Debunking the Regulatory Job Creator Myth

Submitted by kvaughn on Thu, 01/12/2012 - 01:00

One of the reasons I’m running for office is because I’m tired of the partisan spin that constantly comes out of Washington. We need Congressmen who understand mathematical and economic realities so that they can see through the spin that lobbyists often promote for their own purposes. I believe we can do better.

One of the most recent examples of outrageous spin is provided by the Chesapeake Bay Foundation in a report that claims environmental regulations create jobs. Unfortunately, many in Washington seem to buy into this claim, including my opponent, Congressman Gerry Connolly (D, VA).

While it is true that a small number will be employed to implement regulations, we must always consider the direct cost to businesses and the unintended consequences of these regulations. The new jobs discussed in this report don’t create any additional end-user products, but they do increase the cost of doing business in the U.S. This has a predictable domino effect:

  • Costs for American firms increase.
  • American firms raise the price of their products to cover these costs.
  • Consumers increasingly choose less-expensive, foreign-made goods.
  • American firms lose market share.
  • American firms lay off employees or grow more slowly than they would otherwise due to lower demand.

How long will it be before these trends affect you or your family?

Manufacturing in the U.S.

Of course, these trends are amplified when they’re coupled with eliminating trade barriers with countries that don’t have similar regulations. The effect has been dramatic over the last several decades.

Such regulations have resulted in significant job losses in the textile, furniture, and auto industries. Ironically, the Chesapeake Bay Foundation cites the Ford Motor Company as an example of a company that has prospered in spite of regulations! To give this claim some context, Ford had a 28% market share in 1970; today, it only has a 16% market share, with most of this decline occurring since 2000. But while auto production in the U.S. is declining, auto production in China is skyrocketing. Clearly, the American auto industry is being hurt by these policies.

In the 1980‘s and 1990‘s, we were able to offset the losses in these industries by manufacturing new high-tech products. But now, we’re even losing market share in this critical industry. In total, between 1997 and 2008, the outsourcing of high-tech manufacturing increased from 21% to 36%, with a third of this change coming from China, which increased its share from 0.6% to 5.4%.

In short, the old adage proves true once again: “There is no such thing as a free lunch.” The new regulations may provide cleaner air and water and other benefits, but these come at a price - either in terms of higher product prices or fewer jobs.

The key is balance: we must balance the desire for a cleaner environment with the real-world costs of obtaining this goal. We can’t do this if we ignore the costs imposed by regulations, as Rep. Connolly typically does.

Official (U-3) unemployment is currently 8.5%, and U-6 unemployment is 15.2%. Our area has fortunately avoided the worst of the economic slowdown, but if we allow high-tech jobs to continue to shift to China, our communities and our families will begin to feel the impact.

We still have time to restore the proper balance in our economic policies, but we must elect leaders who have the wisdom to see through the biased reports produced by lobbyists.

In Liberty,
Ken Vaughn