in the destruction of jobs in America is demonstrably ridiculous. Job destruction is dominantly due to open borders and cheap foreign labor, not regulation. Sometimes, there are disgusting companies who made $7 billion in 2015, and want to fire 2,000 Americans to get more money — and they need something to blame.