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Philip Howard Leads Roundtable on Regulation for Inc. Magazine

In March, Inc. magazine organized a roundtable discussion with small business owners about the regulations that affect their businesses. Common Good’s Philip Howard moderated the conversation, which is summarized by Inc.'s Editor-at-Large Leigh Buchanan in their July/August issue.

One of the participants, who heads a winery, discussed a federal rule that limits where he can sell his product if it contains grapes from “‘noncontiguous’ states.” Inc. relates:

This rule exists, suggests Howard, to protect vested interests. But, he adds, 'it looks like [rules governing the wine industry] exist only because someone made them up that way 80 years ago.'

That could be said of tens of thousands of governmental rules that appear arbitrary, irrational, or out­dated. Unfortunately, the list is only growing. Roughly 3,400 federal regulations were issued in 2015, 545 of which directly affect small business, according to the Competitive Enterprise Institute. The Office of Management and Budget reports that another 3,000 are on course for this year. Entrepreneurs are, or soon could be, grappling with new federal and state rules related to—among other things—overtime, sick leave, health care reporting, employee retirement plans, independent contractors, lead dust in commercial buildings, and website accessibility for the disabled. The most recent academic paper on the topic released by the Small Business Administration's Office of Public Advocacy—in 2010—reports that per-employee regulatory costs for small companies are 36 percent higher than those for large ones.

The problem is not regulation per se, the roundtable participants agreed—entrepreneurs “want to do the right thing for their employees, their customers, and the environment,” Inc. writes—but that the growing mass of—oftentimes obsolete, conflicting—regulations prevent growth with no accompanying benefit:

Every time your business is prevented from doing something or you choose not to do something because the government makes it difficult, there is an opportunity cost. According to the Paychex survey, concern over regulation had dissuaded 39 percent of respondents from entering a new market, 36 percent from introducing a new product, and 25 percent from starting a particular kind of business.

The Inc. article ends by offering five reform proposals to “build[] a smarter, less restrictive regulatory system”—these include: allowing new business “breathing room” in addressing minor regulations; treating “disrupters” differently than established industries; regulating by principles as opposed to precise specifics; cleaning out obsolete regulations; and empowering regulators to use their common sense.

Common Good has long-advocated for these last three ideas. On the proposal to allow regulators to exercise discretion, Inc. writes:

‘America is run by dead people,’ says Howard. ‘The people who wrote those rules are dead, so you can't argue with them or hold them accountable.’ Some regulations date back 60 years, so it is vital that live human beings have the power to interpret them, says Howard. In general, those who enforce the rules should be encouraged to exercise their best judgment depending on the situation. All too often, regulators and inspectors are conditioned to say no, because that’s the safe bet.

Click here to read the Inc. article in full.