Liberal economic commentators such as Paul Krugman and Brad DeLong are positively gobsmacked by a new study from the Economic Policy Institute. It purports to show that business uncertainty is, in fact, not slowing the U.S. economic “recovery.” The gist from EPI:
An examination of current economic trends, and especially what employers are doing in terms of hiring and investment, debunks this story about regulatory uncertainty as the cause of our dismal job growth. An examination of what employers and their economists are saying again and again in private surveys (cited later in this paper) makes it clear that what businesses actually identify as their challenges does not fit this story either. In other words, what the heavily politicized trade associations in Washington (like the Chamber) are saying does not correspond to the real challenges facing both large and small businesses, even as they themselves perceive them.
EPI points out, for instance, that a recent survey of small businesses found “poor sales” to be their single-most commonly cited problem. So time for Uncle Sugar to borrow/spend more money pumping up consumer demand, right? Maybe not. While it’s true that 25 percent blamed “poor sales,” 37 percent blamed either regulations (19 percent) or taxes (18 percent.)
Another piece of EPI evidence: Private sector employment is up 1.1 percent during the 25 months of this recovery vs. a 0.6 percent drop during the “jobless” recovery following the 2001 recession. But go ahead and contrast the Obama recovery, instead, to the Reagan recovery where private sector jobs grew 9.9 percent during its first two years. One difference then: taxes and regulation were on a pro-growth trajectory—unlike today. (EPI credits Fed easing rather than Reaganomics.)
Maybe EPI should run its own survey and ask entrepreneurs whether they would like to operate in an economy where government spending was running at 28 percent of GDP, revenues 24 percent, and big budget deficits extended as far as the eye could see. That is, by the way, exactly the fiscal scenario EPI recently concocted.
I’m pretty certain of how business would answer.