Government Regulatory Policies and the Delayed Economic Recovery

Thursday, September 20, 2012

Chairman Smith, Ranking Member Conyers, and other members of the committee, thank you for the opportunity to testify at this hearing on “Regulation Nation: The Obama Administration’s Regulatory Expansion vs. Jobs and Economic Recovery.”

In order to address this important issue systematically, I first discuss the disappointing economic recovery and resulting weak job growth. Second I consider the role of the recent expansion of regulations and other government actions in delaying the recovery and job creation. Third, I review the legislation that has been put forward to control the regulatory expansion.

Jobs and the Economic Recovery

The persistently high unemployment rate—especially long term unemployment—is one of the most disturbing aspects of today’s economy The high unemployment rate is mainly the result of the slow pace of economic growth, which has failed to bring the economy and the labor market back to their potentials. Slow economic growth means that firms are not expanding or hiring many workers. Hence, slow economic growth means slow job growth, and that is what we are seeing now. In addition, many people are dropping out of the labor force. If they had not dropped out and thus were still counted as unemployed, the unemployment rate would be even higher than the current 8.1 percent.

While some jobs are being created, the pace of job creation is barely enough to keep pace with the growing working-age population. For example, during the past two years, employment increased by 3.1 million. This may sound ok, but really is quite poor for a recovery from a deep recession. Over the same two year period, the working age population (16 and over) increased by 5.7 million, which is about the same percentage growth as employment. With employment growing at about the same pace as the working age population, the percentage of the working age population that is actually working has not increased as it does in most recoveries.

Read the full transcript:testimony-committee-judiciary-9-20-12.pdf

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