The Regulation Monster 

Monday, 25 June 2012 

By Dean Baker, Truthout | News Analysis

http://truth-out.org/news/item/9963-the-regulation-monster

Those familiar with the "confidence fairy" recognize
that economic policy debates in Washington are
dominated by imaginary creatures. The confidence fairy,
which was discovered by Paul Krugman, is the mythical
creature that brings investment, jobs and growth as a
reward to countries that practice painful austerity.

Economies don't actually work this way, but important
people in policy-making positions in Washington and
Europe insist that they do. And they hope that they can
get the public to believe in the confidence fairy, or
at least a large enough segment of the public, to stay
in power.

In this same vein, Mitt Romney and the Republicans are
trying hard to promote the belief in the "regulation
monster." The regulation monster is composed of the
mounds of bureaucratic paperwork and red tape that
strangles businesses. As a result of the regulatory
monster, America's businesses aren't able to be the job
creators that they want to be.

There are a few problems with this story. First and
foremost, all the data show that businesses are doing
just great. The profit share of gross domestic product
is near its 50-year high. The after-tax profit share is
at a 50-year high since the tax share of profits is
down considerably from its levels in the '50s and '60s.
This means that when we look at the economy as a whole,
the regulation monster has not left any tracks.

Suppose we look at specific industries. Governor Romney
and the Republicans say that President Obama's
regulations on oil and gas drilling having stifled the
development of domestic energy sources. This should
tell us exactly where to look for the regulation
monster.

Last week, New York Times reporter Jonathan Weisman
went to western Pennsylvania, the middle of the
Marecellus Shale, in search of the regulation monster.
This should be one of the places where the monster is
most visible because this is the center of the fracking
industry.

Fracking is the relatively new and controversial
process of extracting gas from deep underground shale
formations. Many scientists and environmentalists have
raised concern about environment risks from fracking as
highlighted in the film "Gasland." Surely, the
regulation monster must be lurking in this region
preventing gas companies from creating jobs and
producing domestic energy.

Remarkably, Weisman found no evidence whatsoever of the
regulation monster. The people in the area said that
the industry was able to do pretty much whatever it
wanted. Many expressed serious concerns about the
damage to their land and their drinking water.

The data are consistent with the industry's free rein.
There has been a boom in gas production during Obama's
administration, pushing prices down by almost 50
percent from when he took office. These low prices are
now causing gas companies to curtail production, not
the regulation monster.

The other obvious place where the Republicans' rhetoric
would imply that the regulation monster is lurking is
in President Obama's health insurance law. Romney and
the Republicans have claimed that the laws mandates
have impeded business hiring.

There is an obvious way to test this claim. The law
only imposes mandates on firms that hire more than 50
workers. Smaller firms that employ 20-30 people would
not be affected by the mandate, nor would larger firms
that already provide health insurance for their
workers. This means that if Obamacare prevented firms
from hiring, the impact should be concentrated among
mid-size firms (near or over the 50 worker cutoff) that
don't currently provide insurance for their workers.

If the weakness in job growth is concentrated among
this group of firms, no one has produced evidence for
this fact. The data from the Bureau of Labor Statistics
show weak job growth in firms of all sizes. This is
consistent with the story that the economy suffers from
weak demand. It does not provide evidence of the
regulation monster.

The fact that Republican claims of massive regulatory
burdens are so out of line with reality should be a
cause of ridicule. The media should be pressing them to
produce some evidence to back up what they are saying.
After all, the public has a right to know whether the
people running for or holding office are completely out
touch with reality.

With rare exceptions, like Weisman's article in The New
York Times, the media don't bother to tell their
audience when candidates are making assertions that are
utter nonsense. As a result, we can expect to have an
election in which at least one party is basing its
economic agenda on the confidence fairy and the
regulation monster. 

Copyright, Truthout.org. Reprinted with permission

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