Tuesday, June 7, 2011

Businessmens' Excuses

James Kwak takes on a businessman's complaint that regulatory uncertainty is preventing him from expanding his business.  This is a favorite excuse of mine.  I heard the CEO of Penn Station complain on NPR that uncertainty over the extension of the Bush tax cuts, which he said was preventing him from opening new restaurants (I still haven't made the effort to eat at a Penn Station since hearing this).  I think that is a comfortable excuse for businessmen, especially conservative businessmen, to fall back on.  As Mr. Kwak says:
I’m not doubting that Mr. Business Owner really believes that regulatory uncertainty makes it too risky to hire more people. But his saying so doesn’t make it so. Well, one might say, the fact that he believes it is the problem, and so the government needs to do a better job convincing business that it’s on their side. But I’m not buying that either. The problem is that the conservative media have been trumpeting the talking point that the anti-business Obama administration is creating regulatory uncertainty, and they’ve been doing it so loudly and for so long that lots of people actually believe it. And if businesspeople aren’t hiring because of that belief, then it’s the conservative media — and people who repeat their talking points — that are to blame.**
I'll second that.  In the end, flexible businessmen, who are willing to learn about the regulations and meeting them, will have an advantage over their competitors.  Regulations and taxes are a cost of doing business, and if a businessman is afraid changes will negatively affect the payback on investment, they will have to accept lower paybacks or raise prices.  Their competitors don't have magical ways of avoiding the same regulations, so they will have to do the same things.

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