Small Business

Small Businesses Win Some Regulatory Relief

A few of our more perceptive government officials seem to realize they've been choking off entrepreneurship.


Christmas has come and gone, but anybody struggling to keep a small business afloat or pondering an entrepreneurial venture might be digging under the desiccated blue spruce (take it out, already) for a missed present or two. The good news is that, as tough as politicians make it to launch your own firm, they've recently gifted us with a bit of relief from their depredations—and more may be on the way.

At the moment, starting a business isn't exactly a growth industry. "[T]otal entrepreneurial activity (TEA) in the United States declined by two percentage points to 12 percent in 2015," according to the latest Global Entrepreneurship Monitor, sponsored by Babson College and Baruch College. And yeah, it's all in startups—"fewer people were entering entrepreneurship in 2015." The report adds.

The Census Bureau agrees, putting new business creation at nearly a 40-year low. "The number of jobs created by establishments less than 1 year old has decreased from 4.1 million in 1994, when this series began, to 3 million in 2015," the Bureau of Labor Statistics chimes in on a less-than-cheerful note.

True the decline comes after several years of decent startup activity, but as the Kauffman Foundation, which monitors entrepreneurial activity, put it, "Despite the large short-term increases, entrepreneurship remains in long-term decline."

There's probably no single reason for the fall-off in startups. Economists and other analysts mention difficulties in gaining financing, increasingly nimble larger companies nabbing opportunities, and the seeming risk-aversion of younger Americans as hurdles for entrepreneurial activity.

But when you ask small business owners themselves, they cite the heavy hand of officialdom as a major concern. "[M]any small-business owners are apparently wary of the current impact of the government on their businesses," Gallup noted in 2014. Specifically, they pointed to "the president's signature healthcare legislation and his push for a federally mandated minimum wage increase as potentially deleterious to business." The two most important problems they faced, small business owners told the National Federation of Independent Business's 2016 annual survey, are taxes and government regulations—a consistent response in recent years.

Keep in mind that, when the economy takes a beating from political meddling, entrepreneurs get the worst of the stomping. As the federal government's own Small Business Administration notes, "small businesses bear a larger burden from regulations than large businesses." Specifically, regulatory compliance costs firms with fewer than 20 staffers 36 percent more per employee than it costs companies cutting paychecks to more than 500 people.

Which sucks.

So it's encouraging when government officials concede that they should, perhaps, step more gently on the throats of the people over whom they rule.

"So-called cottage food laws allow home chefs and bakers to run businesses out of their homes or apartments without needing special licenses or having to comply with food safety regulations," the Washington Post's Erin Bylander noted last month. D.C.'s law, passed in 2013, spares food-related businesses making no more than $25,000 from many regulations. Maryland and Virginia have similar laws in place, though the Old Dominion State mostly dispenses with the revenue cap. Such laws make it easier for culinary entrepreneurs to get a foothold in the market without taking on the huge hassle and expense of dealing with red tape.

Food-policy expert Baylen Linnekin has long championed such regulatory reforms—and more—in the pages of Reason. Last year, he touted victories for "Food Freedom" bills in Colorado and Wyoming that cleared away many of the restrictions on producing, buying, and selling food at the retail level.

Advocates of the Wyoming measure summarize it as saying that, with some exceptions, "any food may be sold as long as there is only a single transaction between a producer and informed end consumer, no middleman allowed. The consumer must be informed that the product is not licensed, inspected or regulated."

Colorado's similar law eases poultry farm restrictions and "exempts from any regulation sales from a home kitchen to the 'informed end consumer' and expands what can be sold under the Colorado Cottage Food law to allow any 'non-potentially hazardous foods' (foods subject to time and temperature control), including pickled fruits and vegetables," according to the Farm-to-Consumer Legal Defense Fund.

Rep. Jared Polis (D-Col.) wants to take reforms national, by easing dairy and meat regulations.

But it's not all raw milk and tamales.

"Today nearly one-quarter of all U.S. workers need a government license to do their jobs," a White House press release warned while announcing grants to organizations working to reduce licensing requirements. And why the concern from government officials not historically averse to requiring their subjects to ask permission before engaging in every conceivable activity?

Well, a year earlier, a report released by the Obama administration conceded that "by one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars."

That seems to be enough of a wake-up call to spur officials from both major parties to roll back requirements that people seeking to work as massage therapists, florists, hair dressers, and in a host of other trades undergo expensive and time-consuming training, testing, and licensing. Those requirements not only make it difficult to go into business while raising prices for consumers; they do so without making anybody safer—except existing practitioners from competition, that is. That's right, study after study has found that even the quality of many medical services, such as those provided by opticians, optometrists, and dentists don't see any improvement from occupational licensing requirements.

As a consequence states such as Arizona, Iowa, Kentucky, Oklahoma, and others have moved, or are moving, to roll back restrictions.

Maybe having protected a select flock of rent-seekers from up-and-coming entrepreneurs, some politicians have come to realize that they're at risk of strangling the goose that lays the golden campaign contribution.

And there are other potential improvements in the wind.

President-Elect Trump has promised repeal of Obamacare, that "signature healthcare legislation" that small business owners identified to Gallup as a major concern. As his pick to head the Department of Health and Human Services, he's named Rep. Tom Price (R-Ga.), an advocate of generally market-oriented reforms.

Trump has also promised a vague grab-bag of deregulation that has many small businesses hopeful for an improved environment in which to operate. Likewise, he's vowed tax cuts that could be welcome news.

But then again…

Trump also plans to limit the flow of people and goods across the U.S. border—moves guaranteed to raise costs to businesses and consumers alike, and worsen government intrusions.

"Trump, like many before him, fails to see the beauty of low-cost, high-quality imports," warns Veronique de Rugy of the Mercatus Center. "This is why he wants to impose high tariffs on foreign products, forcing domestic consumers to 'buy American' even if prices are substantially more."

That would mean higher prices not just for finished goods, but for labor and materials required by businesses.

And that Wyoming food freedom law? The U.S. Department of Agriculture is making heavy-handed efforts to impose restrictions on state residents, no matter their efforts at reform.

Also, not all politicians are on board with the idea of making it easier for people to work without government permission—North Carolina lawmakers rejected efforts to roll back occupational licensing requirements.

Hey, these are politicians we're talking about. Breaking things—and people—is almost a calling for them.

But for business owners and would-be entrepreneurs seeking to make a living for themselves by creating jobs and prosperity, there really is some relief—and the potential for more on the way. That's a hopeful sign at a moment when we could use exactly that.

NEXT: Will a Republican Congress place REINS on a President Trump?

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  1. Didn’t I also read that just today another 709 pages of regulations were released out of the executive office? By executive office I mean the regulatory agencies that are effectively completely outside of the legislative process. I get we’re trying to be positive here at the start of 2017, but it still feels like a hollow victory.

  2. I myself have zero interest in being any kind of boss, but I’ve worked for startups every chance I got, and it has always amazed me how much crap they have to deal with even when there’s only five employees. It’s like being a doctor — I’ve asked several how much cheaper would things be if I paid cash — anywhere from half to 1/3. I have to assume medical is worse than ordinary businesses, but still figure that of five employees, from my experience one dealt with all the paperwork and didn’t get much else done.

    My fantasy world has no government, and I try to imagine how much livelier the economy would be, how much faster it would lift everybody’s standard of living, how much faster tech would enhance lives, and it almost makes me cry the way the progressives claim to care about humanity yet they are the ones blocking progress. Sure, anarchy would still have insurance and regulatory companies, but they’d all be voluntary and competitive and have to listen to customers. They’d be so streamlined it would make every current bureaucrat weep for not being able to smirk at clients who didn’t fill out forms properly.

    1. It’s like being a doctor — I’ve asked several how much cheaper would things be if I paid cash — anywhere from half to 1/3.

      Bless you, sir, you’re a gentleman and a scholar. We generally hint around that “the paperwork” if you pay with a check rather than cash is such a pain – and it’s amazing the number of people who know immediately just what paperwork we’re talking about. Same way if we’re dealing with somebody who owns their own business we hint that “some people” will have us write up the bill as if we’re doing the work at their place of business rather than at their home – not that we are implying that they are that sort of person or that we are the sort of people who would comply with such a request.

      1. it’s amazing the number of people who know immediately just what paperwork we’re talking about.

        Wink-wink-nudge-nudge-say no more!

    2. My fantasy world has no government, and I try to imagine how much livelier the economy would be, how much faster it would lift everybody’s standard of living, how much faster tech would enhance lives,

      L. Neil Smith’s The Probability Broach is in large measure such a fantasy, projecting from what the world could’ve been by our time had things gotten that way around the turn to the 19th C.

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    1. Wow! Nice segue!

  4. Hey! It’s the THIRD of January already!

  5. A few of our more perceptive government officials seem to realize they’ve been choking off entrepreneurship.

    Bullshit. There’s a hell of a lot more than “a few” and you’re retarded if you don’t think they’re doing it deliberately. Fit yourself into the machine, citizen, so we can track you and control you much easier. The government absolutely hates anybody that thinks and does for themselves because they’re harder to keep the chains on. Small businesses are a pain in the ass to keep tabs on because there’s so many of them and there’s so many ways they can find cracks in the wall to slip through and the payoff for catching them sneaking off the plantation is so small. Government would much rather we all work for big corporations that have the same sorts of records and record-keeping the government has – it’s so much easier for the government to keep tabs on you if they just have to look over your employer’s shoulder as it were. Everything’s recorded and everything’s computerized where at any moment the government can just step in and seize control of your digitalized life if they feel the need. You just wake up one morning and your bank account and your credit cards are frozen, your driver’s license and your passport are revoked, your boss needs to see you in his office where there’s a couple of suits waiting. Where you gonna run, how you gonna run? Your phone and your computer and your car are tracking your movements, you know.

    1. Several years ago, the exiting President decided he wanted to be seen as entrepreneurial- so he decided to pull in a bunch a people to “learn” and do an announcemen. It took months, and was embargoed from the press until the Prez was ready to talk about it, and ultimately was a PR event with no outcomes for the effort of the entrepreneurs. Symbolically, we got a new local SBA representative- who had been a 25+ year employee in the another agency before that.

  6. The Census Bureau agrees, putting new business creation at nearly a 40-year low.

    Libertarian moment?

    1. Ahhh, the early/mid-1970s.
      I remember those days.
      Man they sucked.

  7. RE: Small Businesses Win Some Regulatory Relief
    A few of our more perceptive government officials seem to realize they’ve been choking off entrepreneurship

    But…but…but…how will our ruling elitist socialist turds enslaving us all destroy the capitalist machine if they don’t choke entrepreneurship?
    They were doing such a good job of turning our beloved country into a socialist slave state.
    Why stop now?
    We could all live in a proletariat paradise like Cuba, Venezuela or North Korea if we just let our obvious betters continue down the path of socialist enlightenment for a short time.
    Then everything will be honky dory.


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