Tag Archives: small business

How to Help Small Businesses

Politicians love small businesses. Almost every campaign stump speech gushes about how important they are for the economy. Never afraid to put our money where their mouth is, politicians even started a Small Business Administration in 1953 to transfer money from taxpayers to small businesses. Today, the SBA’s budget is nearing $1 billion.

Given how much taxpayer money politicians lavish on small businesses, most of elected officials are confident that they are helping, not hurting. They should listen more closely to the consituency they claim to love so much. The Bush-Obama era has been one of ever-increasing regulation. Over 30,000 new rules hit the books under Bush. Obama is regulating at an even faster pace. Many of their rules hurt small businesses.

Paychex, Inc., a payroll service provider that works with many small businesses, recently commissioned a survey. They asked small business owners their thoughts on the economy, and what the biggest obstacles are to growing their businesses. The most common gripe? Regulation. 47 percent of small business owners say that regulations have “slowed or prevented” their business from growing.

The Rochester Business Journal reports that the types of regulations that most concern small business owners are “tax changes (56 percent), health care reform (39 percent) and state regulations in response to budgetary challenges (25 percent). The research found 61 percent of respondents have seen more government regulation over the past five years.”

If Congress is genuinely interested in helping small businesses while speeding up economic recovery, it’s time for a different approach.

Transferring money from taxpayers to small businesses doesn’t help the economy on net. It actually hurts it. One reason is that the prospect of free money encourages small businesses to redirect their energy from entrepreneurship to K Street. Another is that government largesse tends to be given out according to political interests, not consumers’ interests.

Federal regulation alone costs $1.75 trillion to comply with. Congress should lighten the load. 47 percent of small business owners say that regulation has made their business grow more slowly. Letting that 47 percent grow more quickly would go a long way toward getting the economy growing again.

What’s at Stake for Entrepreneurs?

Everything. Funny how easy it is to lose sight of that. This video by Caleb Brown shows you in less than three minutes just how much one couple put on the line — so that you can enjoy fine coffee and wine. Too few people appreciate that aspect of capitalism.

By the way, this video is part of a contest. The winner is decided by traffic. So if you like what you see, spread it around far and wide.

Regulation of the Day 131: Airport Vendors

A regulation passed in 2005 states that “at least 10 percent of all business at the airport selling consumer products or providing consumer services to the public are small business concerns (as defined by regulations of the Secretary) owned and controlled by a socially and economically disadvantaged individual (as defined in section 47113(a) of this title).

The requirement that the size of a business be taken into account is puzzling; a company’s size has little to do with whether it will do a good job or not.

I would also argue that airports are disadvantaged enough, having already to deal with the TSA, the FAA, the DOT, and others. Snark aside, airports are poorly run, almost without exception. Forcing them to hire vendors and contractors on factors other than price and performance is unlikely to improve matters.

Disadvantaged business quotas bring up a third issue: What happens if a disadvantaged business owner prospers through her hard work, and can no longer be considered disadvantaged? Does she get kicked out of the airport?

That thorny question would have been put to rest on April 21 of this year, when a built-in sunset provision would have made the regulation expire. Wayne Crews and I have written before favoring sunset rules for all new regulations. It’s a painless way to automatically get rid of rules when they become obsolete, or that turn out to be more trouble than they’re worth.

If a rule merits another five years on the books, Congress should be able to vote on it.

In this case, however, the Department of Transportation is getting set to renew the disadvantaged quota program all by itself. Permanently.

According to the DOT, leaving in the sunset provision “would simply cause confusion and disruption, making it more difficult for all parties concerned to carry out their responsibilities under the statute.”

Laws are supposed to be made by legislative branch, not the executive. What we have here is one more case of regulation without representation, out of thousands. You can read all about it in today’s Federal Register.

Regulation of the Day 114: Unlicensed Fruit Candy

The Chicago Tribune has a jaw-dropping story of regulators gone wild:

Department of Health inspectors seized, slashed open and poured bleach over thousands of dollars of local peaches, pears, raspberry and plum purees owned by pastry chef Flora Lazar… Inspectors cited no health problems with any of the food.

And that’s just the beginning. Read the whole thing. This is a scandal. Ms. Lazar is out of business for six months and has lost about $6,000. There is no evidence of harm. This is no way to treat a small business. Especially during a recession.

(Hat tip: the ever-resourceful Brian McGraw)