The Public Policy
Will the Jobs Bill Create Any Jobs?
Probably not, but deregulation would.
On Wednesday, the Senate passed a $17.6 billion spending bill. It needs only President Obama’s signature to become law.
The hope is that the new spending will create jobs. But hope is not the same as reality. Remember: anything that Washington giveth, it must first taketh away from somewhere else. This jobs bill is a zero-sum game. All those new jobs that politicians will be showing off for the cameras will have come at the expense of other jobs elsewhere. On net, they’re not creating a thing.
Take the payroll tax break for small businesses included in the bill. Yes, those small businesses benefit. Maybe the money they save will even be used to hire more workers. That’s easy enough to see. But that money had to come from somewhere. That is harder to see. Too hard for the Senate to see, at the very least.
The reason is this: the government is foregoing some payroll tax revenue, but it isn’t cutting spending to match. That means it has to borrow more. And there’s only so much investment capital to go around. That means less left over for private businesses.
At the very least, companies will have to offer investors higher interest rates to convince people to invest their money rather than do something else with it — and also make corporate investments look more attractive than government bonds.
That makes getting loans more expensive. And when something becomes more expensive, there tends to be less of it. Because of today’s bill, $17.6 billion less capital will be available to invest in the private sector and create jobs.
The spending bill contains a host of tax cuts. Besides the payroll tax break, small businesses can get a $1,000 tax credit for hiring new workers and keeping them on for at least a year. Tax cuts are often a good thing. Unfortunately, these aren’t really tax cuts.
Because these tax breaks and credits are deficit-financed, they will have to be repaid later. And there is only one way to do that: taxation. Government can borrow and borrow all it wants, but eventually it has to pay the money back. A tax cut today is a tax increase later. Don’t be fooled.
So not only is the spending bill zero-sum as far as job creation goes, it will actually hurt the economy down the road because future taxes will have to be hiked to pay for it. Fortunately, Congress and the President have a tool at their disposal that can more than undo the harm that their jobs bills and stimulus packages are doing: a deregulatory stimulus.
It doesn’t cost anything. It doesn’t require new capital. It doesn’t require new government spending that we can’t afford. Deregulatory stimulus means letting companies take resources they already have and put them to better use. It’s a wonderful way to create jobs. And it’s not zero-sum. New wealth is actually created.
Businesses currently spend about $1.2 trillion complying with federal regulations. State and local rules cost extra. The combined total exceeds Canada’s entire GDP. Federal rules cover everything from what colors surgical stitches can be, to how to weigh farm animals, to the size of holes in Swiss cheese. The level of detail is incredible. And it stifles entrepreneurs — not to mention the competitive process.
Licensing regulations and other red tape rules are routinely gamed by unethical companies trying to hobble their competitors. Repealing just some of those regulations would force those companies to compete in the marketplace instead of in Washington. Not only do consumers win, but so do workers. There would be more of them producing more goods.
Lifting just 1.5 percent of today’s federal regulatory burden would free up enough time and energy to cancel out the harm done by Wednesday’s spending bill.
Enough with the spending bills. Enough with the jobs bills, stimulus packages. Not only do they not actually create net jobs, they are filled with hidden tax increases. There is a better way. Congress and President Obama need to pass a deregulatory stimulus.
About the Author
Ryan Young is Fellow in Regulatory Studies at the Competitive Enterprise Institute.
Letter to the Editor View all comments (105) | Leave a comment
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Enemy of the State #666| 3.18.10 @ 7:22AM
Now that would be asking them to rally think before they pretend their idea was a good one. I am glad in my world 2+2 still equals 5. Now if I could convince them they are as stupid as they think we are, we'd be getting somewhere in this conversation.
Sincerly, enemy of the State #666.
basur | 10.27.10 @ 6:01AM
High praise for Mr. Ryan! Finally, a journalist who understands logical arrays and the fundamental mathematics supporting free-market economics.
Scooter 50cc | 2.15.11 @ 6:30AM
The way to get the deregulation is not by haranguing Democrats. Elect Conservatives.
Pieces Scooter | 3.8.11 @ 5:55PM
@Scooter 50cc : Totally agree with you, Democrats, Conservatives, the same ;)
recharger cartouche | 4.22.11 @ 6:17PM
So the converse is true, too. When something becomes more expensive, there tends to be less of it !
Bill Hussein O'Stalin| 3.18.10 @ 7:39AM
The goal of a dictatorship is to destroy all private wealth, then dole out any assets to political allies, thereby destroying the opposition.
Obama is simply an old style Marxist, believing that anyone who has any wealth must have taken it from someone else.
Ironically, the only way these types succeed is to take wealth away from others and give it to someone else.
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Dan Hirsch| 3.18.10 @ 9:22AM
NO! NO! NO! Tax cuts now do NOT mean tax increases later. Tax cuts now reduce the cost of investment now which increase investments which create more economic activity which generate more tax revenue, albeit at a lower percentage of revenue.
Governments state, local, and federal only get revenue from business that happens. Slow down business activity and you get less tax revenue. Increase business activity and you get more tax revenue. Right now every governmental entity in the country is getting less revenue because of decreased business. If they don't like cutting their budgets they better figure out how to stimulate business activity.
Ryan, read what you write! "And when something becomes more expensive, there tends to be less of it." The converse is true, too. When something becomes LESS expensive, there tends to be MORE of it. So you are right in saying regulations restrict business and therefore tax revenues, you are also right in saying that when government borrows it takes from private capital, but lower taxes work. Every time they are tried. Kennedy did it in the early 60's, Reagan did it in the 80's, and G W Bush did it in the 00's.
This ain't rocket science!!!
Thanks for listening.
Pingback| 3.18.10 @ 9:55AM
Will the Jobs Bill Create Any Jobs? | OpenMarket.org links to this page. Here’s an excerpt:
Moe Blotz| 3.18.10 @ 9:58AM
The way to get the deregulation is not by haranguing Democrats. Elect Conservatives.
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The Republican Heretic | 3.18.10 @ 11:51AM
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Liberal Reader| 3.18.10 @ 12:23PM
Conservatives talk about "regulation" as though all regulations were equally unproductive and suspect, as though any regulation that is repealed will automatically lead to job creation and increased economic growth.
While I'm sure there are some regulations that should be done away with, I can't agree with this blanket condemnation.
How will removing regulations that govern water pollution in YOUR town improve your life?
How will deregulating labor laws that prevent children from working 12 hours a day, 6 days a week create jobs?
Well. Before the modern regulatory regime was created we had a country governed pretty much the way "conservatives" say the country ought now to be governed.
New York City may look scary to some of you yokels now, but I suggest you go to the library and investigate what life there was like in 1890. It'll curdle the blood in your veins. NYC was a swarming Calcutta of pain, misery, abject squalor, poverty, and crime.
Sewage was dumped directly into the streets and ran into drinking water sources. Why? Because there was no LAW saying it had to be done otherwise and it was in NO ONE's direct interest to change it.
That's where sensible government regulation comes in.
So please. A little more SPECIFICITY on your part is in order.
Which regulations would you like to repeal and why? How will these repeals affect the communities they are designed to protect? How can we know repealing THIS regulation will create THOSE jobs?
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Clinton Lovell | 3.18.10 @ 3:44PM
High praise for Mr. Ryan! Finally, a journalist who understands logical arrays and the fundamental mathematics supporting free-market economics.
Nobody is interested in your thoughts, Mr. Ryan, don't you see that? After all, if these people had to start THINKING they would bust their brains and that would end the great game of playing God with our money and our lives - Washington's favorite game.
You can deride the Democrats all you like, but the ugly truth is that we have plenty of Republicans who believe in "responsible government" - the code words that people use who believe in earmarks, spending, taxing and progressing.
Until we can get rid of these people, you are like the polar bear on an ice flow, not many places to go and not many prospects for converts either. Still, I applaud you on your effort.
Oldefarte| 3.18.10 @ 3:47PM
This jobs bill will not increase employment, just as the D's previous stimulus bill [which was supposed to do likewise did not; as evidenced by unemployment increasing from 7-10% since its passage]. Employers will nor hire if/until they sense that the economy will be improved which will not happen. The D's proposals have and will continue to push our economy off the financial cliff, due to their basis being upon the PUBLIC [as opposed to the PRIVATE] sector. Government employment has remained constant and increased due to the D's stimulus [funded by taxpayer money] spending, while private industry employment is representated 10% unemployment. Additionally, in increasing the deficit and debt, the D's spending has crowded out the private sectors' access to bank loans needed for their expansion [again, they don't want to expand due to the gloomy economic prospects going forward]. Who will pay for this governmental spending that isn't creating jobs? The taxpayers of course. Over regulation is a problem, but the main concern should be the government's increased, non-stimulative, role that is wasteful and non-productive!!!!
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touch128 | 3.19.10 @ 11:20PM
Oh like it helped all of us with the Banks. We need a lot more regulations. Just like we had in the 1950s and 1960s. At least we had jobs!
Ridebike| 3.20.10 @ 2:57AM
Not a sure thing, Jobs Bill can create jobs.
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Michele San Pietro| 3.21.10 @ 11:07AM
No, it wouldn't create any job, of course.
SR. PIPING DESIGN SPECIALIST| 3.27.10 @ 12:13AM
In NY Times there was an article that OBAMA REGULATES AWAY JOBS to other countries. 850,000 jobs left US last December, 2009. ALL jobs have not returned to US. American Families are starving to death. The Oil & Gas?Petrochemical/Power Plants/Marine Industries are hurting for jobs. Oil Companies are not initiating any new business at this time. AMERICA NEEDS JOBS NOW-2010.
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weddingdresses | 6.23.11 @ 5:50AM
Now that would be asking them to rally think before they pretend their idea was a good one. I am glad in my world 2+2 still equals 5. Now if I could convince them they are as stupid as they think we are, we'd be getting somewhere in this conversation.
Sincerly, enemy of the State #666.
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