How excessive regulations stifle small businesses

Jun 13th, 2014

Many factors are preventing speedy economic growth

By Sean Hackbarth

U.S. Chamber of Commerce

According to revised gross domestic product numbers, instead of being nearly flat, the economy actually shrank by 1 per­cent in the first quarter of 2014. Growth is expected to bounce back later in the year, but ever since the end of the Great Recession, the economy has struggled to produce enough economic growth to return to full employment.

What’s holding back the economy from growing faster so it can produce more jobs and higher wages?

John Dearie, executive vice presi­dent at the Financial Services Forum and co-author of “Where the Jobs Are: Entrepreneurship and the Soul of the American Economy,” said he thinks the vast amount of regulations facing entrepre­neurs plays a role.

At roundtables the U.S. Chamber of
Commerce conducted with entrepreneurs in 12 cities across the United States, a number of major themes everywhere were heard – remarkable, given the size and di­versity of the U.S. economy. One recurring message is that regulatory burden, com­plexity and uncertainty are undermining entrepreneurs’ ability to successfully launch new businesses, expand and create jobs.

“They can be federal, state or local – and sometimes they conflict,” said Alan Blake of Austin-based Yorktown Technologies. “Identifying, understanding and complying with all these regulations is a huge loss of productivity. … Entrepreneurs don’t have the resources to hire an in-house counsel or a chief financial officer. They’re trying to do all of it themselves.”

“It’s as if the politicians and regulators in Washington want me to fail – and spend all their time thinking up new ways to en­sure that I do,” said Sharon Delay, founder of Adjunct Solutions in Westerville, Ohio.

“Quit throwing ridiculous roadblocks in front of me! You either want me to be the engine of the economy or you don’t.”

Dearie continues: “To be sure, regula­tion is essential to market economies. It establishes the rules of competition, ensures a level playing field, governs participants’ behavior and protects consumers, public health and safety, private property and en­vironmental resources.

“But regulation is not free, or without consequence. Regulation imposes costs – costs borne principally by businesses.”

One cost is less job creation. Andy Puzder, CEO of CKE Restaurants, owner of the Carl’s Jr. and Hardee’s burger chains, said the “unnavigable regulatory maze” has made it hard to “create those business models that justify investing to create more jobs.”

Richard Fisher, Dallas Fed president, would likely nod his head in agreement with both Dearie and Puzder. He recently
told Fox Business that the growing regula­tory mountain “keeps building on itself. And by continuing to do so, it’s scaring job creation away.”

But there’s hope: There are places that not only get that excessive regulation is stifling but are doing something about it. Dallas and St. Louis topped U.S. Chamber of Commerce Foundation’s 2014 Regulatory Climate Index, which measures the ef­ficiency of regulations affecting new small businesses in 10 major U.S. cities. With the Index, other cities can learn what’s working from these two cities. In addition, as U.S. Chamber Senior Vice President Bill Kovacs wrote recently, President Obama is “firmly positioned on the side of streamlining the federal permitting process.”

Finally, there’s Fox Business’ Stuart Varney who in a commentary on the extent that regulations have encroached into peo­ples’ lives remains an optimist, saying “All­government, all the time is on the way out. The sooner it leaves us alone, the better.”

We just have a lot of work to do to get us there.