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Small Businesses Not Growing? That's Because Regulations Are

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Small Businesses Not Growing? That's Because Regulations Are

U.S. Senate Hearing Should Outline Concrete Steps for Regulatory Relief

The U.S. Senate Committee on Small Business and Entrepreneurship will hold a hearing Thursday, November 18, on “Assessing the Regulatory and Administrative Burdens on America’s Small Businesses.”

Statement of Wayne Crews, Vice President for Policy at the Competitive Enterprise Institute, author of the annual Ten Thousand Commandments report on federal government regulation:

Over 3,000 federal regulations pour out of 60-plus departments, agencies, and commissions annually, many of which impact small businesses disproportionately. The Small Business Administration pegs annual regulatory costs at over $1.7 trillion. Innumerable regulations yet to come from the new financial reform and ObamaCare legislation guarantee more suffering for small businesses and stagnant job creation.

There is plenty which the Senate Small Business and Entrepreneurship Committee and Congress can do to energize small businesses in America—and large ones, too. The approach needed is an extensive campaign to “Liberate to Stimulate.” Congress doesn’t have to tell the grass to grow, but it does have to remove the rocks on top.

In addition to cutting taxes and reducing the paperwork that paralyzes business and job creation, a good starting point is to inventory all the regulations that impact a small business as it grows, and systematically set about rolling them back. Hiring more workers and gaining more customers should not incur penalties in the form of onerous new rules.

Regulations should not accumulate endlessly. Rather, they should sunset or expire unless renewed by Congress—not unaccountable agencies. Legislation to that effect should be a priority for the new Congress. In the meantime, Congress should take the following steps:

(1) Implement a moratorium freezing non-essential new rulemaking.

(2) Implement a bipartisan Regulatory Reduction Commission to review the regulatory state as a whole and enact a non-amendable package of cuts and purges (possibly along similar lines as the highly successful Defense Base Realignment and Closure Commission). Former U.S. Sen. Phil Gramm created a comprehensive plan for this in the 1990s, which merits attention today.

(3) Require a vote on all agencies’ major rules (those expected to cost over $100 million) and controversial future business regulations before they become binding. Delegation of lawmaking power to unelected agencies is out of control. Examples include EPA’s endangerment finding, unauthorized imposition of “net neutrality” by the FCC, energy efficiency rules, new regulations arising from the recent massive health care and financial legislation, and many more. The means to restore congressional accountability over unelected agency bureaucrats is contained in the Regulations from the Executive In Need of Scrutiny (REINS) Act (H.R. 3765, S. 3826), recently introduced by Rep. Geoff Davis (R-KY) and Sen. Jim DeMint (R-SC).

Going further, to achieve real regulatory reform, Congress should also do the following:

• Increase flexibility for small businesses;

• Create better channels for small businesses to dispute onerous rules;

• Require supermajority points of order for unfunded mandates;

• Create a basic Regulatory Report Card to accompany the federal fiscal budget; and

• Avoid any further government interference into the small businesses that are America’s engines of job and wealth creation.

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Addendum

How do laws accumulate as businesses grow? A rough inventory appears below (exclusive of industry-specific legislation; see endnote).

FEDERAL WORKPLACE REGULATION IMPOSED ON GROWING BUSINESSES*

ONE EMPLOYEE

• Fair Labor Standards Act (overtime and minimum wage; 27 percent minimum wage increase since 1990)

• Social Security matching and deposits

• Medicare, Federal Insurance Contributions Act (FICA) tax

• Military Selective Service Act (90 days leave for reservists; rehire discharged veterans)

• Equal Pay Act (no sex discrimination in wages)

• Immigration Reform Act (eligibility must be documented)

• Federal Unemployment Tax Act (unemployment compensation)

• Employee Retirement Income Security Act (standards for pension and benefit plans)

• Occupational Safety and Health Act

• Polygraph Protection Act

FOUR EMPLOYEES: ALL THE ABOVE, PLUS

• Immigration Reform Act (no discrimination with regard to national origin, citizenship, or intention to obtain citizenship)

15 EMPLOYEES: ALL THE ABOVE, PLUS

• Civil Rights Act Title VII (no discrimination with regard to race, color, origin, religion, or sex; pregnancy-related protections; recordkeeping)

• Americans with Disabilities Act (no discrimination, “reasonable accommodations”)

20 EMPLOYEES: ALL THE ABOVE, PLUS

• Age Discrimination Act (no discrimination on the basis of age against those 40 and older)

• Older Worker Benefit Protection Act (benefits for older workers must be commensurate with those for younger workers)

• Consolidated Omnibus Budget Reconciliation Act (COBRA) (continuation of medical benefits for up to 18 months upon termination)

25 EMPLOYEES: ALL THE ABOVE, PLUS

• Health Maintenance Organization Act (HMO Option required)

• Veterans’ Reemployment Act (reemployment for persons returning from active duty, reserve, or National Guard)

50 EMPLOYEES: ALL THE ABOVE, PLUS

• Family and Medical Leave Act (12 weeks unpaid leave or care for newborn or ill family member)

100 EMPLOYEES: ALL THE ABOVE, PLUS

• Worker Adjustment and Retraining Notification (WARN) Act (60-day written plant closing notice)

• Civil Rights Act (annual EEO-1 form)

*Assumes non-union, non-government contractor, with interstate operations and a basic employee benefits package. Includes general workforce-related regulation only. Omitted are categories such as environmental and consumer product safety regulations, and regulations applying to specific types of businesses such as mining, farming, trucking or financial firms.