Chairman Jeb Hensarling

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Is Regulatory Uncertainty Hurting Job Creation?
Posted by on October 27, 2011
With 14 million Americans out of work and the Obama Administration issuing regulations at a rate of one new rule every 2 hours and 20 minutes, it’s a question that must be asked. 

For the Obama Administration, the answer to the question is a resounding “No!” Dr. Jan Eberly, Assistant Secretary for Economic Policy at the Treasury Department, writes in a blog post that the massive amounts of red tape raining down from the administration are not hurting the economy.  Dr. Eberly cites a survey of economists to back up this claim.

One of the biggest failures of the Obama Administration is its determination to rely upon theoretical academics rather than listen to those who deal with the reality of the administration’s actions.  After all, how many economists are impacted professionally by all the regulations being issued?

When you ask job creators if overregulation is an impediment to job creation, you get a different answer.  A Gallup poll released on Tuesday finds that small business owners view government regulations as the biggest economic hurdle they face.  This number only increases when one includes those who named Obamacare as their primary concern.

If you ask community bankers about the impact regulations have on their ability to lend to local businesses, as the Financial Services Committee has done, you will hear horror stories.  The 2,300-page Dodd-Frank Act with its 400 regulations has been called a “full-employment act” for lawyers.  But hometown banks describe it as a barrier to helping small businesses get started. 

“Each new regulation…adds another layer of complexity and cost of doing business.  The Dodd-Frank Act will add an additional, enormous burden, has stimulated an environment of uncertainty, and has added new risks that will inevitably translate into fewer loans to small businesses,” said Thomas Boyle, Vice Chairman of State Bank of Countryside in Illinois.

Fewer loans to small businesses mean fewer jobs.  It’s that simple.  With small businesses responsible for 65% of all net new jobs created in the U.S. since 1993, why would government want to make it more difficult – and less likely – for entrepreneurs and small companies to have a shot at success?

Of course, community bankers aren’t the only ones speaking out about the burden of overregulation:

“In some cases, regulations have gone too far and it really makes it difficult for small businesses.  There’s too much bureaucracy and red tape; taxes on business are very high.  So we’re not creating the enabling conditions that allow businesses to get started.” - John Mackey, Co-founder and Co-CEO, Whole Foods Market

“Government just doesn’t understand how much uncertainty it creates in the economy when it attempts to regulate what the private sector does.  And it really doesn’t understand what the private sector does.” - Andrew Puzder, CEO, PKE Restaurants”

“Regulations have companies running scared. They are coming at businesses and some new regulations are already taking a toll, while others will soon. This could be a real deterrent to future entrepreneurs.” - David Park, President and CEO, Austin Capital, LLC

The new biography on Steve Jobs reveals that one of America’s all-time great entrepreneurs warned President Obama personally about the consequences of government red tape:

“[Jobs] described [to Obama] how easy it was to build a factory in China, and said that it was almost impossible to do these days in America, largely because of regulations and unnecessary costs,” writes author Walter Issacson. 

As officials in the Obama Administration devise new ways for government to spend, tax and regulate while safely ensconced in America’s newly crowned richest city, they may find it useful to listen to Americans on Main Street.
Comments
The opinions expressed below are those of their respective authors and do not necessarily represent those of this office.
  • Emily Last Name commented on 10/27/2011
    Thank you for this post. This is particularly important: "One of the biggest failures of the Obama Administration is its determination to rely upon theoretical academics rather than listen to those who deal with the reality of the administration’s actions"
  • bob johnson commented on 10/28/2011
    It is not surprising a government bureaucrat, especially in the current administration, uses economist as affirmation for their own policies. The fact she argues the case in this fashion proves she is out of touch. It is said when 100 economist ask for an opinion on one subject, 100 different opinions will be offered. And, government wonders why trust is so hard to come by.
  • Jim Snyder commented on 10/28/2011
    I am a SrVP in lending at a small Community Bank and we specialize in making residential mortgages and our volume is good for a small rural area. However, with the increading burden of the "Dodd Frank Act" looming down on our industry and the increased government take over of our industry it is becoming increasingly difficult to maintain service at a reasonable cost to our customers. The majority of our loans are for refinancing taking advantage of the lower interest rates, we continue to see the amount of purchases and new construction lending go down due to the uncertainty of the economy and by the government's intervention that has caused increased costs to both the banking industry and our customers. I have been in the industry for over 35 years and it is hard to understand why there is no "common sense" to the government's reaction to this economic crisis.
  • Relief http://thedebtsreliefreviews.com commented on 6/29/2012
    It is not surprising ,each new regulation adds another layer of complexity and cost of doing business.
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