January 2 2014

Government Strangles U.S. Growth

Patrice J. Lee

When politicians call for new regulations on business they are contributing to the rapid expansion of businesses and jobs—overseas. They are also engineering market and employment retardation here in the U.S.

Apparently, lawmakers don’t comprehend that incentives and penalties change behavior. They also entirely miss the law of unintended consequences. New regulations raise the costs of doing business and create barriers to entry for new business. Some companies can absorb the costs, others will go out of business, and others will look for other areas to operate. Enterprising entrepreneurs will be deterred from hanging their shingle.

Nothing validates the tangible damage that misguided government policies inflict better than personal testimonies.

Andy Puzder is the CEO of CKE Restaurants, which is the parent company of fast food restaurant chains Hardee’s and Carl’s Jr. He explains that his company’s rapid overseas expansion (now operating in 30 foreign countries) is due to strangling U.S. regulation and more foreign opportunity. And it’s not just federal regulation but state level hurdles. Who knew Siberia is more appealing to new business than California?

Puzder explains:

"Under the current U.S. business climate, regulatory and tax restrictions tend to curb otherwise dynamic entrepreneurial energy," Puzder said. "We'd love to see more growth in domestic markets. Unfortunately, it's easier for our franchisees to open a restaurant in Siberia than in California."

Puzder named ethanol regulation, which has resulted in higher beef costs, a rising minimum wage and higher labor costs due to Obamacare as three obstacles that make doing business in the U.S. more difficult than in the past.

To help lessen the effect of these rising labor costs and to attract a tech-savvy generation, CKE is turning to technology and looking into options for mobile ordering as well as tablet ordering within its restaurants.

"I think it satisfies the needs of younger people. It also reduces your costs," he said. "When they talk about raising the minimum wage or providing health care for employees over 30 hours, you're really encouraging automation."

Let’s highlight an important clue about the future of low wage jobs. He –and no doubt other executives- are turning to automation as an alternative to higher labor costs. So those dandy policy ideas of raising minimum wages and providing healthcare for employees over 30 hours will likely drive up the value of automating some jobs or send more companies to explore overseas markets.

In light of the ObamaCare rollout flop and the woes ahead for Americans as the “Unaffordable” Care Act goes into full effect beginning yesterday, Democrats plan to pivot to supposedly reducing income inequality through raising the minimum wage. Americans should not be fooled. Raising the minimum wage and the employer healthcare mandate will be a (net) loss for workers especially minimum and low wage workers.

Business will not absorb the new costs being foisted on them because of bad policies. They can’t just pass them on to customers in higher prices, so they will alter their costs of doing business and who loses out will be American workers and our economy.

Here’s  to another year of tepid growth and high unemployment –at best.

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