Fox News' Greta Van Susteren pushed the right-wing talking point that regulation is "strangling" small businesses on Sunday, ignoring reports that have repeatedly debunked her theory.
On ABC's This Week with George Stephanopoulos, Van Susteren got into a debate with Nobel Prize-winning economist Paul Krugman over the effect that government regulation has on small businesses and the American job market. Though Krugman pointed out that Van Susteren's assertion is not backed up by the data, Van Susteren refused to give his explanation credence.
VAN SUSTEREN: We're strangling small businesses. I mean, you know everyone -- no one's paying much attention to these small businesses. The regulations that are strangling them, some of them are laughable and silly, but they have a profound impact on the job creators, those who are making jobs. They can't afford to hire people.
KRUGMAN: There's been tons, there's been tons of work on this. And what's holding small business back is not regulations, it's just the fact that they don't have sales.
VAN SUSTEREN: It's not all, it's some of it, some of it.
KRUGMAN: It's not. There's no correlation, looking across, you know which parts of the economy do small businesses complain about regulations and which don't they. There's no correlation between that and actual job creation.
GEORGE STEPHANOPOULOS: Is there one exception perhaps, on the health care, where, firms that are greater than 50 people, have to pay more and that don't you see some firms cutting off at 49?
KRUGMAN: You really -- there might be. but you can't see that in the numbers. The overwhelming fact of the matter--
VAN SUSTEREN: Well If you talk to them, instead of looking at just the numbers, why don't you sit down and talk to these people, lot of them are struggling with this. They don't understand a lot of those things that happen. They don't understand a lot of the things that are happening in Washington. They're very cautious because they see a real dismal economy out there. And that doesn't --
KRUGMAN: If you actually talk to them, that's not what they say.
Despite Van Susteren's claims, Krugman's position has a strong foundation in official economic data as well as less formal anecdotes and survey responses from business owners.
Investment data refutes Susteren's claim that high regulatory environments tend to suppress growth. An Economic Policy Institute (EPI) analysis of the past four economic recoveries found that the slowest growth actually occurred during the deregulatory Bush administration:
EPI research attributes slow economic growth to lagging demand, rather than high regulation:
Instead of uncertainty about regulations, there is strong evidence that the absence of job creation reflects the continued unwinding of the financial collapse and the corresponding lack of demand. Firm investments and hiring are lower because they have ample capacity to produce the goods and services they are selling to a shrunken market, while firms are deleveraging at the same time. One can easily document (using National Income and Products Accounts (NIPA) Table 1.4.6 on GDP and mixing with population information from NIPA Table 2.1) that the final per person demand for domestically produced goods and service in the spring of 2011 (second quarter) was still 0.7 percent lower than it was before the recession, i.e., the last quarter of 2007 (U.S. Bureau of Economic Analysis 2011a and 2011b). Assuming that demand per person would have grown, absent the downturn, at a 1.5 percent rate for three-and-a-half years (a rate 20 percent lower than that of the 1979-2007 period), we find ourselves with demand 8.5 percent lower than we would expect.
Government data and analysis also support economists' case that slack demand is what's hurting small businesses, not regulations. In fact, government regulations have had a miniscule impact on employment rates in recent months, causing just 0.42% of nonfarm mass layoffs in the final quarter of 2012, according to Bureau of Labor Statistics (BLS) data. The primary causes for such layoffs that quarter were completion of seasonal work (44 percent) and business demand (32 percent). A BLS graph shows the discrepancy between demand and governmental regulations as a cause of layoffs. Here, government regulation is a subset of the bar labeled "Production specific":
The Office Of Management and Budget (OMB) prepares an annual analysis of the costs and benefits of major government regulations for Congress. The 2012 draft report estimated that the benefits of major regulations ($141-$700 billion) would dramatically outpace their costs ($43.3-$63.3 billion). The draft also included a comparison of approximate costs and benefits since 2002:
This data is in keeping with the consensus view among economists, as reported in 2011 stories in The Washington Post, The Wall Street Journal, and Pro Publica. And beyond the data, the anecdotal evidence Van Susteren invoked also reinforces the position Krugman, EPI, and government analysts take.
A 2011 McClatchy Newspapers story found multiple small business owners rejecting the perspective on regulations Van Susteren attributed to them. Gallup surveys of small business owners in 2012 and 2013 have found that regulatory concerns lag far behind demand concerns. And even a monthly survey of small business owners conducted by a conservative front group called the National Federation of Independent Business (NFIB) has found that regulation has been a comparatively minor concern for small business owners for many years, as EPI explained: