Don’t be alarmed, its not the end of the world – if we’re breaking the rules, it’s fine – so go the lyrics to the song Rules Don’t Stop by We are Scientists. The problem is that, well, rules don’t stop.
Today, the Administration announced plans to cut or roll back hundreds of federal regulations, saying it hoped to save businesses $10 billion and spur job growth. I applaud this move, since it was something that we suggested (in our July 8 blog post) was necessary to get the economy moving again.
Unfortunately, as we have pointed out before, the threat of running afoul of laws or regulations in the US has become amazingly burdensome. Re-quoting the Economist Magazine, regulation in the United States has become more complex and overbearing than in India during the license Raj. According to the Economist, today nearly 38 percent of workers need to obtain a license or some form of government certification., including such dangerous jobs as florists, handymen and second-hand booksellers. The same story references Dr. Morris Kleiner of the University of Minnesota who found that job growth between 1990 and 2000 was 20% higher in unregulated occupations than in regulated ones.
It’s not just licenses that stop businesses from starting and growing. Myriad laws and restrictions at the state, county and municipal level are not only confusing and expensive to comply with, but can even lead to fines and imprisonment for entrepreneurs who were simply trying to make a go of a new business. When the average business costs more to start than can possibly be made in profits, entrepreneurs will sit on the sidelines. Even large firms find it difficult to negotiate the vast permitting and regulatory bureaucracy – which may be one reason why big firms are investing more abroad than in the US.
While the President is on the right track in trying to at least make a dent in the mass of Federal regulations, it is really the states and localities that are making small businesses suffer. No wonder that there has been so much job growth in Texas with its relatively low regulatory burden, and depopulation and stagnant employment activity in states like New York where the regulatory burden is so complicated that an entire industry of expeditors has arisen – interestingly, in New York City, even the expeditors need a license!
American journalist, John Louis O’Sullivan wrote in 1837 “The best government is that which governs least.” This is even truer today, and one place to start making government better is in making laws and regulations simpler and less overbearing.