According to the federal Small Business Administration, the cost of complying with regulations for the typical small business is $10,500 per year, per employee. A firm with 10 workers, for example, must pay more than $100,000 every year just to remain on the right side of the rules imposed by Washington.
That's a drop in the bucket for General Motors or Google, but for the average small business it's an enormous cost that looms over every decision, including whether to hire anyone new, open a new location or purchase equipment and supplies from other businesses that are struggling with the same calculation.
The SBA estimates that the aggregate cost of those rules imposed on the economy is $1.75 trillion per year. Some of them are no doubt necessary. But many are excessive, duplicative or plainly silly. In a good economy they prevent businesses from operating at top efficiency. But in the midst of the longest economic downturn in 80 years, regulations for their own sake are real job killers.
That's especially true in Florida. A 2011 report by Ernst & Young shows that 94 percent of all businesses in the state are organized as so-called flow-through companies, usually sole proprietorships, partnerships or other small operations. The same report estimates that these firms account for nearly 60 percent of all jobs. In other words, Florida's economy depends on small business, and the weight of federal regulations is pressing down on them very hard.
The recession hit Florida harder than most other states, and the recovery has been frustratingly slow. According to the Bureau of Labor Statistics, the unemployment rate here remains higher than the national average, and small businesses are struggling to keep their doors open. Despite that, the federal bureaucracy continues to pile on new regulations, which are certain to cost businesses thousands of dollars more that they could be spending to stay alive, keep their workers or create new jobs.
In fact, federal agencies in Washington are busily preparing more than 4,000 new regulations covering virtually every commercial activity. Do we need thousands more regulations heaped on top of an economy that is already heavily regulated and which has been sputtering for years?
That question is better put to Florida's congressional delegation, led by Sen. Bill Nelson. He's been one of the president's most reliable allies and a supporter of his aggressive regulatory agenda. With all due respect, that has to change.
For starters, Nelson should support legislation that would put a moratorium on new regulations until the economy recovers. Beyond that he should support guidelines that block regulations unless they can pass a simple cost-benefit analysis. Too many are justified on the basis of theoretical arguments that ignore the practical consequences for businesses, consumers, taxpayers and job seekers. Unless the federal government can show measurable advantages, and unless those advantages are proportionate to the real costs, it should be restrained from imposing new burdens on businesses.
We would urge Nelson to remember as well that regulations can't be used as way to circumvent the constitutional process. Early in his term President Barack Obama proposed a controversial cap-and-trade law that would have sharply increased the cost of energy. For that reason Congress rejected it, but that hasn't stopped the administration from writing into the regulatory code new restrictions on power plants, automobiles and machinery that will have the same effect.
That's not what the Founders envisioned. Our system is designed to prevent the executive branch from imposing its will on Americans unless their elected representatives consent.
Whether we need some rules to protect the environment, the public health and safety is not in question. Small business owners agree with the need for sensible regulations. But what's coming from Washington is a virtual tidal wave that threatens to wipe them out.
Nelson and his colleagues have an obligation. They claim to be concerned about jobs and the economy. And their rhetorical support for small business is encouraging. But concern and rhetoric are weak substitutes for action. It's time for the senator and his colleagues to assert their authority over the administration and throttle back on the regulatory machine.
Bill Herrle is the Florida executive director for the National Federation of Independent Business, the country's leading advocate for small businesses with more than 10,000 members in Florida.