Policy Points: Regulation Reform -- Bad Solutions for the Wrong Problem

By Richard Eidlin

Business hates regulation, right? Frank Knapp, president/CEO of the South Carolina Small Business Chamber of Commerce and board co-chair of the American Sustainable Business Council, says that’s wrong. And he said it for the record in March, in testimony before the U.S. Senate Committee on Small Business & Entrepreneurship.

“Small businesses do not resent good regulations. American Sustainable Business Council (ASBC) polling has found that 86 percent believe that regulations are necessary and 93 percent believe their business can live with fair and manageable regulations.”

Calling them “the rules of the game,” Knapp said regulations level the playing field to prevent unfair, innovation-stifling competition from big businesses” and “keep families, neighbors, workers, communities and environment safe and healthy,” and business leaders know that.

Regulation per se is not the problem; it’s the lack of resources within agencies like SBA and OSHA for helping small firms comply that’s the real issue, Knapp said.

What’s not working?

The process to develop a rule that implements a law passed by Congress can take years and years to finalize. Knapp said that the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996, while well intended, is not giving small firms the opportunity to provide input into the regulatory decision-making process because the process, “has been taken over by powerful, often big-business special interest groups lobbying the agencies.” So-called reforms, promoted by groups like the U.S. Chamber of Commerce, don’t address this.

Compounding the unfair advantage that big business has in setting policy, Knapp added, “In addition to their Washington clout, the anti-regulation interests have used the courts successfully to give us regulatory paralysis. These efforts for the most part aren’t to simply lessen a burden on small businesses. Instead, they are designed to help big businesses protect themselves and prevent competition by stalling the regulatory process so that even good, well-thought out and needed regulations are left in limbo.”

In an ASBC interview, Knapp said that “Uncertainty about what will be required of us due to litigation is simply bad for business.

“Small companies don’t have the financial clout to influence legislators in writing laws that benefit them. Small businesses also don’t have a fleet of top-priced lawyers standing by to help them navigate and comply. So regulations disproportionately affect small and mid-sized companies and they don’t address our problems. When smaller business owners say they dislike regulations, this is why.”

Plans to make things even worse

The Regulatory Accountability Act, introduced this past spring by leading Republicans in the House, pretends to help by relaxing rules for companies in finance, fossil fuels and other influential industries. According to Knapp, it will make it easier for big companies to tie up regulations in expensive lawsuits. Small business is used as justification, but reforms completely ignore the problem small businesses has complying with numerous existing federal regulations.

“We need regulatory responsibility to focus on helping small business with compliance. Now, the Small Business Administration’s national ombudsman is supposed to solicit feedback from small businesses to uncover systemic problems companies are having with compliance, and go back and fix them. What really happens is that they get the feedback, uncover a problem – and then go fix another problem they’d rather deal with. It’s classic misdirection at the behest of lobbyists. If they set out to make business resentful of regulations, this would do it.”

The RAA adds 53 requirements to the regulatory process and another proposal ― the Regulations from the Executive in Need of Scrutiny (REINS) Act ― would require new regulations with an economic impact larger than $100 million to be approved by Congress. It also would require at least one chamber of Congress to approve any new regulation within 70 days of the rule’s proposal. All of these would discourage passage of needed protections for the public and smaller businesses and would let irresponsible corporations avoid accountability for their damaging actions. The costs to clean up damage, whether from financial meltdown or ongoing pollution, would continue to be borne disproportionately by smaller businesses and other taxpayers.

Business support for good regulations

For our part, we at the American Sustainable Business Council came out against the RAA in January. “This would be like taking a chainsaw into surgery,” said CEO David Levine. We also have a sign-on statement for business people to lodge their opposition to the RAA.

What would be better? Perhaps SB 1146 offered by Senator Jeanne Shaheen, the purpose of which is, “To enhance the ability of the Office of the National Ombudsman to assist small businesses in meeting regulatory requirements and develop outreach initiatives to promote awareness of the services the Office of the National Ombudsman provides, and for other purposes.”

Currently, Knapp says, a small business needing help complying with a federal regulation first contacts the federal agency for clarification and advice. But, says Knapp, “a small business owner doesn’t stand much of a chance in working with a big federal agency to get personal attention even if that agency has an ombudsman.”

Next, the business owner contacts the Office of the National Ombudsman to intercede with the agency and find a resolution. But, says Knapp, “The Office of the National Ombudsman is a tiny agency virtually unknown outside the SBA. That can be changed with reasonable funding, as originally planned and now called for in Senator Shaheen’s bill.”

“When business says ‘we need regulation relief,’ that doesn’t mean letting unscrupulous corporations wreak havoc on the rest of us. The current regulatory process can produce good rules while protecting small businesses from unnecessary burdens. But the relief business truly needs is proper, fair enforcement and practical, prompt assistance in compliance. Congress has already established a reasonable process; now we need it to give federal agencies the funding required to make that process do its job for small business and the nation,” he said.

Richard Eidlin is Co-Founder and Vice President of Policy for the American Sustainable Business Council.

Image credit: Internet Association, Flickr