Innovation Ecosystem

Ripping up the rules

What we are talking about when we talk about regulation

By Terry H. Schwadron
Posted 2/13/17
The effort by the Trump administration to do away with regulation begs the question: what exactly is in those burdensome regulations? Overall, businesses have not proven that they will do the right thing when it comes to employee pay, pensions, equal pay for women, environmental rules, affirmative action, consumer protection, and health and safety rules.
How will regulations put into place by the Affordable Care Act to protect consumers from lifetime limits to their coverage, from limits to pre-existing conditions, from parity for mental and behavioral health care, and from equal costs for men and women be kept in place by the state if the law is repealed, replaced or repaired? If environmental regulations for clean water and clean air are rescinded, how much would the state of Rhode Island be willing to invest to protect Narragansett Bay from pollution? How will public health initiatives to protect children from lead poisoning be threatened by the removal of housing regulations?
What are the lessons to be learned from the failed $75 million investment in 38 Studios? One potential lesson that has emerged is the lack of transparency, and the lack of capability to enforce transparency, in the dealings by state government officials and elected officials, short of a lawsuit. While there are benefits that the civil lawsuit brought by the state has now been settled, one of the not-so-good outcomes is that no witnesses were heard in a courtroom, under oath, in questioning by lawyers. As a result, we may never learn what really happened and who was responsible. Sometimes, regulations, particularly when they come to enforcing transparency, can be valuable tools in protecting the public from future alleged “fraudulent” business ventures.

NEW YORK CITY – Your child has rules: bedtime perhaps, or not fighting or biting, or watching both ways before walking into the street, for sure.

Indeed, every parent/grandparent has a ready set of rules to enforce, and they take the time to outline the rules [and the consequences for non-compliance] throughout childhood.

Naturally the rules adjust a bit as the child grows older – all of a sudden there is a new set of issues, like staying out late or driving a car or taking risks.

Now, imagine, for each time the parent issues a new rule, the child says, OK, but first you must remove two other rules. You’d either laugh or reach for your disciplinary toolbox to respond to sass.

Rooting out overregulation
When I heard that President Trump had signed an executive order, fulfilling a campaign promise [admittedly for many previous candidates as well] to root out overregulation in the name of prompting small business creation and jobs, I wondered how it would work. Just what regulations did he have in mind?

But in the operational pattern of this new administration, there is nothing beyond the slogan. Instead, each federal agency that sees need for a new regulation must arrange for two existing regulations to disappear.

Now, many, many people across all political stripes agree that there may be too much regulation by government at all levels. A builder I spoke to recently said that he finds it difficult to properly thread the needle to get a project under way. But he could not immediately name which, say, five regulations were most to blame.

Indeed, many items that get in the way are local building code and inspections, he said, rather than federal ones.

Putting the regulations on the table
I have two arguments to make:
•  If there are specific regulations that are objectionable, let’s put them on the table. The White House should do the work to get 10, 100, even 1,000 regulations that are problematic, and let’s get at it.

Instead, we have a blanket rule just to get rid of other rules. In its early days, the Trump administration skips the details needed to make things work operationally.

Existing regulations came about for reasons. Did those reasons change? Don’t we still want clean water, clean air, employee guarantees? Are we using the regulatory process to pursue an ideological agenda or a problem-solving agenda? Did something happen to make us simply trust that businesses across the board will now be good corporate citizens with no regulation?

So, I turned to the 2017 Small Business Regulations Survey run by the National Small Business Association.

The general finding: “The average small business owner spends at least $12,000 a year dealing with regulations. In addition, 14 percent of small business owners spend more than 20 hours a month on federal regulations, and more than half of small business owners spend a staggering $83,019 average on regulatory costs in their first year of operation.”

Of course, more than a quarter of respondents grossed between $1 million and $5 million, which would put the average cost at under 1 percent for them.

A deeper dive
But as for detail, here’s what the survey reflected:

• “Regulations” include federal, state and local rules.

The biggest percentage of “very burdensome” regulations involved federal tax code filings, 38 percent; the Affordable Care Act [which has no impact on companies with fewer than 50 employees], 43 percent; and new overtime rules 27 percent.

By contrast, EPA-related regulations were reported very burdensome by 13 percent.

Specifically, small businesses found rules from the IRS twice as burdensome as Labor Department or EPA rules.

Overall, the biggest complaints were about administering the rules, filing the paperwork, and understanding the complexity of rules.

What is in the regulations?
A lobbying group in Washington that tracks hours spent reports that “hours spent” on paperwork are at a continuing high point. But they don’t list what is in the regulations.

All of which brings us back to the executive order. By putting into practice a requirement to eliminate requirements without knowing what they are, the question is: will we be better off? If most of the complaints are about the tax code, and the Trump administration intends to simplify and reduce taxes, won’t most of the complaints go away?

Let’s look at the DMV, a state operation. Only recently have we had the technology to text, and therefore a new rule seemed reasonable to stop texting while driving. Will we improve the driving experience by eliminating two other driving rules in order to recognize a new danger from texting?

What business has not proved
To me, the main issue is that business overall has not proved over years that it will do the right thing about employee pay, pensions, equal pay for women, environmental rules, affirmative action efforts, tolerance in the workplace, collective bargaining rights, consumer issues, even health and safety issues.

That’s why we have rules, or OSHA, or even rules protecting whistleblowers.

I realize that the emphasis is on driving job creation at the cost of all else, but I have to wonder whether the administration even cares to track what those costs will be for customers, workers or the environment.

Again, I would prefer that rather than celebrate slogans, we actually do the work of looking at unneeded regulation.


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