Regulation Is This Halloween’s Goblin
American entrepreneurs and small business owners have good reason to be scared this Halloween. According to a new Gallup poll, small business owners consider “complying with government regulations” to be the greatest problem they face. Why? Because the current administration and government bureaucrats simply can’t get enough of scaring the bejesus out of entrepreneurs with calls for more regulations.
The March 2010 health care legislation (not-so-affectionately known as “Obamacare”) is an appropriate bogeyman. Rammed through Congress with little public support, it continues to cast a pall of uncertainty throughout the economy, as thousands of its implementing regulations have yet to be written. As a result, firms are holding back on hiring employees and engaging in new projects until they know how the rules will affect them.
Of the legislation’s 907 pages, the Department of Health & Human Services (HHS) already has managed to turn just six of those, regarding the Medicare shared savings program, into a whopping 429 pages of new rules. At that rate, businesses can expect to face 71.5 regulations per page and almost 65,000 new regulations as a result of this legislation.
Another specter that businesses face is the authority that Obamacare grants to the HHS secretary. Among 139 other powers, HHS Secretary Kathleen Sebelius will single-handedly define the “essential” minimum coverage that every business must purchase for its employees in order to avoid a tax penalty — a measure of absolute power that would have our Founders rolling over in their graves.
Businesses are certain about one thing: more taxes. According to a July 2011 poll by the National Federation of Small Businesses (NFIB), more than 75 percent of small businesses believe that their taxes will increase in order to pay for Obama’s health care overhaul. They just don’t know by how much.
More uncertainty comes from the new Consumer Financial Protection Bureau (CFPB), created by the regulatory behemoth Dodd-Frank Act. Although the bureau’s specific powers are still undefined, it will enjoy a negligible amount of congressional oversight because its budget has been tied to that of the “politically autonomous” Federal Reserve. As a result, unaccountable bureaucrats may interpret the CFPB’s mandate to prevent “unfair, deceptive and abusive” business practices to mean just about anything that suits their fancy.
Worst of all, it’s small businesses that will be hit the hardest by Dodd-Frank. Small financial institutions like community banks and credit unions don’t have entire departments devoted to regulatory compliance, unlike their larger competitors, which can devote considerable resources to complying with the act’s mandates.
A September 2010 NFIB study found that firms with 20 or fewer employees pay $2,830 more per employee in compliance costs than do firms with 500 or more employees. Higher costs for small lenders result in less credit for small businesses, which means fewer jobs.
These two acts are merely the tip of the iceberg. Considering the glut of other regulations coming down the pike, 4,225 to be exact, according to Wayne Crews of the Competitive Enterprise Institute (CEI), it’s no wonder that businesses are afraid to hire more employees and that our economy is stagnant. Crews estimates the U.S. annual regulatory burden at $1.752 trillion, which is about 11 percent of GDP.
Wynn Resorts CEO Steve Wynn famously called the Obama administration “the greatest wet blanket to business” and explained that, “all of us in this marketplace … are frightened to death about all the new regulations … and it makes you slow down and not invest your money.”
As bad as things are now, Obamacare and Dodd-Frank threaten to make them worse as their soon-to-be-written regulations send regulatory costs soaring even further. And worse yet, the president has made no indication of backing off this regulatory rampage. This Halloween, the government may be the scariest trick-or-treater of all.