As of 2008, small businesses faced an annual regulatory cost of $10,585 per employee, according to an SBA regulatory impact study published two years ago.
That’s 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees). And since 2008, the situation has grown worse as the regulation factories in Washington have been working overtime since the Obama Administration has come to town.
The Office of the Chief Counsel for Advocacy of the U.S. Small Business Administration estimates that the annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008.
The report noted had every U.S. household paid an equal share of the federal regulatory burden, each would have owed $15,586 in 2008. By comparison, the federal regulatory burden exceeds by 50 percent private spending on health care, which equaled $10,500 per household in 2008.
The regulatory burdens on U.S. small business are only getting worse. Both the World Bank and the Global Entrepreneurship Monitor report that U.S. entrepreneurs faced more start up red tape in 2010 than in 2003.
Is it any wonder that small businesses faced with regulatory cost and red tape don’t have the confidence to hire?
This week, as we recognize National Small Business Week, it’s a time to celebrate the ingenuity of entrepreneurs — and to consider what the government should be doing to create an environment whereby our small businesses, the backbone of the American economy, can be successful. A good place to start is by eliminating crushing federal regulations.
If you really wanted to find the agency that is drowning small business in red tape, the EPA tops the list.
A recent web video from 2010 came to light that features Al Armendariz, an Environmental Protection Agency official, who ultimately resigned from the agency for his remarks that his agency's work was similar to crucifixion
According to reports of the interview, Armendariz suggested that the EPA’s approach to regulation resembled the practices of the Romans, whose soldiers would “go to a town somewhere, find the first five guys they saw, and they'd crucify them. And then, you know, that town was really easy to manage for the next few years."
The point made was that by making examples of certain businesses or industries, it would serve as a deterrent to ensure compliance. Unfortunately it this sort of thinking that permeates our federal agencies now being guided by Obama political appointees.
RedState, the most widely read right of center blog on Capitol Hill, reacted to the crucifixion analogy accordingly: “So does the EPA have a deleterious effect on the current economy? A reflexive thought would be that firms undergoing regulatory crucifixion tend not to have excess funds to hire new staff. They also tend to stay away from anything that would require them to take regulatory risk. Regulatory crucifixion leads firms to stop asking where they should explore and start asking what they need to shut down if they don’t want nail holes in their hands. Logically, this should lead to a necessary level of damage to American economic vitality.”
Lest you think that Al Armendariz’s remarks are the voice of a lone maverick, during an Environment and the Economy Subcommittee hearing in 2011, EPA Assistant Administrator Mathy Stanislaus admitted to U.S. Rep. Cory Gardner that the EPA does not account for jobs when they issue regulations.
National Economic Research Associates (NERA) used the Federal Government’s own data in finding that Obama’s proposed EPA regulations would cost America over 180,000 jobs per year between 2013 and 2020.
That would add up to a total nationwide loss of about 1.44 million jobs.
An economic study produced by the Manufacturers Alliance and financed by the National Association of Manufacturers and the American Petroleum Institute, has concluded that if EPA adopted the strictest standard under consideration (a limit of 60 parts per billion on primary ozone, down from the 84 parts per billion limit in effect currently), the cost of compliance would reach more than $1 trillion a year and reduce the size of the nation's economic output by 3.6 percent in 2020. The study projected U.S. job losses of 7.3 million, equivalent to 4.3 percent of the entire workforce in 2020.
The paper industry says that new EPA regulations will cost billions. They predicted that 36 mills across the country would become unprofitable if they had to make those modifications. Those mills would be shut, the industry said, taking with them 20,000 direct jobs – 18 percent of the industry's workforce.
What is apparent is that onerous regulations are job killers. Congress needs to take a fresh look at the economy and decide where their priorities are. Are they propping up green energy industries with unchecked cronyism or are they working to ensure that every American has a job?
They’ll find the answer out during this year’s election when Americans tell them in no uncertain terms: “It’s the economy stupid.”
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