Economic Growth

Slow Economic Growth: It's the Regulations, Stupid!

Regulations multiply at record rates while productivity slows downs - coincidence?

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RegulationsDreamstimeFilmfoto
Dreamstime: Filmfoto

It's the economy, stupid!, was the slogan devised for Bill Clinton by his campaign manager James Carville in the 1992 presidential race. The slogan kept the campaign focused on the financial and employment anxieties of Americans who had just gone through what, in the wake of the Great Recession, we would call a minor hiccup. New York Times economics columnist Eduardo Porter wonders why the post-Great Recession economy has been so sluggish, and especially why productivity growth has faltered. Porter cites the dire forecast of Lakshman Achuthan of the Economic Cycle Research Institute who argues that anemic labor force growth of half a percentage point plus productivity growth of half a percentage point "will push the economy ahead at the anemic pace of just 1 percent a year."

Porter, a convinced Keynesian, urges the government to print money, ah, "prepare for another bout of fiscal stimulus" to boost consumer demand as a counter for recessionary forces should they emerge. He cites Harvard economist Larry Summers as suggesting that the right policies could boost economic growth half of percentage point. It's not nothing, but it's far from the 3.4 percent per year growth rates the U.S. experienced in the 1990s. Is there anything that can be done that might boost economic growth to something like the boom years of the 1990s?

Porter does hit upon the right idea when he notes, "Eliminating onerous regulations — things like occupational licenses that restrict eligibility for a variety of jobs and overly tight zoning laws that prevent the building of new homes — would improve economic efficiency and equity." Yes, a thousand times, yes!

As the Competitive Enterprise Institute reports, "six of the seven record-high Federal Register annual page counts are attributable to President Barack." In fact, 2015 broke the record for number of pages in the Federal Register at 82,036 pages, more than 600 pages longer than the previous 2010 record. This accumulating pile of rules, regulations, and guidance has cut economic growth in 1980 by about 0.8 percent annually, according to a recent study by the Mercatus Center at George Mason University.

"The economy would have been about 25 percent larger than it was in 2012 if regulations had been frozen at levels observed in 1980," the Mercatus authors say. "The difference between observed and counterfactually simulated GDP in 2012 is about $4 trillion, or $13,000 per capita."

Another way to think about what an 0.8 percent lower growth rate means is to consider that from the trough of the Great Recession in 2009 when real U.S. GDP had fallen to $14.335 trillion until the first quarter of this year when it was $16.492 trillion implies a growth rate of 2.02 percent annually. If the growth rate had actually been 2.82 percent, U.S. GDP now would $17.415 trillion, about $1 trillion more than it is. If growth had increased at 3.4 percent per year (the 1990s rate) since 2009, U.S. GDP would now be $18.115 trillion.

It's the regulations, stupid!

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  1. Strip out the ‘growth’ accounted for by government borrowing and you have no real growth at all.

    1. You actually have a shrinking economy, if you go by GDP ex-federal debt.

      GDP increase from 2009 – 2015: $3 trillion, or an increase of 20.83%.

      http://www.tradingeconomics.com/united-states/gdp

      Increase in federal debt 2009 – 2015: $6.25 trillion, or an increase of 52%.

      That debt gets spent, and counts toward GDP. Take it away, and our economy has shrunk by $3.25 trillion.

        1. Down to the penny! That is some *mighty* fine accounting.

      1. Yup. Thanks for the legwork, RC. I award you one of my prize orphans.

      2. That government spending distorts the economy and incentivizes politically motivated business decisions should be obvious to most people. However, I don’t see how subtracting growth in government spending from overall growth in the economy shows how well the economy is doing. At best you might be able to find a correlation between the two figures, but it wouldn’t prove causation. Over regulation likely has more to do with slowing economic growth, and there is a decent amount of research supporting that claim.

        1. It isn’t illustrative of how well the economy is doing. It is illustrative of how poorly it is doing.

          1. If it isn’t illustrative of how well the economy is doing, it cannot illustrate how poorly the economy is performing.

            Government is an industry, just like manufacturing or telecommunications. I fail to see how excluding one industry, especially one which accounts for 30% or more of the national economy when you figure in all levels of government, makes any sense.

            1. Government is an industry? Haha! Oh, do please tell. By that reasoning, every criminal in the country is an industry. Yeah, yeah… there are a few minor things that government does that people would pay for anyway – schools, roads, etc. But in a real industry people pay for those things voluntarily AND, typically, only if they use those things!! You’re talking about an organization that makes its living by stealing from people. That’s not an industry. The lumber industry doesn’t steal from people, they voluntarily exchange with people. The electronics industry isn’t going house to house with guns taking people’s cash, spending on what THEY want and then claiming that they are growing the economy. Come on!

            2. Government is an industry? Haha! Oh, do please tell. By that reasoning, every criminal in the country is an industry. Yeah, yeah… there are a few minor things that government does that people would pay for anyway – schools, roads, etc. But in a real industry people pay for those things voluntarily AND, typically, only if they use those things!! You’re talking about an organization that makes its living by stealing from people. That’s not an industry. The lumber industry doesn’t steal from people, they voluntarily exchange with people. The electronics industry isn’t going house to house with guns taking people’s cash, spending on what THEY want and then claiming that they are growing the economy. Come on!

  2. We need occupational licensing because otherwise anyone could call themselves a doctor and start treating patients who would then die! You want people to die!

    1. *raises hand*

      I want people to die…

      1. We could use a good culling…

        1. Depends on what is being culled.

    2. Tell me this is satire… right? This is satire? If it’s not then you don’t belong on the web. I mean, truly, this is as stupid an argument today as it was 50 years ago, and another 50 years before that.

  3. Getting the regulatory state under control could be a good campaign issue for the Republicans. Hillary and Bernie certainly aren’t going to do it.

    1. Neither are the Republicans. No statist wants to reduce the power of the state, they all just want to divert it to their particular causes.

      It’s that same mantra over and over again. This is what governments do. They are coercive (and corrosive!) by definition, that is their core competence, and violence is the only tool they have. People end up trying to push the government around because everyone else is doing the same, and it’s better to at least try to push the Aptosaurus away from you onto somebody else than let the others push it into you. Meanwhile no one is in control, it just blunders around, and even the cronies riding its back have no real control, but at least they can only be hurt if they are pushed off or if it rolls over.

    2. I agree with Scarecrow. Neither party will ever throttle the bureaucracy. We’d get lots of economic growth just by eliminating the DOL and EPA. The only thing we can do, short of refreshing Jefferson’s tree of liberty with the “blood of patriots and tyrants”, is to resist Leviathan as much as possible. And neither Trump nor Clinton, and certainly not Sanders, will do that.

  4. “The economy would have been about 25 percent larger than it was in 2012 if regulations had been frozen at levels observed in 1980,” the Mercatus authors say.

    Once again failing to take into account the multiplier effect of bureaucrat salaries.

    1. “The economy would have been about 25 percent larger than it was in 2012 if regulations had been frozen at levels observed in 1980,” the Mercatus authors say.

      Once again failing to take into account the multiplier effect of bureaucrat salaries.

      Okay, it would have been 30% bigger if regulations had been frozen at 1980 levels.

    2. You’ll believe anything.

  5. Ya. If we had 3.4% growth without stimulus, and .5% with stimulus, why do they think more stimulus will act like no stimulus?

    Don’t answer. It’s rhetorical.

    It’s amazing how they blame the slightest imperfection in markets for all problems, yet forgive socialism for massive failures and just want more of it.

    1. To answer your rhetorical question: I think they just want to control everything. Progressives/Socialists are busy-body elites and just cannot fathom little people running their own lives.

  6. You have it all wrong Ron. According to Paul Krugman the more burden you put on businesses the better the economy gets. You wouldn’t want to contradict a Nobel Prize winning economist, would you?

    *I wonder if Trump is enough of a troll to undo every single regulation and/or executive order from the last 8 years. Better yet, all of them back 20 years. That would be the greatest blow struck for liberty since…the civil war.

    1. *I wonder if Trump is enough of a troll to undo every single regulation and/or executive order from the last 8 years. Better yet, all of them back 20 years.

      I wouldn’t bet on it. I suspect he’ll just use the government to reward/ punish different groups of people. That seems to be his whole appeal: “I’ll use the power of leviathan to go after people you don’t like for a change.”

  7. He cites Harvard economist Larry Summers as suggesting that the right policies could boost economic growth half of percentage point.

    This is why these economic experts pull down the big bucks.

  8. I don’t think the malaise in the US economic growth is primarily caused by government regulation. Cart and horse. We’re just getting lazy.

    From Bowie


    Sons of the silent age
    Stand on platforms
    blank looks and note books
    Sit in back rows
    of city limits
    Lay in bed coming
    and going on easy terms
    Sons of the silent age
    Pace their rooms
    like a cell’s dimensions
    Rise for a year or two
    then make war
    Search through their one inch thoughts
    Then decide it couldn’t be done

    I, for one, have no solution for this.

  9. “The economy would have been about 25 percent larger than it was in 2012 if regulations had been frozen at levels observed in 1980,” the Mercatus authors say. “The difference between observed and counterfactually simulated GDP in 2012 is about $4 trillion, or $13,000 per capita.”

    This makes me want to strangle every progressive and keynesian I come across.

    1. No one needs an extra $13,000 per capita when children are going hungry in this nation.

  10. I think the administration tried to argue seriously at one point that more regulations are good for the economy because they create jobs (more regulators, attorneys, etc.)

    1. I believe it. Can you remember a link?

        1. Getting some error code. Google “regulation creates job epa”.

  11. I bet there are many people who are cheering dismal economic growth. Why? Because when the economy booms, inequality increases. When someone comes up with some product that makes millions of people happy, and gets rich as a result, that is unfair because inequality. Better that those millions of people be deprived of something that makes them happy than allow the creator to get rich. Because equality. That’s the whole point of strangling the economy with regulations. To make everyone equal. Equally poor that is.

    1. Don’t forget climate change. Booming economy means more factories spewing poison into the air. It also means more people buying more things that are harmful to the environment.

    2. Which should be a winning argument against the notion that inequality is in itself a bad thing. But people are fucking idiots.

      1. Can’t reason someone out of a stance that is based on emotion.

        *gasp*

        Inequality? Like some people getting really rich while children starve? That’s not fair! We can’t allow that! We must stop people from getting rich!

        Um, they get rich by providing goods, services, and jobs to people which make everyone richer.

        But it’s unequal! It’s not fair! Not fair! Not fair!

        1. Right. Better that no one gets rich, while even more children starve. Obviously.

          1. Better that no one gets rich, while even more children everyone starves.

            They don’t just want children to starve. GREAT LEAP FORWARD, COMRADES!

            1. Don’t be silly. Well connected party members won’t starve. Someone has to lead the remaining population to the glorious future.

              1. Well, of course! That goes without saying. The party elites need more and better food for their brains to work at their best. You wouldn’t want your betters to be anything less than 100%.

    3. A rising tide lifts all boats. True enough, but it ignores the human physiological condition. We like to better than our neighbors We like to be top dog regardless of the overall circumstances.

      Sorry ’bout that,I have been re-reading some Jack London recently.

      1. God, people are assholes. Who the fuck cares if someone else has more than you if you have what you need and more? I guess lots of people.
        I mean, I’d certainly like to have more money. But that’s because there are specific things I would like to do that require more money, not because some other people are rich.

    4. To make everyone equal. Equally poor that is.

      That this truth is not obvious to more people astounds me. Since it’s impossible to make everyone equally rich, the only other option is to make everyone equally poor. Of course, they’d argue that everyone could be “Middle Class” by stealing from the rich and giving to the poor, but that ends up making everyone poor because there’s nothing left over for investment. Man progressives are stupid.

      1. So many people are convinced that you can just redistribute wealth without destroying most of it. Another case where people don’t know the difference between money and wealth.

        And to be fair, very few people are arguing for absolute material equality. But even so, the economic stupidity is astonishing. They really do think that all the wealth of rich people is just sitting there in a pile of money ready to be redistributed.

        1. Jealousy plays a big part, I’m convined.

        2. Then there are the idiots who think they can fund a minimum income for everyone by taxing the rich at 100% above some arbitrary income level, like a million dollars. As if some CEO making $300m is just going to pay $299m in taxes instead of figuring out a way to change how he is compensated to get around the tax. Yeah, people are stupid.

          1. As if some CEO making $300m is just going to pay $299m in taxes instead of figuring out a way to change how he is compensated to get around the tax.

            The way I understand it a lot of those “$300 million incomes” are total compensation, not just paycheck. In a lot of cases those CEOs get most of their compensation in the form of stock options, etc. so it’s not like they’re just getting a before tax paycheck of $5,769,230.77 each week, but to hear some progtards talk, they seem to think that’s what happens.

            1. It’s not like progtards understand the differences between money and wealth, compensation and salary, or basically anything remotely related to economics.

      2. Since it’s impossible to make everyone equally rich, the only other option is to make everyone equally poor.

        What are you talking about? Just print a whole bunch of money! Then we’ll all be rich!

        1. + 1 Billion dollar coin

    5. Inequality is a leftover from the days of old, when inequality actually meant that if one person was wealthy another person was poor. It takes some people a very long time to evolve.

  12. OT: Device Uses Electric Shock To Zap Users Out Of Bad Habits

    They should have been able to come up with develop a better name than “The Fap Zapper”, though.

    1. The CEO was on Shark Tank. He was a dick.

      1. It’s stupid to have the user consciously shock xirself.

      2. Yes. A dick and he seemed damn proud to be so.

    2. I guess calling it “The Shocker” would have gotten them into a demographic they probably didn’t want?

      1. Hey, what’s wrong with Spiderman fanboys?

        The Shocker

    3. If he named it “the Fat Zapper”, he could have cleaned up.

  13. I think it’s important to distinguish between different types of regulations. Food, health and safety regulations had their purpose, though they have become onerous (e.g. shutting down Uber and home-cooking businesses). However financial regulations always backfire – e.g. Glass Steagall – they always end up only creating more sophisticated scams. The end result is inevitably a bubble and a crash. The less financial regulation the better – yes this is proven – and people must be responsible for ‘due diligence’ for where they put their money. (See ‘Rethinking Bank Regulation: Till Angels Govern’.)

    1. Unfortunately the regulators are all bureaucrats subject to Pournelle’s Iron Law.

    2. How the gutting of regulating derivatives work out in that 2007 recession that put 9 million out of work?

      Libertarianism is economic creationism.

      1. Yes, it was all that deregulation that never happened that caused the recession, you know through magic.

        “Libertarianism is economic creationism.”

        You hear that guys? He heard us use a word to describe something, but then he used it to describe US! Holy shit, it doesn’t even matter that he clearly has not the slightest grasp of what “economic creationism” could be referring to, we just got PWNED!

  14. OT: Not sure if this was already posted by someone else or not:

    Bill Named After Murdered Girl Fails On House Floor As Her Family Watches /Huffpost headline

    Quick, someone help the retard who wrote this headline to their fainting couch, and get them some pearls to clutch, stat!

    Named after an 18-year-old woman who was abducted from a Target parking lot in 2007 and found days later murdered, the “Kelsey Smith Act” would allow law enforcement agencies to work with telecommunications companies to locate people in situations similar to Kelsey’s.

    Outside groups made a late lobbying campaign against the measure Monday amid concerns that law enforcement agencies could use an overly broad definition of the word “emergency” to subvert courts.

    “The proposed legislation creates an unprecedented loophole to our Fourth Amendment right to privacy,” the libertarian think tank R Street wrote in a post on Monday.

    While 22 states have adopted similar legislation, House lawmakers seemed to have some reservations about the bill. The measure would have allowed police to decide what constituted an emergency, and groups like R Street and the ACLU have expressed concern over those provisions.

    Silly glibertarians, don’t they know cops would NEVER abuse such power? /sarc

    1. How hard would it really be to get a warrant in that situation? And unless someone knew that she was violently abducted, I prefer the presumption of privacy for missing persons. Sometimes people want to disappear and they should be left alone by the police.

  15. Real economists don’t cite Larry Summers.

  16. Does anyone know the reason for the drop between 2008 and 2009?

    1. Market failure?

    2. Inequality?

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  18. $1.8T is what Americans pay complying with federal (yes, just federal) regulation each year.

  19. Libertarian moment just compounds annually at a brisk 1%.

    1. Bingo!

  20. Bush cut regulations to the bone. We had the deepest recession in 80 year. Looks like cause and effect to me

    1. Citation fucking needed jackass

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