If as to demonstrate how misguided the Democrats are in their efforts to improve our economy, when Rep. Keith Ellison (D-MN) was asked whether regulations kill jobs, he responded by saying:
No, and here is why: When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement.
Such a position demonstrates how too many of our Congressmen lack a fundamental understanding of the private sector economy, proving that their lack of business experience results in inefficient solutions that often worsen the problems they are trying to solve. To fully explain this, let’s take a detailed look at some of the effects of the original fuel efficiency standards, which are typical of ill-advised regulations.
- Ill-advised regulations increase costs. American car manufacturers had to redesign their fleets, typically resulting in smaller, less powerful cars. While this required additional work, it did not result in more cars, just different cars. As a result, the cost of each vehicle increased for consumers.
- Ill-advised regulations result in a lower standard of living. Manufacturers had to provide incentives to encourage buyers to buy these new car designs; as a result, they subsidized smaller cars while increasing profits on existing models. Consumers were forced to select between buying a smaller car or spending more to buy the car that they wanted. This distorted the free market.
- Virtually all regulations favor large corporations. In order to be competitive, car companies had to mass-produce vehicles in every size category. If a company focused only on large cars, it would be fined out of business. If a company focused only on small cars, it would not be able to compete against the subsidized cars offer by larger firms. A company that did not have sufficient market share would not be able to afford the costs associated with redesigning its vehicle fleet. As a result, both Chrysler and AMC were forced to merge with larger firms.
- Regulations are typically less effective than market incentives. The fuel-efficiency standards were adopted to eliminate our dependence on foreign oil. However, since the price of gas did not change, there was no incentive to reduce travel patterns; in fact, travel demand continued to increase, resulting in the U.S. becoming even more dependent on imported oil. Increasing the gas tax would have been a much more efficient way to eliminate our dependence on foreign oil while also providing funds to improve our nation’s infrastructure.
- Ill-advised regulations have unintended consequences. Foreign manufacturers, who typically sold more efficient vehicles to start with, have seen their market share increase from 15% to 43% over the last 30 years, resulting in a massive loss of jobs from American firms.
Some regulations are necessary in our society, but career politicians do not have the business experience to understand how their proposals can harm our business environment and worsen our current unemployment crisis.
It is time we elect new leaders who understand firsthand the challenges faced by the small businesses that fuel the engine of our economy.