Can Businesses Afford Any More Government Regulation?
On August 30, President Obama announced he will introduce a total of seven new government regulations for Congress to consider during its current session. Four of them are Environmental Protection Agency rules and three are Department of Transportation rules.
The Obama Administration estimated the cost for each of these new regulations at $1 billion a year or more. It has also proposed 219 additional regulations this year that will cost the economy $100 million or more apiece.
Each of these major and minor regulations and rules have a significant cost attached to them, from the direct cost of enforcement to lost productivity for businesses that have to interpret each rule and decide how to comply.
This chart demonstrates how the number of major rules and regulations has grown from 1900 to 2010. In 1900, business owners had to be concerned with case law and common law. By 1940 the number of additional regulations increased by seven. By 1980 they had increased by 16. In 2010 the number of major additional regulations businesses had to contend with rose by an additional 28!
I am not questioning the need for all of these rules and regulations. I do think that regulations become immaterial when the cost to comply with them becomes so great that businesses can’t afford to hire new employees and can't earn a profit.
A 2005 Small Business Administration (SBA) study concluded that the cost to comply with governmental regulations was being disproportionately borne on the backs of small-business owners. The SBA Office of Advocacy indicated in its 2005 study: “The research finds that the cost of federal regulations totals $1.1 trillion; the cost per employee for firms with fewer than 20 employees is $7,647.”
The study showed that government regulations fell into four main categories (sorted here from biggest to smallest):
- Economic
- Environmental
- Workplace
- Tax Compliance
At a time when our country needs more jobs than ever is it fair to burden small businesses that create nearly 90 percent of all jobs in America with another nearly trillion dollars in governmental regulation costs this year alone?
Sam Thacker is a principal in Austin Texas based Business Finance Solutions and the Texas PEO Group.
His direct email address is mailto:sam@lesliethacker.com
Twitter: SMBFinance
