Regulations are Strangling Small Businesses

If you have a heart problem would you to to a foot doctor?

 

That was my thought recently after the latest yuck report on the economy. Last quarter, it grew at half the speed needed to employ all the people who want to work. 

Here is what led to the foot doctor thought.

 

Yes, the economy is incredibly complicated. But it is also simple. To understand it, imagine a town, called “Yourtown.” It has a big bank and a big manufacturing company. And several big-box retail stores. 

 

These employ half the people in town. They create no net new jobs. About the time the bank adds staff, the manufacturer cuts jobs.

 

Yourtown also has a bunch of small businesses — restaurants and stores, consultants and engineering shops, small manufacturers, accountants and tech-geek upstarts, etc. Oh, and a small community bank. 

 

These businesses employ half the people in town. They normally add a lot of jobs. Some of these enterprises die. But more new ones start up than die. So, these small businesses usually generate growth.

 

Now, let us inflict new burdens and costs upon all these businesses. In the form of Obamacare, higher taxes, and the Dodd-Frank financial regulatory bill, which does a kneecap job on small banks. Oh, throw in a raft of punitive regulations from EPA and other agencies on top of that.

 

How do you suppose the businesses of Yourtown react to these new burdens? Basically, the big guys shrug. And, the small guys get stuffed. Our economy is no more complicated than that.

 

All these burdens have been heaped upon American businesses. Big companies have adapted. They don’t like the new costs and red tape. But their lobbyists worked closely with politicians to write the new rules. And, they have huge staffs to handle this stuff. 

 

Small companies have suffered. The new costs are too much for them, and the new regulations too onerous.

 

Thousands of small banks have disappeared. Yes, thousands. Only three new banks have been chartered since Dodd-Frank was unleashed. That’s right, three. Small banks used to lend to small businesses, with more understanding and sympathy than big banks possess. Dodd-Frank has smothered them. The people who wrote it should be in jail.

 

Bottom line is we have fewer jobs than we should have. Fewer jobs than small businesses used to create. Less investment and expansion by small business. More small businesses dying than being born — for several years now. An ominous sign. 

 

How could our politicians and bureaucrats be so stupid to do this to our new-jobs machine? The answer is full of complications. The answer is also simple.

 

Suppose we gather all of Congress and its staff — the folks who write these laws. And all the White House crew — the people who propose the grand ideas that end up in laws. And all the top bureaucrats — the people who create the red tape and write and enforce the regulations.

 

Tell them, “All of you who have owned a business, raise your hand. All of you who have worked as adults in small business, raise your hand. All of you who prepare your own tax returns, raise your hand. Now, anyone who does NOT have a hand in the air, please clap.”

 

The applause would be thunderous. The guys who create and inflict these burdens on our jobs machine don’t know squat about that machine. Or about its working parts. From the president on down, they are ignorant about the small businesses of this country. And their ignorance shows.

 

When they try to fix the problems in the economy, they are like foot doctors working on a heart problem. It is an appropriate analogy, because small enterprises are the very heart of our economy. 

 

To paraphrase Ronald Reagan: Government is the problem, not the solution. 

 

From Tom...as in Morgan.          

 

Tom Morgan writes about political, financial, and other subjects from his home near Oneonta, in addition to his radio shows. Contact him at tomasinmorgan@yahoo.com