Regulation Nation: Drowning in Rules, Businesses Brace for Cost and Time for Compliance
Published September 12, 2011
From financial services to farming, plumbing to computer repair, business owners say new regulations have them so bogged down in compliance that it is hindering their ability to plan and expand for the coming years.
Even though President Obama recently acknowledged the need to minimize regulations, the number appears to be growing. Obama administration regulations on new business rose to 3,573 final rules in 2010, up from 3,503 in 2009 — the equivalent of about 10 per week.
The Chesapeake Bay has been a magnet of regulatory rules to prevent pullution through the watershed that spans six states.
Indeed, the 2010 volume of the Federal Register, the "newspaper" of regulatory agencies, stands at an all-time record-high 81,405 pages composed of final rules, proposed rules, meeting notices and regulatory studies.
"There is something like 180 million words of binding federal law and regulation. It would take a lifetime just to read it," said Philip K Howard, founder of Common Good.
According to House Speaker John Boehner, the Obama administration has publicly listed a total of 219 new regulatory actions under consideration for the upcoming year that would each have an estimated cost of $100 million or more. That’s on top of the conservative Heritage Foundation’s estimate, which found that the administration has imposed more than 75 new "major" regulations since 2009 whose annual cost of compliance is $38 billion.
The U.S. Small Business Administration reports that the average regulatory cost burden on U.S. firms of any size was approximately $161,000, not including costs passed on to the consumers for the goods and services rendered.
Manufacturing is the industry hit the hardest by regulatory costs, with per-firm costs at $688,944. But all small businesses pay a steep price — $10,585 for every employee.
Howard said that regulations in the U.S. are, at best, "semi-effective" while also "horribly expensive."
"No one has the time to read all the rules. So instead of focusing, for example, on worker safety, which is a very useful regulatory goal, it focuses on little detail nits that end up basically tripping everyone up, because they end up spending all their time complying with the nits instead of making the factory safe," he said.
Among the industries facing massive regulations is farming, whether it be dust-ups over dirt to the fallout from manure.
"It’s a big concern; I’m worried they’re going to regulate us right out of farming," said Calvin Haile, of Dunnsville, Va., a grain farmer whose five employees have to keep check on the runoff to the Chesapeake Bay. "Since we’re so close to the bay and you know, we just won’t be able to farm profitably and comply with all the regulations, that’s my concern for the future."
Steve Baker, a swine farmer and owner of Baker Farms in Shenandoah County, Va., said he’s doing what he can to be a responsible business owner. He spent $15,000 five years ago to build a transfer pump for any pigpen runoff so it flows to a holding tank. He said he chose to do this before regulations came out to deal with runoff water into the Chesapeake Bay
"We want to do what absolutely needs to be done because this is our livelihood, this is what puts a roof over our heads," Baker said.
Americans appear to be concerned by the impact of regulation on business. A poll conducted by the Tarrance Group for Public Notice, an independent, nonprofit group that provides information on how government policy affects financial well-being, found that 74 percent of those surveyed say that the U.S. is creating too many rules. The poll of likely voters in 10 states taken Sept. 6-8 also found that 47 percent fear the rules will result in job losses while 22 percent think it will increase the price of goods and services. Seventy percent said they believe increasing the number of regulations on American businesses will result in jobs moving overseas. Howard said he believes in legitimate regulatory goals, but the rules need to be practically applied and enforced.
"You can tell a factory owner that it can’t pollute and it needs to meet certain guidelines for pollution, but if you give them a thousand pages of rules that tell them exactly how to catch the pollution. Chances are they’ll waste huge amounts of money catching the pollution in the wrong place and it probably won’t be effective," he said.
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