Ease of doing business in U.S. and record corporate profits contradict Chamber’s regulatory complaints
After years of hearing the Chamber of Commerce and certain other business groups complain about the regulatory burden government imposes, far too many Americans (and politicians) are probably convinced that regulations are excessively burdensome to businesses. Not so, according to two important new pieces of information.
First, after examining 185 nations on 10 key factors, the World Bank’s latest “Ease of Doing Business” study ranks the U.S. No. 4 overall and No. 1 among the 25 largest economies. In the words of the World Bank, “A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm.” Unlike so many business trade associations and lobbyists, the World Bank recognizes that the regulatory environment includes many rules that enhance and protect business activity, and the U.S. ranks especially high in protecting investors, enforcing contracts, and getting credit.
A second fact that contradicts business complaints about burdensome regulations is that corporate profits, which were $1.75 trillion in the third quarter of 2012, are at an all-time high (higher as a percent of GDP than at any time in our history). That corporate America’s bottom line is doing extraordinarily well should, at a minimum, make one skeptical of the seemingly endless studies by business groups which somehow find that regulations are damaging them.
That leads to the central question: Given that the U.S. has one of the most welcoming regulatory environments in the world, why aren’t U.S. businesses creating more jobs instead of hoarding the historic profits they’ve accumulated? The answer, as most economists know, is slack demand. Without customers able and willing to spend, businesses won’t invest. The solution is the same as it was at the start of the recession: because financially squeezed consumers can’t spend and businesses won’t, it is the responsibility of the federal government to make large enough investments in infrastructure and human capital to lift the economy and protect our future prosperity.