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Legislators Must Protect Small Businesses 

By: Luke Wake – – January 22, 2019

This month we saw the beginning of a new Congress, one where Democrats regained control of the U.S. House of Representatives, while Republicans modestly increased their majority in the Senate. This means that we have returned to a period of divided government in Washington — a point only underscored by the ongoing federal shutdown.

And if recent history is any guide, we cannot expect much in the way of major legislation from Congress in the coming years — not unless the parties are able to compromise on key issues on which they are deeply entrenched. But while much of the transition coverage has understandably focused on our reshaped political landscape at the federal level, the reality is that we should be paying more attention than ever to state-level politics because that is where we are most likely to see regulatory changes.

Republicans held a majority in two-thirds of state legislative bodies going into November’s election. But Democrats managed to flip six of those legislative chambers while winnowing away at the GOP’s control in states like Pennsylvania, North Carolina and Arizona. Democrats also wrestled control from Republicans in at least seven gubernatorial races. And while it is tempting to look at these developments from a federal perspective — perhaps speculating on what this means for the 2020 presidential election — that sort of thinking overlooks the stark reality that state and local politics matter.

The fact is that state and local authorities are responsible for much of the red tape that we all deal with, especially for small business owners who spend excessive time, energy and money in sorting out regulatory requirements daily. That is not to downplay the burdens of federal regulation. But with so much gridlock in Congress, we’ve seen more and more regulatory action at the state and local level over the past few decades, with legislators and regulators piling-on on top of already complicated federal requirements.

And that trend has only picked-up momentum as municipalities have increasingly balkanized regulatory requirements — imposing even more demanding standards than are required in the bluest of blue states.

For small business owners, it is especially daunting to keep pace with a perpetually changing regulatory landscape. But the tendency is for the regulatory thicket to grow. Legislators pile-on incrementally with various impositions that are usually well-intended, but which demand more time, energy and or money to navigate.

While any single regulation may (arguably) be justified when viewed at a granular level, the reality is that the totality of regulation, at all levels of government, takes on a life of its own. This discourages many would-be entrepreneurs, making it more difficult for established businesses to bring on or retain hardworking employees, and/or giving larger companies a competitive advantage over smaller start-ups.

Even in more conservative states, there are many examples of unnecessary regulation stifling innovative business models. But the regulatory thicket appears to be even more unmanageable in states like California, New York and Massachusetts, where lawmakers seem to be more indulgent of controversial impositions. And with Democrats regaining control of numerous legislative chambers and turning some “red” states into “purple,” there is reason for concern that lawmakers will only continue piling-on, without questioning whether someone should be pruning the regulatory garden.

Regardless of our respective ideological stripes — liberal, conservative or libertarian — we ought to agree that regulation should go no further than actually necessary to address cited public concerns and that regulation should be made as simple as possible to cut down on unnecessary red tape. But if we are worried about the accumulation and ossification of regulation impeding innovative business models and hampering small business growth, it would also be prudent for states to entertain regulatory reform measures.

For example, it may be wise to consider sunsetting certain regulatory regimes, eliminating unnecessarily burdensome rules and requiring regulators to provide plain English explanations of what is necessary to remain compliant. Legislators can also pursue reforms to control the growth of the state and local regulatory thicket by pre-empting local regulation of business or by imposing a regulatory budget — to require state agencies to eliminate red tape as a condition of allowing new regulation going forward.

But instead, many of our newly-elected lawmakers are focused myopically on pushing forward regulation on their pet issues, without much thought about the big picture. Indeed, in the aggregate over-regulation is a significant problem for the vitality of the American economy. And the problem will either get better or worse in the coming years, depending on the actions of state legislatures across the country.

But if legislators are intent on pressing forward with new regulatory regimes, we must at least hope that they are thinking about the impact on small business and are willing to consider alternatives that may prove less burdensome. Better yet, legislators should stop to question the prudence of piling-on more red tape when the regulatory thicket is already out of control. For that matter, we should all be asking: What will happen if the thicket is allowed to continue growing unabated?

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Source: Why legislators must protect small businesses from too much red tape – Washington Times

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