Will President Obama’s governmentwide review of existing regulations have a positive net impact on the psyche and bottom lines of small-business owners? The short answer is no. The burden of the existing system, made worse by the torrent of new regulations, has become far too costly and intrusive.
The president directed federal agencies and departments to produce plans to eliminate red tape and streamline compliance. The results of the look-back include 500 actions and recommendations that aim to produce a minimum of $10 billion in savings over 10 years. While that’s progress (if these savings actually materialize), the amount represents a small fraction of the $1.75 trillion in total federal regulatory costs as quantified by the Small Business Administration’s Office of Advocacy in 2010.
The White House calls the regulatory review “unprecedented.” Yet every administration going back to President Reagan’s has undertaken similar programs, albeit with varying degrees of success. This is not to downplay Mr. Obama’s initiative. The size of government and the vast changes in our economy warrant a permanent and ongoing review process. Office of Information and Regulatory Affairs (OIRA) Administrator Cass Sunstein has pledged that the current review will not end. He is “very much among the people who are focusing on the cost of new regulations.” In that case, OIRA has significant work ahead.
The quantity and scale of new federal regulation is unprecedented. Of the more than 4,200 regulations in the works, 845 of them affect small businesses - an 11.5 percent increase over 2009. Of “major” regulations (costing the economy $100 million or more) 224 were issued last year - an increase of 22 percent over 2009 and the highest number on record.
As Mr. Obama learned during his recent bus tour, small-business owners are working as hard as they can to survive in a difficult economy. Illinois farmer Rock Katschnig told the president that he tills the land as safely and efficiently as he can and would rather start his day plowing fields, not pushing paper. “Please don’t challenge us with more rules and regulations from Washington, D.C.,” he politely pleaded.
Mr. Katschnig specified three regulatory concerns that could impact his business, but the president was dismissive. He suggested that business associations sometimes make stuff up regarding regulations, so no need to worry because his administration uses common sense. Mr. Katschnig was urged to call the government to get the real story even though he technically was correct regarding the specific cases he cited. That flippant Beltway attitude is part of what’s draining the confidence out of America’s small-business owners, which is a major problem for the Obama economy.
The American Express OPEN website recently analyzed the 10-year findings of its Small Business Monitor Survey to see how today’s “small business optimism” matches up against previous periods. Until 2007, small-business owners were a confident bunch. Optimism hit its highest point in 2005 but then sank at the beginning of the recession. It has yet to recover.
If the regulatory mess is not fixed, the economy will continue to limp along or perhaps sink further. Therefore, the president’s new economic plan must include a look forward at the pile of new regulations associated with Obamacare and Dodd-Frank along with new rules oozing out of the Environmental Protection Agency (EPA) and other departments. New regulations must be scaled back to boost business confidence and restore certainty.
The EPA, especially, shows a lack of regard for its actions. The agency’s response to the president’s current review is overly vague and noncommittal. The report, quite literally, is filled with good intentions. It uses the word “intends” more than 139 times.
Congress needs to intensify its reform effort as well. The Regulation from the Executive in Need of Scrutiny (REINS) Act, sponsored by Sen. Rand Paul and Rep. Geoff Davis, both Kentucky Republicans, is a good start. REINS would require Congress to take an up-or-down vote on every new major rule before it could be enforced. That’s accountability.
The Restoring Economic Certainty Act, introduced by Rep. Reid J. Ribble, Wisconsin Republican, would place a 24-month cooling-off period on the majority of new regulations moving through government agencies. It would make practical exceptions for emergency and disaster rule-making. A bill by Rep. Jim Matheson, Utah Democrat, and Rep. John Sullivan, Oklahoma Republican, requires the EPA to conduct a comprehensive analysis of the cumulative costs and benefits of regulations that are due to be imposed over the coming two years. This analysis must include their impact on U.S. competitiveness, employment, energy prices, the reliability of power and more.
Mr. Obama told farmer Katschnig he’s for common sense and weighing the costs and benefits of regulations. Applying those principles to the regulatory mess of the past two years would prove that claim.
Karen Kerrigan is president of the Small Business & Entrepreneurship Council.