Lifting Regulatory Burdens to Create Jobs

On June 15, 2011 the House Committee on Small Businesses held a hearing entitled,  “Lifting the Weight of Regulations: Growing Jobs by Reducing Regulatory Burdens,” reviewing H.R. 527, the Regulatory Flexibility Improvements Act of 2011 and H.R. 585, the Small Business Size Standard Flexibility Act of 2011.  These two bills are intended to remove gaps in the Regulatory Flexibility Act and strengthen the power of the Office of the Chief Counsel for Advocacy.

Illustrating the regulatory burdens that small businesses routinely encounter, Ranking Member Nydia Velázquez (D-NY) noted that they pay 36 percent more in regulatory compliance costs than their larger business counterparts.  Which begs the question: why are small businesses drowning in higher regulatory burdens?

Witness Frank S. Swain of Baker & Daniels mentioned that small businesses simply don’t have the broad economic or employee base to spread regulatory costs.  Representative Renee Ellmers (R-NC) also expressed her concerns, noting that government regulation is the number one problem that small businesses must confront; the fear of regulation and higher taxes continues to dissuade businesses from expanding

Jane C. Luxton of Pepper Hamilton noted that H.R. 527 addresses major concerns to help small entities, and tackles the indirect effects of regulations.  Luxton urged that there also must be protections for small businesses to prevent duplicative regulatory burdens.  

Dr. Adam Finkel (Fellow and Executive Director, Penn Program on Regulation at the University of Pennsylvania Law School) disagreed.  He noted that while regulations hurt some small businesses, others take advantage of the market to, for example, provide safe equipment, pollution control technology, etc.  Finkel also explained that the estimates of regulatory costs are dubious and there are more pressing needs in regulatory analysis than to focus on the “most favored constituencies.”  He remarked that it was important to think about small businesses that do benefit, and to realize: costs come in two flavors, positive and negative, and to not to focus just on the negative.

Simply put, small businesses are the bread and butter of the U.S. economy.  According to SBA, small business have generated more than 64 percent of new net jobs over the past 15 years, employ over half of all private sector employees, and represent 99.7 percent of all employer firms.  Growth in small business entities will be necessary for economic recovery, and until the costly, unnecessary regulatory burdens weighing down small businesses are lifted, the likelihood of recovery is uncertain.

For witness testimony and opening statements, click here.

Forum research assistant Kara Behrens contributed to this report.