Former Reagan Economist and Ex-Ron Paul Staffer: Deregulation Does Not Spur Job Growth

Bruce Bartlett is probably better known for having held a senior policy role in the Reagan and George H.W. Bush administrations. He also served--albeit briefly--on the staffs of Reps. Jack Kemp and Ron Paul.

Recently, his name has been making the rounds because of an article he wrote titled Misrepresentations, Regulations and Jobs.The thesis of his report is that deregulation will do nothing to help spur job growth.

As expected, his article (and his past experience with conservatives) has been touted by news outlets ranging from the Huffington Post to The Associated Press.

"Republicans favor tax cuts for the wealthy and corporations, but these had no stimulative effect during the George W. Bush administration, and there is no reason to believe that more of them will have any today," Bartlett writes in his New York Times article.

In regards to the idea that deregulation will lead to job growth, Bartlett says, "It's just nonsense. It's just made up."

The Associated Press immediately lent Bartlett their support and claimed “Government and industry studies support his view.”

"1,119 layoffs were attributed to government regulations in the first half of this year, while 144,746 were attributed to poor 'business demand,'" reports the AP via a recent Bureau of Labor Statistics.

Bartlett makes his case:

The Wall Street Journal’s July survey of business economists found, “The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists.”

In August, McClatchy Newspapers canvassed small businesses, asking them if regulation was a big problem. It could find no evidence that this was the case.

“None of the business owners complained about regulation in their particular industries, and most seemed to welcome it,” McClatchy reported. “Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-9 and its grim aftermath.”

Keynesian economic theory states that the government can spur demand--to some degree--through stimulus spending.

The GOP presidential candidates beg to differ.

When Rick Perry introduced his economic plan to improve jobs growth and reduce unemployment, critics pounced and claimed that it would only benefit the wealthy.

"I don't care about that," Texas Gov. Rick Perry told The New York Times and CNBC, referring to tax breaks for business owners. "What I care about is them having the dollars to invest in their companies."

In response to Perry, and the entire GOP presidential field for that matter, the Associated Press argues, "many existing businesses, however, have plenty of unspent cash. The 500 companies that comprise the S&P index have about $800 billion in cash and cash equivalents, the most ever."

So what are they saying? The 500 companies on the S&P index should pay a higher tax rate because they have "plenty of unspent cash" and because McClatchy claims that they couldn't find many small businesses who complained about government regulations?

According to the AP, it's not regulations that have stunted job growth. Businesses are not hiring because of the bad economy.

But what makes a bad economy?

It wasn't too long ago that Muhtar Kent, the CEO of Coca-Cola, was bemoaning the tax on repatriated earnings, which he says forces U.S.-based companies—unlike those based in other countries—to pay “a very large tax burden” on money earned overseas and brought back to the U.S.

He even went so far as to say that, in some respects, it's easier to do business with Communist China simply because you don't have to wrestle around a “labyrinthine tax code” and because the "local governments fight for investments with each other."

Wouldn't a “labyrinthine tax code” qualify as part of a larger system of regulations that could discourage expansion and hiring?

Similarly, the vice-president and general manager of North American operations for Air China, China’s national flag carrier of civil aviation, said that “It is getting easier and easier to do business in China as the country is becoming more and more open to business,” and that “I think the U.S. has the tendency of becoming less and less open to business.”

Communist China thinks the United States has become "less open" to business.

Being "easier" and "open" to business has little to do with "scant" demand; it's more about ease of transactions—something that can be greatly hindered by regulations.

The AP advances its narrative by claiming that small businesses rate "poor sales" as their biggest problem, with government regulations ranking second (according to a survey by the National Federation of Independent Businesses). Of the small businesses saying this is not a good time to expand, "half cited the poor economy as the chief reason. Thirteen percent named the 'political climate.'"

The results of the National Federation of Independent Businesses (NFIB) survey are used by the AP to bolster the claim that business owners don't think government regulations are the problem--it's the "bad economy."

However, the NFIB poll doesn't really tell us anything. The results are tantamount to a man going to a doctor and repeatedly saying "my failing health" whenever the doctor asks him what's wrong.

Of course his failing health is bothering him. That's why he's there. The doctor needs to know something about what's causing the poor health in order to fix it.

The survey only tells us that business owners realize that there is a bad economy and that sales are not good.

Perhaps the NFIB could retool their questionnaire so that the results inform the public of the (hopefully) curable symptoms rather than state the obvious ailment.

Bartlett continues his article by pointing out some facts that he thinks should be considered. For instance, government regulations were actually a bigger concern during the Clinton and Bush administrations, according to an analysis of data gathered by the Economic Policy Institute.

"While concerns about regulation have risen during the Obama administration, they are about the same now as they were during Ronald Reagan’s administration," Bartlett writes.

Bartlett and the AP can argue that the GOP is falsely zeroing in on regulations, but is doubtful that the candidates will budge on their position.

"We need to get government out of the way," Herman Cain said. "It starts with making sure that we can boost this economy and then reform Dodd-Frank."

Bachmann, railed against the housing market, saying foreclosures fall heavily on women who are "losing their nest for their children and for their family." She added that Obama "has failed you on this issue of housing and foreclosures."

“Don't try and stop the foreclosure process. Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up," Romney told a crowd in Las Vegas.

To all of the GOP candidates Bruce Bartlett simply had this to say:

In my opinion, regulatory uncertainty is a canard invented by Republicans that allows them to use current economic problems to pursue an agenda supported by the business community year in and year out.

In other words, it is a simple case of political opportunism, not a serious effort to deal with high unemployment.

Read Bartlett's full report here.