Steve Klingaman

Steve Klingaman
Location
Minneapolis, Minnesota,
Birthday
January 01
Title
Consultant/Writer
Bio
Steve Klingaman is a nonprofit development consultant and nonfiction writer specializing in personal finance and public policy. His music reviews can be found at minor7th.com.

Editor’s Pick
OCTOBER 13, 2011 8:33AM

We Need Demand, Not Deregulation

Rate: 18 Flag

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The best way to grow jobs is to dismantle government as we know it.

Trust us.

Image: abcnews.com

To hear the Republican primary candidates tell it, all will be well if we just gut government regulations.  All of ‘em. Miraculously, the jobs will start to flow like honey in the land of milk and sophistry.  What I want to know is where do they get this crap and why doesn’t anyone call them on it?

            Here’s three recent sound bites reported by NPR in an Associated Press story entitled “FACT CHECK: Regulations Not A Huge Jobs Killer.”

  • MITT ROMNEY: "All of the Obama regulations, we say no. It costs jobs."
  • RICK PERRY: Regulations "are strangling the American entrepreneurship out there."
  • RICK SANTORUM: "Repeal every regulation the Obama administration put in place."

Meanwhile, the story goes on to say, “Labor Department data show that only a tiny percentage of companies that experience large layoffs cite government regulation as the reason.”  The number of jobs lost due to government regulation is “two-tenths of 1 percent.”

            A small business survey released by PNC Financial Services Group on October 7 found that four out of five small businesses have no plans to hire in the next six months due to—listen closely presidential wannabes—weak sales.  What’s more, some of them are contemplating more layoffs.

            Yup, lack of demand is the driver, or anti-driver here.  Government regulation is just flat wrong.  Ask Scott Holstein, of Kim and Scott’s Gourmet Pretzels in Chicago:

Demand really drives the hiring. So if we're just gonna get a discount in, say, employment taxes, that's not necessarily an incentive. I mean, it's a little bit - it's nice, but it's not gonna make us hire somebody. What makes us hire somebody is demand, you know, is needing to make more product.

            According to the PNC survey, just 18 percent of small businesses are optimistic about their business prospects over the next six months.  Given that small business is the primary engine for new jobs in a recovering economy, it looks like we are in for another bout of too much of nothing.  A stagnant jobs pond is virtually a given; and perhaps we’ll even see a double dip if these business owners do start to shed workers in a big way after the holidays.

            The last thing we need right now is a bunch of economic amateurs harping about regulation.  They are just carrying water for client companies like the major electrical power generators.  These guys want to gut the Clean Air act so they can poison the air with more mercury from antiquated coal-fired plants even though reports out just this week link these power plants to dangerous levels of mercury in a variety of wildlife.  Rick Perry and Mitt Romney should get their facts straight:  that kind of deregulation leads to more cancer and premature deaths, not more jobs.

            The coal and gas industries have their sights set on the Clean Water Act.  Fracking and mountaintop removal means big, big money to these vested interests who would love to see a President Bachmann close the EPA.

            Speaking of Michele, who would be a veritable environmental Sister Sludge if elected, after repealing “radical environmental laws,” she’d overturn the Affordable Care Act to solve our jobs problem.  The only jobs that would lead to would be more ER nurses assigned to care for people showing up way too sick for their care of last resort.

            The Republican call for deregulation as job growth strategy is only taken seriously by Cato Institute “economists,” to use the term loosely.  Yet the major media dutifully reports debate remarks and daily sound bites with hardly a shred of context or analysis about what has become the major Republican answer to joblessness.  No matter who gets the nod from the Republicans, we are going to have to listen to some kook explain how cutting Small Business Administration red tape or FDA food safety regulations related to cantaloupes is going to really get this economy humming.

            Of course corporate tax holidays, or even permanent vacations, such as candidate Bachmann’s call for a corporate tax holiday on $1.2 trillion (that's with a tr-) in profits will emerge as a proposed solution from the right.  But even if we went totally Greek on corporate profits and just stopped collecting taxes on them, it wouldn’t make a shred of difference on the number of workers they would hire, it would just increase their already grotesquely bloated cash reserves.

Hiring corresponds to demand.  Period. 

As Scott Holstein points out with more clarity than the entire Republican field put together, a discount in employment taxes is nice, a little something around the edges, but it will hardly drive hiring.  As one who has advocated just that strategy here, I agree, it’s just a little something that might encourage someone who is on the fence about hiring to act a little quicker.  It’s not going to reduce that gigantic lump in the snake, that 45 million person lump of unemployed people.

            We owe it to ourselves and the nation to just stick our fingers in our ears and resort to blah blah blah every time we hear the R-word posed as the root of our evils and deregulation as the key to a hiring binge.  When the Year in Stupid is written, its marquee headline will almost certainly includes the words Republican and Regulation pertaining to the profound dearth of comprehension on what regulation does and doesn’t do.  Either that or a profound adherence to whoever is pulling their money-strings.  And the minute a Republican candidate for president or dogcatcher comes up with a plan to stimulate consumer demand, I promise, I will be all ears.

 

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Thank you! This cuts right to the heart of the problem. All the Republican is a smoke screen for greed.
Yes demand does impact hiring but...we need to think beyond job creation - consumpiton creates jobs where labor is cheapest.

What we need is a democracy - not mob rule - or top down take it or leave it crap. Scale is not as important as we make it - if we can agree that everyone deserves justice - and humane treatment (national health and an end to drug war) - the market will work its magic.

The same people who want less government gave us both drug war and managed care - we have been whip- sawed by decades of both of Ron and Nancy's contributions to the destruction of urban amercia and the middle class.

Stop the internal state sponsored terrorism that is drug war, and give us national health - do these two things and demand will take care of itself.
Snowden,
I’m certainly no economist but I have been in business a number of times. The phrase “the market will work its magic” scares the hell out of me! I’m afraid I lost my belief in “magic” a great many years ago. My business experience tells me that “demand” is what drives production. That is incontrovertible fact. I also know that when folks don’t got no money, THERE IS NO DEMAND. Sure they need things. And they want things. But no money means they do without. So sir, I think that any plan for economic recovery that is meaningful to more than the fat-cats MUST involve getting spending power (money) into the hands of the population.

Dumping more cash into the vaults of the banksters and already rich is not likely to create a huge demand now is it? Yeah, I know, it will trickle down to the public and eventually create a demand. Bullshit. Money trickles upward - not downward.

As to jobs being created where labour is cheapest; a decent national minimum wage will handle that. Low wages might be attractive to manufacturers but if the wages don’t allow a decent living, what’s the point? Wages too low to allow the manufacturer’s product to be purchased means he’ll soon have a surplus of goods in his warehouse and no one who can afford to buy them.

I may be wrong but that “market magic” thing doesn’t fly, y’know?
Actually, there's a lot of state level petty regulation that should go. Licenses for all sorts of petty stuff. The Economist had an article on it a few months back. One example was an African Braider with 20 years of experience moved to a state which required 200 hours of training at an accredited institution before someone could work with hair. None of the accredited institutions taught African hair braiding. In short, the woman would have had to fork out thousands for useless training to be legally able to practice a profession which she'd had for decades.

The government will let someone con you into a mortgage you can't afford, something that could bankrupt you, but will protect you from a second rate hairstyle.
These people don't know jack about entrepreneurship.

Speaking as a small business owner, the biggest detriment to entrepreneurship is the specter of medical bankruptcy. The best thing the US government could do is pass true universal Canadian-style single payer health care. Then all businesses, large and small, would be on even footing. Small businesses could afford to hire employees. And yes, a vast army of paper-pushing desk-jockeys at Aetna, Blue Cross, and other places would be out of work. But that's a price I'd be willing to pay.
The problem is demand cannot be effectively stimulated within our dysfunctional income distribution template. Also, the money sent into the economy will in too many ways be expatriated overseas before it can have the needed level of impact. Subtract what is spent on stimulus from the resulting contribution to trade imbalance.

That's why traditional methods don't work like they used to, but none of those debilitating factors had to exist in the first place and should be repaired. There is no constitutional right to free trade, and no economic reason to pursue an assured loss of US wealth. There's no right to have the free market set wages and working conditions, but there is a right to demand it works to our benefit as a nation.

The hilarious thing about the Repubs...and Obama and the Dems who pitch this fantasy as well, though less stridently...is this is amid the ruins of what deregulation caused so recently. Hell, if we truly do need more deregulation, you might as well start calling America Jonestown.
steve - you missed my point - keep thinking it your way- the editors agree - but you are wrong - demand will create jobs - in china

I say no justice - no jobs ! You think it is about jobs - but it is about power - and how power was shifted from the center to the right. So are you against ending drug war? providing Health Care? Or not? I am attempting to get you to look deeper - there have been better demand arguments made on OS - but do not get the ep. Read torritos from yesterday - but better yet read his latest post - you might get what i am driving at - torrito nails it. and all that said - you are thinking! great! and putting it out there! greater still ! and the editors like you...
shit ! sorry steve it was that darn cat i was responding to - who - was defending you...puuurrly I might add, and I do love the cat too!
You are exactly right. Demand was created by a false economy until 2007. Falling wages, jobs lost to foreign shores, and a loss of benefits were, for a time, compensated by borrowing. When Americans could no longer keep up with their debt the house of cards began to fall.

Demand can only be created by jobs and income creating discretionary purchasing. Americans have been paying off their debt for the past 3-4 years and paying for necessities. It will be years before John Q. Public loosens his purse strings.
Thanks for writing this. It was very well written and dead on. R
I suspect what they're really after is any kind of environmental regulation that slows down any and all drilling & fracking. They talk like the U.S. is the most environmentally regulated country in the world. C'mon. And you'd think that post-BP, at least one of them (Huntsman?) might have mentioned that sometimes strict regulation and enforcement saves billions.

The candidates continue to go for the bumper-sticker wisdom. Get rid of regulation and free up the economy. It's all so painless.
I am with you somewhat but what businessmen call DEMAND is actually usually GROWTH IN DEMAND. its a subtle yet enormous difference. as for continual growth, the earth is finite, and we need an economics that respects that. see hermann daly "ecological economics" who I might write an article on soon. yes its radical, yes its revolutionary. thats the point.
What is so amazing is that behind all the colorful and distracting craziness of the GOP, clowns like Sarah Palin and the Tea Party, et.al., is simply an agenda of Back to Bush: back to the disasterous priorities of deregulation, lack of accountaiblity, lack of transparency, endless tax cuts for the rich, special exemptions and privileges for corporations....in short, the exact same policies that created this disaster in the first place, that has ruined the lives of millions of people, perhaps for a full generation. That this line has any traction at all is mind-boggling. The refusal to learn from experience is breathtaking.
Demand is obviously in demand. :-)

Seriously, more regulations won't help.

Regulations are absolutely meaningless when the people the regulations were meant to regulate have the means to undermine them via political contributions AND PR FIRMS.
@Paul J.

Who expatriates money? The US is a safe haven for a lot of the world's money. As is the dollar. 2/3 of the US dollars in circulation are outside the US. The economic crisis may be encouraging some to move their capital from its 'safe haven' in the US to their home country. But this kind of capital flight is as, or more, dependent on the home country politics as it is US politics.

Sure, crooks use tax havens, but the economy is not in crisis because of too many crooks stashing illegal gains in the Caymans. The American ultra-rich have enough tax shelters in our incredibly convoluted tax code to not need to send their money offshore.

Money is being used to pay down debt, or be saved because the investment opportunities aren't there, but not stashed overseas at any great rate.
trying to stay with the point you make here, when the repubs say they want less (meaning "no") regulation, they mean we should do away with: the EPA, the FCC, FTC, and every board and agency that protects consumers (state *and* federal), among others. that way, Business will again be able to pollute the air and water, there will be no constraints at all on monopolies and bogus crap pretending to be news, and, yes, anyone will be able to practice bad hair practices (including putting chemicals that can cause third-degree burns) on consumers. there will be no government oversight for anything that goes on in business, and consumers will be up the proverbial creek. and if they are successful in eliminating the ability of plaintiffs to sue medical (and other) providers for damages caused by negligence, then *everybody* is off scot-free. who wins in this scenario? business. who loses? us.

i listened to a state senator last weekend repeat the GOP pitch that you describe in your well-written piece, steve: we need to eliminate regulations in CA because they're driving businesses out of state. the statistics *prove* otherwise, but they keep saying it. why? because it's dogma, just like the gun thing and the abortion thing and the tax thing. facts don't matter.

and *of course* demand drives hiring because demand means sales. and sales are down because consumers either don't have jobs or are making less money than they were before or they're *afraid* they will be one or both of those things soon. until something breaks the cycle - government putting money into projects like the infrastructure stuff in the jobs bill that the senate just didn't pass, which would mean that a whole bunch of *businesses* would start hiring, paying people who could then start buying stuff - nothing is going to change.

off the soapbox. sorry for the length. this stuff really makes me see red.
Thanks for the comments. Candace, I wish I had written your first paragraph. Yes, that's it exactly. This is about back to the same old, and underneath the deregulation mantra we hear the murmur of money talking. The shiny tea party hat does not conceal the threadbare polyester of wellworn dogma. On Tuesday I see Michele Bachmann's "jobs plan" advocating a tax holiday for $1.2 billion in foreign profits of American corporations. On Friday it's in John Boehner's hands in his little "Job Creators" book. Essentially all of his prescriptions amount to deregulation in one form or another. It's all cut from the same cloth and it's a boondoggle of historic proportions.
So, was the problem in the Soviet Union a lack of demand? People demanded insufficient quantities of cars, TVs, refrigerators, milk, bread, toilet paper, vodka?
"A man walks into a shop and asks, 'Do you have any fish?', and the clerk replies, 'No, this is a butcher shop: we don't have any meat. They don't have any fish in the fish shop across the street.'"
John, Umm, the economy Obama inherited was not Soviet-issue. Cute joke though.
absolutely, steve, and thanks.

boondoggle. that's exactly what it is. i love that word except when it's what they're doing (laughing up their sleeves the whole time) and the stupid news departments of all television/cable/print media don't call them on it. pah.
Mal,
The reality of a overly heavy import market expatriates money. Consumer goods purchases send money overseas that used to be cycled back into our manufacturing. So, in multiplier effect terms, the dollar gets spent fewer times before it packs its bags and heads away. People bringing capital to the US or holding it isn't the same as bringing demand to the market or even investment to assist demand. In fact, one problem with the bad wealth distribution is it created a cloud of capital far in excess of productive investment, so that creates bubbles and schemes to increase wealth by economy-destructive investments...rent seeking. Commodity speculation.

The expatriated funds used to be labor income, which is demand income. It's also profits made in America going to overseas concerns. I'm not talking about investment capital fleeing, I'm talking about American income fleeing.
This is crazy. This is how we will get into serious financial trouble and businesses will close. . You have to have demand to be able to generate the revenue to be able to hire people. Deregulation stops choking businesses so that they can flourish and generate revenue to create demand for labor so that people will have to be hired. You can't just hire people with out the revenue and money to pay them.
Always excellent as usual! Interestingly, I just finished watching "This News Hour" on PBS on my DVR and they were talking about the 0.2% of employers who cite 'regulation' as the reason for layoff employees. My post last October discussed this issue as well.
Every time I hear one of the talking heads ramble on about jobs being destroyed by regulations, I want to reach through and slap some sense into them.

A little logic would go a long way. The pretzel makers hit it right on the head.

Businesses hire people because they need them to do the work. Tax cuts, regulatory reform, and so on may make a difference on the margins. Now it costs you a little less to hire that person, so the amount of increased business you need to see to benefit is a little lower.

But you hire people because you need another person to do the work. If you don't need another person to do the work, you're not hiring.
As always Steve, you're spot on. Product demand spurs jobs growth...nuff said.
Normally, the tragedy of the commons refers to the individual disincentives to restrict use of a shared resource- such as a common grazing meadow, fisheries or even the air or water we breathe. Thus the shepherd could graze fewer sheep, but if he/she did that his/her competitors would just assume control of the common resource. So everyone adds sheep until no one gets much productivity out of the common.

Aggregate demand turns out to be a commons as well, and each company that sends jobs overseas thinks "my taking jobs away won't make any difference to the domestic aggregate demand" the same as the shepherd thinks his one more sheep makes him more money.

Henry Ford had it right...pay your workers enough so they can buy your product. People like Immelt assume that everyone will always be able to buy if you reduce the price low enough. Ford was right, Immelt is wrong. But, even if we invest trillions in needed infrastructure work, at the end those jobs go away...and we're still buying everything from India and China. I think there could be ways out of the trap, but they won't come quick, easy, simple or cheap.
Checkitout, what a thoughtful comment. Your jobs overseas as a reverse commons analogy is an important concept. The irony that we can't build our infrastructure without Chinese manufactured material is lost on...everyone in power. Also a commons issue. "Oh, if we buy all these components for the new Bay Bridge from China, that doesn't count in the grand scheme of things, does it?"
Thanks Steve,

I've also seen indications that automation in the US is responsible as much as job exports. And beyond that- a sustainable planet means we have to kick our addiction to growth. We need to find ways to have a creative, vibrant, properous society without the kind of traditional growth that we now depend on. I don't know how to do this, and I don't trust 'the market' to have enough foresight either....if markets really had foresight we'd never have bubbles.
Steve - great to read you again - excellent and insightful (as always)
nice piece, but maybe not relevant. facts that conflict with goals disappear from the mind with great ease. search for motivation before you go far in analysis, for the absurdity of the republican position changes greatly once you admit their goal is personal power, and resulting status and wealth.

don't dare to hope dem politicians are any different, the american system does not select philosopher kings, nor even breed them.

want a better result? get a better system.