from Dean Baker
Harvard’s standing in economic policy debates took a big hit when the famous Reinhart-Rogoff 90 percent debt-to-GDP growth cliff was shown to be the result of a simple spreadsheet error. Niall Ferguson’s strange rant in the Wall Street Journal about the United States becoming the land of government regulation continues the downhill slide.
The gist of the piece is that the country is going down the road to economic stagnation and suffocating bureaucracy because of excessive regulation. The Affordable Care Act (ACA) is the main villain in this story.
It’s fair to say that just about everything in the piece is wrong. Starting with the meat, rather than being some horrible burden for small businesses, the main effect of the ACA on the vast majority of small businesses will be to provide them with a subsidy if they offer their workers insurance. The mandate only applies to firms that employ more than 50 workers, most of whom already provide insurance that would meet the mandate anyhow. So these engines of innovation will grind to a halt if the government offers them subsidies for insurance? Interesting theory.
Ferguson then cites a number of hack studies that find enormous costs to regulation. The main trick in this sort of study is to add up every possible cost associated with restrictions without taking account of the benefits of these regulations. Read more…