Dem Rep: Regulations are totally awesome for job creation, or something

posted at 10:45 am on October 11, 2011 by Ed Morrissey

Minnesota elected Keith Ellison to Congress, so it falls to Minnesota bloggers like Gary Gross, Scott Johnson, and myself to point out his many absurdities — including Ellison’s economics.  The Congressman makes an argument that would shame even the Obama administration by claiming that expanding government regulation stokes job creation.  Hey, businesses have to hire compliance officers, don’t they?  Click the image to watch:

Rep. Keith Ellison (D-Minn.) tells MSNBC regulations create jobs because a business will have to hire people to help them comply with the new requirement.

“I think the answer is no,” Ellison said when asked if he believes regulations kill jobs. “And here is why: When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement.”

“I believe if the government says, look, we have got to reduce our carbon footprint, you will kick into gear a whole number of people that know how to do that or have ideas about that, and that will be a job engine. I understand what you mean, because if anything adds a cost to a business, you could assume that that will diminish that business’s ability to hire. But I don’t think that’s actually right. I think what businesses want is customers and what — if they are selling product, if they have a product to sell they will do well even if they have some new regulations to meet,” the Congressman said.

It’s almost impossible to overcome the economic incompetence in this statement, but we’ll give it a try.  First, unlike government, business employment usually gets divided up into direct and indirect labor.  Direct labor produces the goods or services that the company sells, while indirect labor doesn’t.  The trick for successful businesses is to keep indirect labor low, since it takes away from the profit of the company and/or raises the cost of the products or services.  Compliance efforts are always indirect labor, and the more that is needed, the more prices have to rise to cover their cost.  As prices rise, consumers lose buying power, which means that production and delivery will tail off, and less direct labor will be required.  Capital gets used less efficiently, which means less capital for economic expansion and job creation.  In fact, that’s exactly what we’re seeing now, and have been for the last two-plus years of the Obama “recovery.”

But that’s not the only problem in Ellinomics.  Compliance costs do not scale well, which means smaller companies pay a higher cost per unit to meet the demand of existing and especially new regulation.  Larger businesses can adapt more quickly and efficiently.  That’s why the big players in markets welcome government interventions in most cases, because it eliminates competition.  The smaller businesses either fail due to lack of competitive standing or they end up selling the business to the larger players.  That not only eliminates smaller businesses, it also eliminates jobs, since acquisitions allow larger companies to realize savings through their economies of scale.

Investors Business Daily wonders why we haven’t seen a jobs explosion, if Ellinomics is true:

[I]f regulations were job-creation engines, the economy should be in danger of overheating right about now. Obama has overseen the fastest growth in new federal rules ever, imposing 75 new major regulations in his first 26 months in office at a cost of more than $40 billion, according to the Heritage Foundation.

Ellinomics has the same basic flaw as Obamanomics, which is that it makes virtues out of the vice of government intervention and assumes a world which doesn’t exist in reality.  In fantasy, though, Ellinomics has a great explanation from Gary Oldman in The Fifth Element, which rightly derides the villain’s reliance on a version of the broken-windows fallacy:

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If Ellison really believes this crap(and unfortunately I think he does), it shows how fargone the Democrat Party is. The best we can hope for is to keep them out of power because I don’t see them ever getting their collective you-know-what together.

Doughboy on October 11, 2011 at 10:48 AM

Ahhh my lovely rep – I’m so proud/

I still contend if MN passed a voter ID law – he would have no chance in the next election.

gophergirl on October 11, 2011 at 10:48 AM

All we have to do is force every business in the United States to increase its employment by 10%, and we’ll have no more unemployment!

Problem solved!

Realist on October 11, 2011 at 10:49 AM

You can’t make a company pay for a regulation oversite, when it is not needed. Also, federal “engineers” are about the slowest workers I have ever met.

upinak on October 11, 2011 at 10:50 AM

The first Muslim to be elected to Congress is apparently, a Dem first and foremost. What is wrong with the people in Minnesota. Between this dolt and Al Franken, to have to wonder if someone put something in the water.

Syd B. on October 11, 2011 at 10:51 AM

because if anything adds a cost to a business, you could assume that that will diminish that business’s ability to hire. But I don’t think that’s actually right.

This has to be one of the most stupid things I’ve read in a while… and I’ve been reading the posters at the OWS protests.

mankai on October 11, 2011 at 10:51 AM

so it falls to Minnesota bloggers like Gary Gross, Scott Johnson, and myself to point out his many absurdities — including Ellison’s economics.

I think I actually heard you utter a sigh of disgust in having to write that, Ed.

ted c on October 11, 2011 at 10:52 AM

It’s almost impossible to overcome the economic incompetence in this statement, but we’ll give it a try.

I know what you mean, but you did OK Ed.

listens2glenn on October 11, 2011 at 10:52 AM

When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement.”

Which means the increased cost was passed onto the consumer, making vehicles more expensive for everyone … including businesses.

darwin on October 11, 2011 at 10:54 AM

Weapons-grade stupid.

greggriffith on October 11, 2011 at 10:55 AM

The presence of such an imbecile in the congress is a powerful indication of the decline of America — even in a race-gerrymandered district full of Muslim transplants from Africa. That such a blithering twit can get elected to high office is a tough indictment.

Jaibones on October 11, 2011 at 10:56 AM

I suppose Michigan will be sending more “Keith Ellisons” to DC in the coming years.

Thanks, Minnesota voters.

BuckeyeSam on October 11, 2011 at 10:57 AM

You’ve never actually run a business, have you Mr. Ellison?

greggriffith on October 11, 2011 at 10:58 AM

Ellison has a law degree… that explains this… and crr6′s insights on economics and business.

mankai on October 11, 2011 at 10:58 AM

Let’s smash every window in the society. That way, we’ll have a Golden Age of window production.

Good Lt on October 11, 2011 at 11:01 AM

Reagan was correct when he said that Democrats are economic ignoramuses, and Ellison just proved it.

Ward Cleaver on October 11, 2011 at 11:01 AM

Jaibones on October 11, 2011 at 10:56 AM

So many morons, so many names to insert into your comment: Reid, Pelosi, Franken, That florida witch,etc.

upinak on October 11, 2011 at 11:02 AM

LOLOL, oh. my. goodness.

How have we arrived at a day where this kind of insanity is not only *not* ridiculed (and maybe institutionalized), it’s elected to office?

Midas on October 11, 2011 at 11:03 AM

It’s scary when we stop to think about it… that there are people in Congress with no ability to think logically.

Murf76 on October 11, 2011 at 11:03 AM

Let’s smash every window in the society. That way, we’ll have a Golden Age of window production.

Good Lt on October 11, 2011 at 11:01 AM

And let’s start with the offices of Democrat economists and lawmakers.

Midas on October 11, 2011 at 11:04 AM

Please God, redistrict MN4 & MN5 into a single district so we can get rid of either Betty McCullum or Louis Farrakan’s favorite tool.

Because an Act of God is the only way we’ll be rid of this chump.

Bruno Strozek on October 11, 2011 at 11:04 AM

Wow! The stupid is strong in this one!

OldEnglish on October 11, 2011 at 11:04 AM

Big companies always like regulations. It is easy enough to spread the costs out to all their costumers and unleash a flood of lobbyist to make sure that it doesn’t really hit them that hard. Small concerns on the other hand either have to stay small and under the regulatory radar or they have to hire a larger percentage of people to make sure they are following the ever changing regulations. Either way they do not really endanger the larger companies. So regulations decrease competition, raise prices and general come nowhere near controlling the actions of large companies. A much better approach to control is to increase competition and so drive the companies to provide cheaper and better services and goods on their own. However, companies hate that approach. It’s just to much work and it’s almost impossible to game the situation. So large companies are just fine with new and improved 3,000 page reform packages coming out of Washington.

Fred 2 on October 11, 2011 at 11:07 AM

A poster challenged me stating that he would rather have an experienced professional politician than gamble on Cain…
Here is an example of a professional experienced politician…I rest my case.

right2bright on October 11, 2011 at 11:08 AM

Thanks for posting this, Ed. I heard Ellison spout this nonsense over the weekend and later was reading an old issue of “Hawai’i Magazine” from 1991 containing a history of inter-island boat travel in the late 19th and early 20th centuries. Here’s the money quote:

In 1898, at the time of Hawaii’s annexation by the United States, both Interisland and Wilder’s were doing a thriving business. This changed when Hawaiian vessels were forced to comply with United States maritime regulations. The law requiring all steamers to carry licensed officers had disastrous effects. Many native Hawaiians, who were excellent at their jobs, couldn’t pass the examinations and were replaced by Mainland officers unfamiliar with Hawaiian waters. Wages for both officers and seamen were increased greatly, costly alterations were required to meet standards and duty was charged on fuel from Australia and Canada, which had been duty-free to the Kingdom of Hawaii.

The story goes on to note that after these regulations went into effect, the number of accidents increased greatly. In addition, Wilder’s lost so much money due to the regulations that it was forced to merge with its competitor. Interisland was able to stay afloat for a couple of decades, but ended up selling out to Matson, which is still around today. Before it folded, however, Interisland also started an inter-island airline, which is today’s Hawaiian Airlines.

Del Dolemonte on October 11, 2011 at 11:11 AM

Big companies always like regulations. It is easy enough to spread the costs out to all their costumers and unleash a flood of lobbyist to make sure that it doesn’t really hit them that hard.

Fred 2 on October 11, 2011 at 11:07 AM

That’s the key, regulations they can control…but in the end, it eventually comes around, as it has, and gets them, because someone else gets their regulation, that eventually infringes on their rights.
Classic example of what you stated:
In California, environmentalists demanded new regulation on gas stations…tanks, pumps, and monitors. Costing tens of thousands of dollars for each station…the companies “fought” it, but eventually gave in, with some concessions…turns out, the gas companies wanted the regulations, it forced the independents out since they couldn’t afford the upgrades. The were, through non-profits, supporting the environmentalists.
Company gas stations, they set the price, and the rest is history…no more franchises, no more competition, higher, much higher prices and greater profits…thank you environmentalists for being a tool.

right2bright on October 11, 2011 at 11:14 AM

Final Solution

The sad part is that the fact of scarcity settles in eventually. Then they need scapegoats.

P. S. I hear stuff like this from libs all the time and MSNBC sings praises of regulation creating jobs.

IlikedAUH2O on October 11, 2011 at 11:18 AM

Ahhh my lovely rep – I’m so proud/

I still contend if MN passed a voter ID law – he would have no chance in the next election.

gophergirl on October 11, 2011 at 10:48 AM

We must be neighbors, (I live in Longfellow,) and I totally agree. Same with Franken. The absentees “won” him the election.

foxforce91 on October 11, 2011 at 11:19 AM

Oh ya keith and that 300 billion in IRS compliance is really a big plus to the economy and helps keep consumer prices low!

tim c on October 11, 2011 at 11:26 AM

We could have full employment if everyone carried parcels on their backs instead of transporting them in trucks, and we’d solve our energy crisis if all the unemployed were put to work on stationary bicycles generating electricity. There’s a glorious future for America in Obamanomics!

Socratease on October 11, 2011 at 11:27 AM

The War on Drugs is totally awesome too since we have to hire so many prison workers.

faraway on October 11, 2011 at 11:32 AM

Spoon ready regs

faraway on October 11, 2011 at 11:36 AM

Here’s another huge flaw:

Just because a requirement may change – the staff, engineers, etc dont change, nor does it always equal a “net gain” in hires, which this dope is alleging.

And if new engineers and scientists are brought into the “new green standard” – what happens to the net employed “old engineers and scientists?”

MOre baffling BS froma liberal dope – wth zero results in job creation, parroting a losers creed.

Odie1941 on October 11, 2011 at 11:38 AM

Sure new regulations create jobs, but they create unproductive jobs, jobs that destroy wealth instead of creating it. The odious Sarbanes-Oxley is a good example. For a couple of years after this stinker was passed, postings for financial people that knew the legislation was one of the leading items in Monster.com. Many thousands of accounting types were hired, which increased costs to all those companies, who passed the costs on to customers that could afford it, and lost customers that couldn’t. All those accountants were deadweight overhead, unproductive anchors around the neck of industry.

Companies that couldn’t afford the Sarbanes-Oxley ‘tax’ went out of business. How many companies were not formed because of the costs of S/O?

Could Steve Jobs have created Apple Computer with loons like Ellison running the government?

slickwillie2001 on October 11, 2011 at 11:39 AM

But but but Lisa Jackass over at the EPA wants to hire nearly a quarter million new bureaucrats to enforce new EPA regs!

Jobs! Jobs! Jobs!

Yes, you read that right. The self-admitted number is 230,000 new bureaucrats, even though “The Environmental Protection Agency has said new greenhouse gas regulations, as proposed, may be “absurd” in application and “impossible to administer” by its self-imposed 2016 deadline.”

Jackass is probably underestimating the required number of new bureaucrats, given her tendency to underestimate the costs of regulations just as wildly as she overestimates the benefits. Of course, the fact that the resulting spike in energy costs will massively erode consumers’ buying power and further repress economic recovery is irrelevant. So is the fact that those costs will burden most heavily those least able to pay.

But that is Demonomics® for you. (I just invented that term, and I demand a 1¢ royalty on every use. Probably make me a millionaire, if I can only figure out how to collect. It can be pronounced with either a long or short “e” sound, as both are equally evocative and descriptive.)

I can only echo some of the comments above on the mind-boggling ignorance and stupidity of Ellison and his ilk. It is just very difficult to believe that anyone with two firing neurons could take these idiots seriously. (And WTF is going on in Minnesota, Ed? You aren’t from there, but you have been there a while, so have you any idea how a midwestern state can foster and elect so many politicians who are so fu**ing stupid?)

novaculus on October 11, 2011 at 11:50 AM

Expanding regulations cause big companies to get bigger by preventing competition by upstarts operating on a shoestring. It prevents “garage” operations from being able to compete because regulatory compliance is expensive. For a big company, that compliance is an acceptable “cost of doing business” because it raises the bar of entry to make it more difficult for competitors to enter the market.

Lets look at the ultimate extreme in regulations: drug laws. The drug cartels LOVE drug laws because it keeps out competition by legitimate operators. They don’t have to compete with smart law abiding citizens because the drug laws keep them out of competition with them.

Financial regulations do the same thing. A financial company might need an entire compliance department. That is an entire department of people that do not bring in any money to the business but whose entire job is to simply make sure that all government hoops are jumped through. They are pure overhead. A small startup company with an innovative idea can not enter that market unless they are backed by a billionaire because they can not afford the additional overhead expense of regulatory compliance. As a result, the big get bigger and the smaller fish either go broke, never start in the first place, or allow themselves to be eaten by the bigger fish.

These regulations are a perfect example of Milton Friedman’s “unholy alliance” between “dogooders” and the special interests. The dogooders believe they are helping people but are really tools of the special interests that want the regulation in order to keep out competition.

The answer to a robust economy is to slash regulatory overhead and allow bright people with innovative new ideas into the market. Not all will succeed but the ones that do will make the entire process worthwhile.

crosspatch on October 11, 2011 at 11:54 AM

This just in….

War is Peace,

Freedom is Slavery;

Film at 11.

Venril on October 11, 2011 at 11:58 AM

As soon as I read the first word of this article (Minnesota), I knew this was going to be entertaining. They really elect some doozies up there.

lynncgb on October 11, 2011 at 12:05 PM

Minnesota – “Land of 10,000 Lakes” and millions of idiotic voters!

Bob in VA on October 11, 2011 at 12:09 PM

crosspatch on October 11, 2011 at 11:54 AM

Well said. Large, established corporations LOVE heavy regulations, because they are more able to absorb the costs than smaller businesses. They spend millions on lobbyists to go to Washington and push lawmakers to make life more difficult for their competitors.

Regulations therefore help create and maintain monopolies, making the rich richer and keeping the less “fortunate” from getting ahead. It’s a shame that the “Occupy {insert your town’s name here}” protestors are too stupid to understand this.

UltimateBob on October 11, 2011 at 12:33 PM

crosspatch on October 11, 2011 at 11:54 AM

And to expand on your drug cartel analogy, I’ve visited “dry” counties in the south, and I can tell you that there are two kinds of people there who support prohibition: the devoutly religious who believe alcohol is evil, and bootleggers.

No offense intended to either group, they are both looking out for their own perceived self-interest.

UltimateBob on October 11, 2011 at 12:39 PM

You’ve never actually run a business, have you Mr. Ellison?

greggriffith on October 11, 2011 at 10:58 AM

Pandering to people even stupider than he is isn’t a business??

BigWyo on October 11, 2011 at 12:43 PM

…we’d solve our energy crisis if all the unemployed were put to work on stationary bicycles generating electricity…

Socratease on October 11, 2011 at 11:27 AM

Hey, you might have something there… Maybe if Funemployment isn’t quite so fun, folks will get the hell off the dole and get serious about finding a job, even if it’s ‘beneath’ them. Jerking soda beats the hell outta a 8 hours on a stationary bike.

Venril on October 11, 2011 at 12:52 PM

UltimateBob on October 11, 2011 at 12:39 PM

The same can be said about gambling and prostitution laws. They don’t stop gambling or prostitution, they just ensure that the mob gets all of that business.

crosspatch on October 11, 2011 at 12:52 PM

Ellison…..CAIR’s favorite Congressman.

’nuff said.

PappyD61 on October 11, 2011 at 12:58 PM

Right Keith, increasing overhead costs is the goal of every manager with P&L responsibility.

Barnestormer on October 11, 2011 at 1:02 PM

Regulation creates jobs. Sharia freedom. That is Keith Ellison in a nutshell.

pat on October 11, 2011 at 1:06 PM

The qddictive drugs are the broken windows, not the enforcement of drug laws. Legalizing drugs will only destroy productivity and enslave millions more to their drug suppliers.

Count to 10 on October 11, 2011 at 1:37 PM

All we have to do is force every business in the United States to increase its employment by 10%, and we’ll have no more unemployment!

Problem solved!

Realist on October 11, 2011 at 10:49 AM

The engineer in me says that you could also eliminate 13% of the population and have no more unemployment!

Alas logic dictates that there will be unemployed people no matter what. There are those who will never work for a variety of reasons, Karl Marx was one of them.

This guy is like most people I meet or observe in public…
They think the Laws of Physics don’t apply to them.

orbitalair on October 11, 2011 at 1:37 PM

The engineer in me says that you could also eliminate 13% of the population and have no more unemployment!

Over 30 percent of the current US workforce will be retiring in the next 15 years.

crosspatch on October 11, 2011 at 1:57 PM

Where did SNL find this new guy!! He is spot on and hilarious.

Koa on October 11, 2011 at 2:02 PM

Ellison is a cockroach and he deserves all the consideration any cockroach deserves.

SKYFOX on October 11, 2011 at 2:32 PM

As an entrepreneur, hearing the wisdom of Congressperson Ellison made the CFL come on. Once it warmed up under it’s sickly yellow glow, I decided to apply the principles of ‘Obama-Ellison-Unicorn Economics’ to start a company that enables everyone from 8 to 80 to create up bazillions of jobs by the time Obamacare has lowered the national debt.

Our product is called .. *FUNGULATIONS!!!!* That’s right! Fungulations! (That’s Fun Regulations for the slow and Republican…).

Our tag line: “All your jobs they are created by Fungulations!”

Now you too can be the first liberal on your block to CreateOrSave skads of “jobs” simply and easily using Fungulations!.

Just go to our web site, select the Fungulations! package that’s politically-correct for you, (credit cards and food stamps accepted, sorry, no checks), then prepare yourself to achieve all the sweet, sweet JobCreation ™ you can possibly stand!

“But isn’t creating or saving jobs too hard for anyone but the government?” you ask? No way dude! Anyone can do it! Simply pretend your new Fungulations are Real Government Regulations! From The Like Real Government! and the peer-reviewed, science-is-totally-settled, big-F’n-deal ‘Obama-Ellison-Unicorn Economics Effect’ will kick in instantly – and then as if by magic (but it’s not, it’s just like real science) you will instantly hire up to 10,000,000 people or more who will help you through the years of non-productive work needed to achieve compliance with our life-like Fungulations!

So with Fungulations! you too can feel free to unclench and go about your life with skads of new found FauxSelfEsteem! (included at no extra cost) knowing that you too will soon leave funemployment behind and begin your lucrative new career as a “CEO of Fungulations! Compliance Studies”.

We guarantee that due to your successfully creating so many jobs and raking in more than four figures(!) of income that you’ll soon be hating yourself so much that you’ll be demanding that the government raise your taxes and prosecute you for something.

DrDeano on October 11, 2011 at 6:37 PM

Drinking and politics don’t mix.

CW on October 11, 2011 at 7:54 PM