April 1, 2014

Shift the Jobs Debate

Veronique de Rugy

George Gibbs Chair in Political Economy

Patrick McLaughlin

Senior Research Fellow
Summary

Many congressional debates over how to improve the economy have centered on whether increased government spending will help create jobs. But in recent months the jobs debate is shifting toward something that could actually help: regulatory reform.

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Many congressional debates over how to improve the economy have centered on whether increased government spending will help create jobs. But in recent months the jobs debate is shifting toward something that could actually help: regulatory reform.

The shift in strategy is a welcome move considering the incredible regulatory burden faced by Americans and business owners in the U.S. Recent economic research has estimated that economic growth in the U.S. is slowed by as much as 2 percent per year because of the accumulation of restrictions in the federal regulatory code. With regulations causing that sort of drag, even a little bit of regulatory reform could go a long way toward improving the economy.

Regulatory reform may be our best option for another reason: increased government spending won’t fix our slow economic growth rate. For one thing, we have tried it before. In 2009, the administration implemented a large stimulus spending bill in the hope that unemployment rates would stop increasing.Unsurprisingly, the results were far from what we were promised; unemployment remains high, and the recovery in the labor market has been relatively weak.

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