Regulatory Nightmares

We all love stupid paperwork and doing what mindless bureaucrats tell us, don’t we?

reality check r1What do job-creators have to say about regulation?

  Investors Business Daily : What’s the single biggest impediment to job growth today?

 “The U.S. government. Having built a small business into a big one, I can tell you that today the impediments that the government imposes are impossible to deal with. Home Depot would never have succeeded if we’d tried to start it today. Every day you see rules and regulations from a group of Washington bureaucrats who know nothing about running a business. And, I mean every day. It’s become stifling.”  Bernie Marcus,  Co-Founder of Home Depot

econ  5US Businesses’ cost of regulatory compliance for 2012 was estimated at $216 Billion and 87 million hours of paperwork, cite, costs that raise consumer prices and hurt international competitiveness.

Regulations Inhibit Businesses Start-Ups.

New businesses often fail in the first few years because of limited funding and the time it takes to find a path to profitability and establish a customer base. Regulations and red tape cost time and money, making it that much harder to establish a new business.

Rush Limbaugh has an interesting take on why big established companies often like burdensome regulations: he says that Walmart likes Obamacare because they can afford it, and their smaller and less profitable competitors can’t. That Target is OK with raising the minimum wage for the same reason.  So harsh government regulations help them fend off the competition.

The go-to guy on government regulations hurting small and new business is former CNN reporter John Stossel who has lots of  YouTube videos You can now see him on FoxNews Channel, home of ultra-cool Neil Cavuto.

Inevitably, Beyond Their Original Intent.

Well-intentioned legislation can turn into abusive regulations that go far beyond the original intent. Who’da thought that surveillance of terrorists would turn into the recording of everything you do on your smartphone?

And though we all want breathable air, who wants their electricity bills to skyrocket when the EPA pushes their regulatory authority to the limit without balancing its overall effect? (e.g. emission standards will take down coal-fired generation plants, which will in turn raise electric costs, and make US businesses less competitive in the world economy).

Helicopter_smallSome say the intent of these EPA regulations is to bring down the US economy

Regulations as Political Tools 

Regulations have become political tools, with selective enforcement being a weapon  against ones political foes. Some say the IRS is auditing Republican contributors, at the behest of the Obama administration. (cite).  Even if one is cleared, an IRS audit is expensive and time-consuming.

The other danger is when an administration deliberately chooses which regulations to enforce, like not enforcing immigration laws, but pushing hard on EPA rules. Sound familiar?

Remember how the IRS gave special scrutiny to Conservative groups in approving their applications for 501(c)(4) status, and less scrutiny to left-leaning groups?  The IRS admitted this.   This is the scandal Lois Lerner took the 5th on, and lost her emails.

If the law was repealed so that 501(c)(4) status did not exist, neither party would have the advantages of that special status, and the party in power would lose the power to pick and choose who gets its benefits.

doc-tPaperwork Changes the Way People Do Business.

Obamacare mandates medical practices to adopt electronic medical records (EMRs), which in theory, was supposed to produce cost savings. The cost of inputting patient data can be in the (unsubsidized) $100,000+ range per physician.

These and other Obamacare  mandates are driving doctors out of private practice: some are retiring early, and others are moving into bigger, more institutional practices. So, if you like your private practice doctor, well, you know…

Regulations substitute for good business judgment.

To meet the demands of government regulators, businesses can end up doing some pretty stupid things. The best example might be the Community Reinvestment Act (CRA) that forced banks to lower lending standards (including no money down loans) in an effort to help low to moderate income people buy houses. While opinions differ, many feel this was a causative factor in the 2008 financial crisis. Here is a good history of the CRA.

Under pressure by regulators (who control licenses to do business), banks made these loans they would have not made otherwise — and it was the loans with relaxed credit standards that led to the financial crisis.

Even more outrageous: though the banks were pressured by regulators to make these imprudent loans, Eric Holder’s Justice Department is prosecuting these same banks for the same loans, and are extracting settlement in the millions and billions of dollars, the banks pay to avoid the bad PR of a trial and a big chunk of the money goes directly to Eric Holder’s Justice Department. Some call it an extortion racket.

Congress’ Extortion Strategy.

Most people think that big companies buy influence with political contributions to politicians, which is true, but political fund-raising has a much darker side. In his 2013 book Extortion, Peter Schweizer explains how members of Congress shake down industries by using their power to regulate. It goes like this:

A congressional committee calls in several CEOs of an industry to testify concerning possible regulation of their business. After the hearing, but before the vote, they approach the CEOs, letting them know that if they do not make a large political contribution to them, they will push industry regulations that will have a far higher business cost (than the requested contribution).

reality check r1If you owned a business and knew to expect this kind of annual expense, would you open a new manufacturing facility here, or take it overseas?

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