When Republicans describe the strength of the economy over the past two and a half years, they generally cite the 2017 tax cut and the Donald Trump administration’s record on deregulation. Indeed, the connection between regulation and employment has over the past decade become a permanent feature of anti-regulatory rhetoric on the right. One study found the explosion of the phrase “job-killing regulations” during the Obama administration.
Ironically, the experience of the Trump administration should put an end to this rhetoric. The past two and a half years have shown consistently low unemployment numbers. Even critics of the administration admit that the economy has been consistently strong (they differ of course on whether the Trump administration is responsible).
But while the economy has shown consistent strength over the past few years, none of that strength can logically be attributed to reduced regulatory requirements. That’s because, despite the rhetoric of the Trump administration and its supporters, there has been very little deregulation. At the beginning of the Trump administration, there were thousands upon thousands of regulations on the books. In 2019, the overwhelming majority (more than 99.99 percent) of those regulations remain.
Sure, there have been a few high-profile examples of deregulation. At the beginning of the administration, Congress, using the Congressional Review Act, repealed 15 regulations promulgated late in the Obama administration. In addition, there have been a few high-profile attempts by the Trump administration to repeal other regulations issued by the Obama administration.
Many of these attempts are still in progress or are being litigated. It is likely that some of these deregulatory initiatives will be declared illegal. Even if some survive the judicial gauntlet, these efforts (consistently exaggerated by the administration) in aggregate represent a very small fraction of the regulations issued over the past 50 years.
If there hasn’t been a reduction in the burden of regulation, is there any logic to the argument that the Trump administration’s regulatory policy has contributed to the economic strength? One argument could be that the lack of enforcement of existing regulations is responsible. But this assumes that firms have reacted to reduced enforcement by wantonly breaking the law. Most firms are responsible actors, so this seems to be an unlikely source of economic gains.
Another possible explanation rests in the argument that the Trump administration, while eliminating very few regulations, have also created very few new regulations. This lack of new regulations could spur business by increasing the predictability that many businesses crave. But if this is the case, then it is not regulation that is the problem, it is unpredictability. An administration that wishes to regulate could minimize economic harm by being clearer about its policies.
The simplest explanation for the relationship between Trump regulatory policy and the economy’s strength is that there is no such relationship. This is not to say that individual regulations do not impose burdens on particular industries and lead to layoffs in those sectors. But those same regulations likely help other industries (a climate change regulation could hurt the coal industry while helping the solar power industry). The overall impact on the larger economy is likely to be minimal. So is the cumulative effect.
The economy writ large is affected much more by factors such as interest rates, trade policy, productivity gains, and the business cycle. Rhetoric attaching regulatory policy to large-scale economic harm is largely groundless. We should remember that when evaluating an administration’s economic performance, and when evaluating proposals by candidates for the nation’s highest office.
Stuart Shapiro is professor and director of the Public Policy Program at the Bloustein School of Planning and Public Policy at Rutgers University, and a member of the Scholars Strategy Network. Follow him on Twitter @shapiro_stuart.