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Central Planning Is a Job Killer

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Thursday, 06 Sep 2012 08:10 AM Current | Bio | Archive

In Paul Ryan’s acceptance speech at the Republican National Convention, he referred to “central planning” as the core of the Obama administration’s approach to the economy. He nailed it. Central planning is actually a form of social engineering, where the chief planner (President Barack Obama) intervenes in the economy to manipulate it to his own standards and anticipated results.

This is the antithesis of how this country grew and prospered. After suffering under the yoke of a British monarchy where the king had the power to pass any law, our Founding Fathers understood how this power could be corrupted. That’s precisely why they instituted a series of checks and balances. They also understood that the federal government should have as little power as possible.

The federal bureaucracy began with the three cabinet departments established by George Washington in 1789. Today, the federal bureaucracy consists of about 500 departments, agencies, administrations, authorities and commissions that carry out responsibilities assigned to them through Congressional legislation.

Central planning creates the bureaucracy that kills decentralized decision making, which is the foundation of free markets and entrepreneurship.

A recent Gallup study found that in several of Europe's most economically troubled countries, fewer than 20 percent say the government makes it easy to manage a business, and more than three-fourths say corruption is widespread in government. The pattern shows the degree to which bureaucratic corruption can restrain free enterprise and limit economic growth.

Gallup's findings, based on surveys in 16 EU member countries in 2011, suggest that “removing perceived barriers to entrepreneurship may offer part of the solution. Small and medium-sized enterprises employ about two-thirds of the EU's private-sector workforce and are vital growth engines.”

In the United States, small businesses account for more than 75 percent of all job creation. As an entrepreneur myself, I’m proud to employ some 200 U.S. workers. And I couldn’t agree more with Gallup’s findings that removing governmental barriers is the key to job creation.

America’s 27.2 million small businesses employ nearly 60 million people. Despite their important contribution to the country’s economy, these companies face some of the steepest regulatory costs in the world. According to a U.S. Small Business Administration study, firms with fewer than 20 employees actually pay 36 percent more in regulatory costs per employee than do larger companies. Is it any wonder that small businesses are reluctant to hire?


The Office of the Chief Counsel for Advocacy of the U.S. Small Business Administration estimates that the annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008 and is now over $2 trillion. Had every U.S. household paid an equal share of the federal regulatory burden, each would have owed $15,586 in 2008. This federal regulatory burden exceeds by 50 percent private spending on health care, which equaled $10,500 per household in 2008.

An NBC report found that during Obama’s first two years in office, 555 new “significant” regulations, or ones that have a cost or benefit of at least $100 million in a year, have been enacted, according to the Office of Management and Budget. Over the eight years that George W. Bush was in office, about 2,380 regulations were enacted, an average of 595 every two years.

Alec Ross, senior advisor on innovation to Secretary of State Hillary Clinton, recently noted that you can’t regulate or litigate to spur economic growth. You have to innovate. He must not be talking to the Obama people.

Central planning has destroyed this economy and has resulted in 25 million Americans being unemployed or underemployed. We need a new direction that reduces taxes and regulations so that the power flows back into the hands of innovators — our entrepreneurs and job creators.

Donald Boudreaux, a professor of economics at George Mason University, recently wrote: “The failure of central planning all boils down to one thing: the limits of knowledge. Central planning is as futile as trying to strap on wings and fly like a bird — and potentially as calamitous.”

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2012-10-06
Thursday, 06 Sep 2012 08:10 AM
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