Monday, July 9, 2012

What's the Trigger?


After Friday's disappointing jobs report one of the commentators I listen to remarked there's nothing to make the job's outlook any better, "What's the trigger?" he asked. In his opinion, both monetary policy (interest rates near zero) and fiscal policy (a permanent $1 trillion stimulus since 2009) have both proven ineffective. Using his metaphor, both of those triggers have been pulled and the bullets missed.

A trigger we haven't pulled is liberalization, or radical liberalization, to modify John Cochrane's prescription for Greece, "shock liberalization."

Despite the claims of most on the Left that since 2000 there has been a roll-back of countless regulations resulting in lawless financial markets, dirty skies and water, unsafe working conditions and shoddy products endangering our children, we have to go no further than our lunch room to recognize this is untrue.

One wall in the kitchen in our office is devoted to posters from the state, OSHA, Department of Labor with a mind-numbing cacophony of regulations on minimum wages, fair wages, equal wages, workplace safety etc. There's probably a poster that tells us we have to display these posters since about zero of them apply to our business. When I first started working a couple of decades ago there was maybe one of these posters; now, a wall 8 feet by 5 feet. These regulations must copulate since the number of regulations increase every year.

Or look at the number of pages in the federal register, which codifies federal regulations. This has grown from 2,620 pages in 1936 to 82,419 pages in 2011. The only real respite from this growth occurred in the Reagan years.

You may say, "But these are necessary rules, these rules keep us safe." Maybe. What about the rules that force utility companies to purchase a certain percentage of their generating capacity from sources like solar and wind? I can see how that makes electricity more expensive and how it makes it more unreliable, but making my life safer? That extra utility bill means I have less to spend on what I want. But who cares about me. It really hurts the poor who spend much more of their income on electricity than I do. It pushes out industries that have need for greater amounts of electricity to produce their goods. The millions hurt by these policies are rarely heard. But we do hear of the minuscule amount helped.

But it's fair you say. Without these rules the rich would get richer and the poor poorer. Maybe. But how then do you explain 50% unemployment for Blacks in New York City? I blame much of this on minimum wage laws that crowd workers out of the labor force and government schooling that is a complete failure in the inner city.

In 1992 the Department of Agriculture introduced the Food Pyramid, a guide to healthy eating. Since then we have seen an "epidemic" (I'm positive that is an improper description) of obesity. When I go on a diet, do you know what I cut back on? Bread, then dairy. High calorie, low density food. You have to eat a lot to make you sated so you end up consuming a lot of calories. If you follow the food pyramid guidelines I think you'll gain weight.

Are the regulations on my office's kitchen and the pages in our federal register the economic equivalent of the food pyramid? After all, the three weakest recoveries in employment, since WWII are Obama's, Bush's and Clinton's. Is this a coincidence? Or is it the result of the policies we have pursued for the past few decades? Is it the result of more and more regulations and obstacles to competition, that primarily benefit the rich, powerful and connected? Is it the result of more and more regulations and obstacles to competition the primarily hurt the poor?


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