Treasury takes a swipe at the “regulation keeping us down” argument

Interesting and insightful blog post from Dr. Jan Eberly, assistant secretary for economic policy at the U.S. Department of the Treasury. Dr. Eberly argues in a blog post on Treasury’s website that regulations on business are not the primary cause for the slow down in the economy or the lack of hiring by business.

To support the conclusion, Dr. Eberly provides some quantitative analysis, just enough to make the argument credible without having our brains blow up.

Dr. Eberly stated in the blog post that, “If regulatory uncertainty was a major impediment to hiring right now, we would expect to see indications of this in one or more of the following: business profits; trends in the workforce, capacity utilization, and business investment; differences between industries undergoing significant regulatory changes and those that are not; differences between the United States and other countries that are not undergoing the same changes; or surveys of business owners and economists.”

To highlight a couple of Dr. Eberly’s winning arguments, sectors like health and energy would not be posting the gains we see today given these two sectors have the highest earnings per share of any other in the S&P 500.

I concur with Dr. Eberly on the gains in health and energy. Stock prices are forward looking, and if regulatory threats were that fatal, to the point of creating onerous uncertainty, prices would fall overall, not increase.

Dr. Eberly also cites a survey conducted by The Wall Street Journal showing 65% of economists laying the blame for a lack of hiring on our old friend, derived demand. Having managed a business, I can tell you first hand, no demand for your food, then there is no demand for labor.

Can the two schools of thought, onerous regulation vs. lack of demand, be reconciled? Who has the argument upon which a jobs policy should be based?

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in Economy, Political Economy, regulation, unemployment and tagged , , , . Bookmark the permalink.

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