NFIB: U.S. Businesses in Regulatory Hell

America’s great optimists, its small-business owners, have been looking for good news out of Washington, D.C., and not finding any, for several years now.

Last week, the president caught the attention, and raised the hopes, of the small-business community by saying that government regulations ought not stifle the ideas and economic energy of our great nation. It sounded like good news – like the leader of the behemoth federal regulatory agencies might be lighting the way to a less burdensome tomorrow.

We hoped. But the closer we looked, the more we realized that President Obama’s lip service about softening the crush of regulations was the equivalent of proposing to plug last summer’s gulf oil plume with one’s thumb.

It is disappointing to realize that the president’s executive order mainly proposes that government do all of the things it is already supposed to be doing under the 1980 Regulatory Flexibility Act. Furthermore, independent agencies with enormous regulatory power – like the IRS, the National Labor Relations Board and the Environmental Protection Agency – are only encouraged, not required, to comply with the order.

Even if we ignore the fact that the president’s executive order was redundant at best, and even if we ignore the fact so many government agencies are essentially exempt, the small-business community cannot ignore the fact that the Obama administration is proposing new regulations faster than this new alleged crackdown can tame them.

The president’s Labor Department alone has a list that would make any regulator blush! From  requirements for reams of new paperwork documenting how worker pay is computed, to collection of data on how many musculoskeletal disorders workers might have (is there a doctor in the house?), the regulators at DOL are busy coming up with ideas that would suffocate already-struggling small firms. The list of proposed EPA regulations is equally disturbing. One would require farmers to limit the amount of dust their fields produce. To a small farmer in the dry West, this would be a challenge to say the least.

And then there are, of course, the regulations already foisted upon small business by this administration and the last Congress. Where was the concern for the regulatory cost to business when the 1099 provision was put into the president’s health-care reform legislation? That one provision was the worst insult the small-business community has suffered in a decade, requiring them to file paperwork for countless low-dollar purchases and allowing the IRS to nickel and dime our nation’s job creators to pay for a health-care law they didn’t want.

The small-business community is already past the point of saying “uncle.” They are already in regulatory hell, and it’s lonely. The owners of small firms handle all regulatory compliance themselves; they do not enjoy the big-business luxury of having lawyers and compliance officers on staff. Small businesses also pay 36% more per employee to comply with regulations than their larger counterparts. Environmental regulations alone cost 364% more for compliance at small firms than at larger firms. Tax compliance costs 206% more.

Small businesses with fewer than 20 employees spend an average of $10,585 per employee to comply with federal regulations. That’s $2,830, more, per employee, than it costs larger firms.

If you don’t believe me, ask President Obama’s Small Business Administration. These are their numbers.

At the end of the day, there is nothing new in the president’s regulatory initiatives – except new regulations themselves.

While the president didn’t seem to make small business a priority in his executive order this week, we’d be happy to help him if he’d like to re-tool it. Better yet, he could work with Congress to take up some regulatory reforms that really would help America’s economic engine.

Here are just a few things we recommend.

First, create a waiver for first-time, non-harmful, paperwork violations. This would reward small employers who are doing their best to comply with federal rules but may make an innocent mistake.

Second, create Small Business Regulatory Enforcement Fairness Act panels for every agency to provide input on every significant regulation and to publish a report with every proposed rule. Currently, only EPA, OSHA and the newly-created Consumer Financial Protection Bureau have these panels.

Third, provide for resolution of disagreements between small businesses and regulatory agencies when an agency proposes a rule. Today, an agency can actually simply “certify” that a regulation will not significantly impact a substantial number of small entities when it proposes a rule.

If the Obama administration really wants to clean up regulatory hell, they are going to need to engage the small-business community. Last week’s announcement didn’t do the trick, but we would be more than happy to take them on a tour of the regulatory landscape, and offer some ideas for relief, from our point of view. In return, we will do our very best to continue to create two-thirds of all net new jobs.

Mr. Obama: will you step inside our world for some perspective and ideas?

Dan Danner is president and CEO of the National Federation of Independent Business, one of the nation’s leading small-business associations.