Fix the Broken Regulatory System to Save the American Dream (The Hill)

Out on the campaign trail, candidates and politicians have blamed a whole host of culprits for our challenges in the modern global economy. But the fact is, if we want to win jobs for Americans and outpace our international competitors, then we have to lower the cost of doing business in the United States. We can begin by tackling the onslaught of federal regulation that has kept small business owners and entrepreneurs from realizing the American dream.

Talk to small business owners and you will hear the same thing over and over again: some regulations are absolutely necessary, but others are ineffective at best and harmful at worst. The constant churning out of new regulations without careful vetting and analysis, or a transparent process, leads to some rules being counterproductive, contradictory and next to impossible to understand. The problem is magnified among small business owners who often lack resources to keep pace with new regulations—and as a result have to make difficult choices.

If Washington doesn’t get serious and change how regulations are written, by giving those most affected a seat at the table, the road to the American dream could end up being a dead end. Small business owners and employees rarely get to play a part in assessing the rules that govern the “system,” and therefore, they often have the hardest time keeping up with Washington’s aggressive regulatory pace.

In fact, the National Association of Manufacturers (NAM) calculates that federal regulations cost small companies—those with fewer than 50 employees—almost $12,000 per employee each year. For manufacturers of the same size, that cost increases to almost $35,000. So it’s not surprising that regulatory costs have led to hiring freezes, growth stagnation and even businesses closing their doors.

The truth is there is nothing “small” about the impact small businesses have on the U.S. economy. The vast majority of manufacturing firms in the United States are small companies. Half the working population—120 million Americans—work for small businesses. More than 60 percent of private-sector job creation comes from them. They are the lifeblood of our economy, and when they suffer, we all do—our economy, our communities and our collective prosperity.

Regulations affect almost every facet of small business operations, from financing and staffing to franchising and licensing. In recent conversations with an Ohio real estate developer and a specialty olive oil retailer from New York, both spoke of the minute regulatory details they must navigate, such as the types of paints that may be used to the kinds of appliances that must be installed in some storefronts. For each rule the government adds, there is a cost—sometimes paid by small business owners in dollars and other times in hours that would be better spent on expansion plans, new projects or serving customers. 

Many still haven’t recovered from the economic recession that began eight years ago. Today’s regulatory environment is part of the reason why. A 2015 study, titled The Two-Speed Economy, concluded that the impact of government regulation on small firms, combined with the Great Recession, made the recent recovery period weak in comparison to previous downturns. Because of this, it is estimated that there are 600,000 small businesses and 6 million jobs “missing” from the economy that would have otherwise been created. Bureau of Labor Statistics figures also show the climate for new business job growth has yet to rebound. The number of jobs created by new firms in 2015 is still 500,000 less than the number created in 2007.

We fundamentally believe the federal government’s regulatory process must be reformed so important goals like public health, environmental protection and consumer safety are better balanced with the need to encourage more entrepreneurship and economic growth. To generate momentum for this reform and showcase the impact regulations have on American startups, we are co-leading a new coalition called Rethink Red Tape—a partnership of the NAM, the Small Business & Entrepreneurship Council, the International Franchise Association and Women Impacting Public Policy.

America’s small business innovators need a voice in the debate about regulations as well as a platform to help reform rules that have failed or outlived their usefulness. We want to change the way regulations are written based on five key principles:

  • Meaningful public engagement in the rulemaking process
  • Prioritization of unbiased, scientific information in rulemaking
  • Consideration of public costs and benefits
  • Transparency and clarity in how rules will be enforced and how compliance can be attained
  • Regular evaluation of whether regulations are working

With millions of Americans dependent on small businesses to provide for their families, and with communities across the country placing their hopes for growth and prosperity on startups and the small business economy, government officials should do all they can to reduce the burden of regulation on small firms—lowering the cost of doing business and making it easier to compete and win in the global economy.

Our coalition and small businesses are calling for smarter regulation and an acknowledgement that regulatory reform has to shift from being a partisan political issue to a bipartisan policy priority.

Karen Kerrigan is president and CEO of the Small Business & Entrepreneurship Council, a nonpartisan advocacy and research organization dedicated to protecting small business and promoting entrepreneurship. Jay Timmons is president and CEO of the NAM, the largest manufacturing association in the United States.


View Article