Today on Face the Nation (hosted by fellow Horned Frog, Bob Schieffer), I heard Mitt Romney add his voice to the chorus of those saying that economic recovery would follow if only we relieved the terrible burden that the government has placed on the nation’s job creators: business. Were taxes and regulations were relaxed, this would reduce costs sufficiently to allow firms to do what they are already dying to do, which is expand operations.
But even if we grant the argument that business taxes and regulations are high (which is by no means clear–in fact, it’s easier to make a case for the opposite), this ignores two crucial facts. First, as my friend Mike Norman has pointed out, employees are a cost, usually the most significant one faced by firms (Mike Norman Economics). For that reason, every rational entrepreneur’s goal is to reduce, not increase, the number of workers they have to pay. And quite right. Entrepreneurs have families, too, and they need to feed and clothe them. It would be irresponsible to do otherwise.
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