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President's Message: $1.1 Trillion Isn't Chump Change |
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Written On: November/December 2005 |
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Written By: by Don C. Brunell - AWB President |
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When I grew up in the 1950s, the federal government spent millions of dollars a year—unfathomable amounts for a family whose Dad made $5 an hour as an electrician. For most of my adult life, Congress and the President spent billions each year, but in the last decade, they’ve been spending trillions.
For most of us, even one million dollars is more than we’ll ever see in a lifetime. But for folks on Capitol Hill and in the federal bureaucracy, it’s "chump change."
One trillion dollars, now that’s "real money!" It is almost impossible to grasp, so think of it this way: If you made $50,000 a year, it would take you 20 million years to earn $1 trillion. So picture the shock on the average employer’s face when he learns that federal regulations cost him and his colleagues $1.1 trillion in 2004 alone—and the numbers keep growing.
In fact, according to a study sponsored by the Small Business Administration, regulatory costs hit small businesses the hardest. W. Mark Crain, a Lafayette College professor, found in 2004 that national mandates cost firms with fewer than 20 workers $7,647 per employee. That’s 45 percent higher per employee than large firms pay.
Why is that important? Because small businesses create the most jobs in this country. The more money they’re forced to spend on regulations, the less money they have to create a job for you, your son or your daughter.
Crain looked at the federal costs for five major sectors of the U.S. economy: manufacturing, wholesale and retail trade, services, health care and other general businesses. He broke the costs down by economic, workplace, environmental and tax compliance costs and looked at them for firms with fewer than 20, between 20 and 499, and over 500 employees.
The U.S. Chamber of Commerce reports the $1.1 trillion in 2004 is 11 percent of national income, an increase of 16 percent since 2000. Tom Donohue, U.S. Chamber President, states: "To put the cost of regulations in perspective, if the federal government split up that $1.1 trillion among all of the households in the country, each one would owe $10,172. That's more than they each spend on health care annually."
No matter what type of regulation, the cost of compliance is disproportionately high for small firms. Small businesses are paying astronomically more to comply with environmental regulations than their larger competitors—364 percent more—and they pay 67 percent more to comply with tax regulations. For small manufacturing companies, the cost of complying with federal regulations is at least double that for medium-size and large companies.
This new study only confirms what small businesses have known for years. So the question is what do we do about it? Here are three suggestions:
First, look at existing laws and ordinances to find those that are not being enforced, are outdated or overlap. Streamline authority, jettison unnecessary bureaucracy and wipe out outdated statutes. Put a sunset provision on all laws and ordinances so elected officials have to review, revise and re-enact them or they are automatically wiped off the books.
Second, rein in agencies at all levels to ensure they are not exceeding the authority granted them by the legislative branches. Lawmakers must provide clarity in the law and then conduct aggressive oversight to ensure agencies not only act within the letter of the law, but its spirit as well.
Third, government inspectors need to work with those who must comply with these regulations, whether they are home owners, employers, non-profits or other governments. There needs to be more voluntary assistance as opposed to compliance inspections. If people are recalcitrant, then throw the book at them.
There are no simple solutions. A place to begin is to make sure our elected officials don’t pass a whole set of new laws in 2006 that only add to the pain and cost of government.
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