Small businesses push back against over-regulation

October 31, 2011

The Tennessean

Duane Marsteller

Jim Brown says he hears “regulatory horror stories” from small-business owners every week.

There was the Martin, Tenn., developer who spent $6,000 and nine months dealing with four agencies before his company could install a septic system for a three-lot subdivision.

Or how about the dry cleaner in Somerville, Tenn., whose annual state registration fee jumped from $500 to $2,000 to help stabilize a cleanup fund?

Then there is the Springfield excavation company that now must pay $1,000 each time it retrieves gravel from creek beds, up from $150 previously.

“Those are just some of the profound examples of over-regulation that I’ve heard,” said Brown, Tennessee state director for the National Federation of Independent Business, a small-business lobbying group with a major agenda of cutting red tape that it believes inhibits business innovation and growth and kills jobs.

It’s a familiar refrain. Business interests long have complained about what they feel are overly intrusive and expensive government regulations — in their view, meddling in legitimate activities.

But the business community isn’t just griping about red tape these days — it’s also increasingly pushing back in search of relief.

Regulatory reform is one of the U.S. Chamber of Commerce’s top legislative priorities this year. That heavyweight business federation has launched a national coalition to push the issue in Washington, D.C. And business interests are spending more money to lobby regulatory agencies on a range of topics.

Business groups say regulatory reform is needed to create jobs and trim high unemployment rates.

But critics who speak for consumer and environmental causes say corporations and their owners are just using a “jobs, jobs, jobs” mantra to sway policy and increase profits at the expense of public protections.

More dispassionate experts who study economic policy trends say that the reality probably lies somewhere between those arguments — and that both sides tend to exaggerate the impact of paperwork and regulations on how much it costs companies to operate.

Here come lobbyists
The heightened debate over government regulations isn’t new, said Jerry Ellig, senior research fellow at the Mercatus Center at George Mason University.

“It seems to go in cycles where, maybe every 15 or 20 years, there’s an upsurge of interest in Washington about regulatory issues,” he said.

The latest up cycle stems from the Great Recession and the Obama administration’s regulatory agenda, he said.

“Being in a recession with 9 percent unemployment, people are going to start looking around and say, ‘Gee, is there anything we can do to make things better?’ And they look at the regulatory process,” Ellig said.

The passage of Obama’s health-care law and the Dodd-Frank Wall Street reform act, as well as several proposed environmental rules, also have galvanized business interests on the federal level, he said.

Those measures led to a record $3.51 billion in federal lobbying last year, according to the Center for Responsive Politics, a Washington, D.C., watchdog group that tracks money in politics.

And that pace has continued into 2011, spokesman Michael Beckel said.

“The ink isn’t dry yet on what the new rules and regulations will be, so the lobbyists haven’t stopped pounding the pavement,” he said. “Government regulators are the new targets of lobbying.”

For example, the number of lobbyists who reported targeting four agencies in the Dodd-Frank debate — the Commodity Futures Trading Commission, the Federal Deposit Insurance Corp., the Federal Reserve System and the Office of the Comptroller of the Currency — in the first quarter of 2011 was the most since Obama took office, the center said.

Costs vs. benefits
Business groups are doing more than hiring lobbyists. They’re also organizing the rank and file.

In August, NFIB launched a regulatory reform campaign called Small Businesses for Sensible Regulations. It’s the first time NFIB has organized such an effort over the thorny issue, said Brad Close, its vice president of public policy.

“Regulations shouldn’t be one-size-fits-all because they fall disproportionately on the little guys,” he said.

A 2008 Small Business Administration study estimated federal regulations alone cost those with fewer than 20 employees an average of $10,585 per employee per year, compared with $7,454 for businesses with 20-499 employees and $7,755 for those with 500-plus employees.

The coalition now comprises six states and plans to expand to Tennessee and the rest of the country.

Business interests also are backing several regulatory reform proposals, such as the Rules from the Executive in Need of Scrutiny (REINS) bill. It would require federal agencies to get congressional approval of any major proposed regulatory rule within 70 days before being implemented.

Supporters claim the measure would lead to better, streamlined rule-making. Opponents decry it as an effort to stymie needed regulations by creating difficult-to-meet artificial timelines.

“It’s obvious who stands to gain: REINS is supported by big business with a stake in undermining public protections so they can increase their profits,” wrote Ben Peck, a senior legislative and policy associate for Demos, a liberal-leaning think tank in Washington.

Demos is part of the Coalition for Sensible Safeguards, formed earlier this year to counteract corporate leaders’ goal of limiting regulatory red tape.

Its members include several labor and environmental groups. The coalition argues on its website that many rules and regulations have protected Americans from a variety of dangers, bringing benefits that it says far outweigh the cost of implementation, compliance and enforcement.

But business groups say there are too many regulations whose costs outweigh the benefits, and they fear more are on the way. Thomas J. Donohue, the U.S. Chamber of Commerce’s president and chief executive, warned earlier this year of a “regulatory tsunami” coming from Washington.

There were 4,257 federal regulations in the works this past spring, according to a semiannual tally by the White House Office of Management and Budget. That’s the most since 2004, when 4,393 regulations were in the pipeline.

However, the number of major proposals — those with an estimated economic impact of $100 million or more — rose from 143 in 2004 to 210 earlier this year.

Linking it to jobs
Both sides of the regulatory debate are “trying to link it to jobs because that’s what people are concerned about right now,” Ellig said.

But the impact that regulations have on jobs “is probably overstated on both sides,” he said. “One side says regulations have costs, while the other sides says, ‘Yeah, but they also have benefits.’ They just keep knocking heads and nothing changes.”

While most of the debate has been focused on the federal level, business owners in Tennessee say some state regulations also have given them problems.

Sam Wolfe, the Somerville dry cleaner whose registration fee quadrupled, said that’s too much for a business that lost money because of the economic slump. He said it might force him to move his business and its 10 part-time jobs to Mississippi, where he perceives operating costs are lower.

“Before, when things were good, I could afford it,” Wolfe said. “Now, I can’t afford it. Something’s got to be done.”

Graphic: 'Major' Impact
The number of pending federal regulations has varied since 2000, but those considered “major” — with at least a $100 million impact on the U.S. economy — have risen significantly:

Year     Total    Major
2010    4,225    224
2005    4,062    143
2000    4,895    151

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