According to the latest report from the Small Business Administration, America's regulatory state costs our economy $1.75 trillion annually. -- For America’s smallest businesses, this cost amounts to roughly $11,000 per employee, per year.
With these businesses normally providing 2/3 of all new jobs, and amounting to 90% of all firms, it's easy to understand why the U.S. economy is hobbling along. That amount, $1.75 trillion, is no small matter—in fact, as I have long said, these costs are an anchor, dragging this economy down.
Moreover, given that the new Congress forces the President to pursue his party’s objectives administratively (see, for example, the EPA’s move to regulate CO2 as a pollutant, despite Congress’ clear intention to stop this from happening), there is every indication that this number is going to grow by leaps and bounds in the coming months.
That’s why it’s no great surprise that President Obama chose to share his views in an op-ed in The Wall Street Journal on Tuesday, announcing his administration’s new plans to confront this morass head-on.
In his op-ed, the president announced his plan to sign a new Executive Order, which orders agencies to take serious steps to confront their regulatory costs. But the question remains whether the president is truly serious about confronting these costs, and whether the competing progressive influences among his political appointees (not to mention pushback from congressional Democrats) will allow any major changes to happen.
Understand, with the president’s serious and skilled Regulatory Czar, Cass Sunstein, you have a fundamental understanding of the nature of the regulatory state and the importance of having sound principles underlying new regulatory impositions.
Yet for all of Professor Sunstein’s expertise, and his role as the president’s “Regulatory Watchdog,” the regulatory state has grown at unprecedented levels since the president took office two years ago this month.
According to the Competitive Enterprise Institute’s Wayne Crews, the regulatory state stood at an already-far-too-massive $1.1 trillion in early 2009—which means $600 billion was added in a mere 2 years!
The president and his team could have, at any point in time during the past two years, engaged in comprehensive regulatory reform. He could have already signed this executive order, and made great strides to build on the work of the two previous regulatory czars, Susan Dudley and John Graham (whose outlook on regulations was similar to Sunstein). But he did not—and the question is whether the promise of this move is real or imaginary. It could not be more important: cut regulatory costs by even a third, and the money saved by small business could wipe-away the nation’s unemployment!
The problem is two-fold. First and foremost are these aforementioned progressive influences, who, after years of frustration with administration policies that sought a more “compliance-oriented” approach to regulation (as opposed to an adversarial “enforcement-oriented” approach), have called for major changes to regulations—driving up costs considerably through new regulatory regimes.
But second, and perhaps more important, are the pernicious “incremental” costs.
These are the small changes, the small mandates, that tick away at a small business owner’s time.
I prefer, frankly, to talk about regulatory costs not in dollars, but in time, since time is a resource nobody can make more of. Agencies express burdens in terms of time, but generally grossly underestimate those approximations. Moreover, nearly any burden can be justified under an incremental nature—i.e., “we’re only adding X number of minutes, and that’s nothing.”
One of the recommendations we have long made is a requirement that agencies be forced to assess the hours of burden they require each and every year, to make a justification when they are adding to those hours, and perhaps even require a zero-sum game when it comes to new burdens. In other words, a “no net loss of time” wherein new mandates would require the lessening of mandates elsewhere.
Another recommendation we have made is one of transparency. We recommend that the bureaucrat responsible for each and every mandate, especially forms required by the federal government, put their name and contact information on each of those forms. This will do two things: on the front of accountability, the desire to not be contacted endlessly by the regulated community will encourage these officials to write mandates that are more clear, something that has not happened despite years of legislative mandates.
Second, it will have the very real world practicality of being able to get in touch with the regulation’s expert directly when they have a question—a bit of sleuthing that takes precious time away from the small business owner (or his employees) and can leave the public vulnerable to the downsides of regulatory misunderstanding.
Make no mistake, today’s message from the president is an important signal that maybe someone in the White House is finally “getting it” when it comes to regulatory costs. A $1.75 trillion anchor is something that simply cannot be ignored. The question is whether or not the president is willing to do what it takes to actually bring those costs down.
Andrew Langer is president of the Institute for Liberty, a Washington, D.C.-based advocacy organization focused on small business and the costs of regulation.