Some people, it seems, live to rail against free markets and
free enterprise, holding them responsible for flat wages, lack of opportunity,
income gaps, middle-class stagnation, poverty and economic listlessness.
They're convinced private greed holds back the government's ability to improve
conditions.
But it's the government that's done the most damage to
economic growth, new research shows.
America is now more of a regulatory state than a haven of
free enterprise — a development that has not come without measurable cost.
A study published this month, for example, observes that if
just federal regulation (state regulation wasn't considered) had remained at
the level it was in 1949, the economy would be more than 3.5 times bigger than
it is.
"Regulation's overall effect on output's growth rate is
negative and substantial," economists John Dawson and John Seater write in
"Federal Regulation and Aggregate Economic Growth" Published in the
June issue of the "The Journal of Economic Growth."
"Federal regulations added over the past 50
years," they say, "have reduced real output growth by about two
percentage points on average (annually) over the period 1949-2005. That
reduction in the growth rate has led to an accumulated reduction in GDP of
about $38.8 trillion as of the end of 2011.
"That is, GDP at the end of 2011 would have been $53.9
trillion instead of $15.1 trillion, if regulation had remained at its 1949
level."
Numbers that big aren't easy to put into perspective. But at
a more micro level, they mean losses of "$277,100 per household and
$129,300 per person" per year, the the authors reckon.
To get a handle on the economy's regulatory burden, Dawson
and Seater counted the number of pages in the Code of Federal Regulations and
came up with a sixfold increase — from 19,335 in 1949 to 134,261 in 2005.
Their work does not consider four other government
activities that affect economic activity — spending, taxation, deficits,
monetary policy. So it's likely that if Washington had been more responsible in
those activities since the middle of the last century, the $53.9 trillion the Dawson
and Seater estimated would be even bigger.
Federal spending alone does tremendous damage. David Ranson,
a senior fellow at the National Center for Policy Analysis, has just published
a study showing that increases in federal spending since 1929 has been
accompanied by even-larger decreases in private-sector spending.
Conversely, in the years when federal spending fell, private
spending grew by a greater degree.
"Increased government spending induces the private
sector to contract, a phenomenon that has been called 'crowding out,'"
says Ranson. "Surprisingly simple evidence shows that government growth
tends to cut the business sector back."
There are those who will say that government regulation has
protected Americans and saved lives. That's arguable. But this isn't: A
wealthier society is a safer and healthier society. More than six decades of
regulation can't be erased in a moment. But the dismantling needs to start.
Source: Investor's Business Daily
Posted 06/28/2013,
http://news.investors.com/ibd-editorials/062813-661866-dont-blame-capitalism-and-free-markets-for-poor-economic-performance.htm?fromcampaign=1#ixzz2XdztaFT1
Comments;
We need to elect a Senate in 2014 who work with the House
to begin to dismantle unnecessary, unwanted, job killing laws and regulations and
to reduce government spending by $1 trillion a year. They can cut it and we will never miss it.
Norb Leahy, Dunwoody GA Tea Party Leader
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