Small businesses and the large war to save the economy

We all know that these are very serious times.  The US economy appears to be dangling on a thread.  The rest of the western world doesn’t appear to be doing much better.  When politicians and media pundits talk about how to get the economy “moving again” they tend to focus on tax policy.  No doubt tax policy has a big impact on the economy.  However, any move on tax policy gets in the same old arguments of class warfare and the ever growing debt.  We do need to fight those battles, and we need to get some directionally correct movement on taxes.

However, there are other political battles that involve far less of a politically entrenched defense that could nonetheless have a large positive impact on the economy without adding a penny to the deficit. Yes, I am talking about regulations.  It is my hope that in the final week of the 2010 campaign, that Republican candidates help their campaigns and future governing mandates by educating the American people the stupidity and costs of stifling government regulations.

The American voter is ready to embrace deregulation at all levels, federal, state, and local levels.  Now is the best time to make this case.  The Democrats are rudderless and flayling about like headless chickens.

The USA Today has a great article showing how regulatory policies are killing small businesses while so many in government and the media declare the importance of small businesses.

In an economic climate with few jobs and cutbacks on basic city services such as police protection and firefighting, you would think cities and states would be overjoyed when someone was willing to open up a new business, bringing with him jobs, economic vitality and tax revenues. You might think that, but you’d be wrong.

I work with small businesses each and every day.  I was nonetheless surprised to hear just how self-defeating so many regulations are. Keep in mind, the focus here is just on city/local regulations.  When you factor in state and federal regulations, its amazing that anyone anywhere even considers opening a business.

Instead, cities and states stifle new small businesses at every turn, burying them in mounds of paperwork; lengthy, expensive and arbitrary permitting processes; pointless educational requirements for occupations; or even just outright bans. Today, the Institute for Justice released a series of studies documenting government-imposed barriers to entrepreneurship in eight cities. In every city studied, overwhelming regulations destroyed or crippled would-be businesses at a time when they are most needed.

The problems with our government can be found at all levels.  Even red states and red cities have some incredibly stifling regulations.  Red Staters need to take back their city councils and local governments if we want to have a prosperous economy sometime in the foreseeable future.  Whatever happens in the November elections, we need to press on and expand the tea party movement so that it is not so exclusively focused on DC.  We need a tea party revolution in every major city.

Time and again, these reports document how local bureaucrats believe they should dictate every aspect of a person’s small business. They want to choose who can go into which business, where, what the business should look like, and what signs will be put in the windows. And if that means that businesses fail, or never open, or can operate only illegally, or waste all their money trying to get permits so they have nothing left for actual operations, that’s just too bad. This attitude would be bad enough in prosperous times, but in a period of financial strain and high unemployment, it’s almost suicidally foolish.

The article provides some specific examples of horror stories:

In Chicago, Esmeralda Rodriguez tried to open a children’s play center, paying rent month after month while she waited in vain for the government permits she needed to open her business. After a full year of bureaucratic red tape, she finally exhausted her life savings and closed down for good.

•Worried more about their personal aesthetic preferences than the survival of local businesses, Houston now strictly limits all window signs — inexpensive advertising that is vital for small shops that can’t afford to advertise through other media.

•Los Angeles places enormous and pointless restrictions on home-based business. For people who are struggling and can’t afford to rent commercial space, working out of the home might be their only option to stay afloat. But in Los Angeles, they had better make sure they don’t use their garage, manufacture or sell any products, advertise or violate any of the other myriad laws. Many businesses end up operating illegally, scared to grow their business for fear that the next knock on the door could be a regulator.

•In Miami, an accidental loophole in state law allowed jitney van transportation services to flourish briefly. As soon as Miami-Dade County got the opportunity, however, it shut down the new jitneys and ensured no others would open by requiring any new business to prove it wouldn’t hurt its competitors. It even allowed those competitors to object to any new businesses, which is like allowing Burger King to veto the building of a new McDonald‘s.

•In Milwaukee, Nasir Khan spent tens of thousands of dollars renovating an abandoned hot dog stand and getting permits, only to have them withdrawn when a local alderman intervened. The politician wanted something nicer than a hot dog stand at that corner, and apparently it was better to have no business than one he didn’t like.

•In Newark, several long-term businesses just managed to escape destruction. The city tried to use eminent domain to remove one of the few thriving business areas, but new judicial restrictions on eminent domain put a stop to the city’s plans. Ignatius Paslis was also lucky. Although the city delayed his permits so that his café catering to Rutgers students could not open until after all the students had left for the summer, he managed to survive until the fall, and now his business is thriving.

•Philadelphia’s permitting and licensing codes are difficult enough in themselves, but city officials often seem hellbent on treating the system as a perverse game designed to punish honest enterprise. The government required convenience store owner Ramesh Naropanth to put new gates on his store before it would allow him to sell sandwiches, setting the small businessman back $8,000.

•In Washington, D.C., hundreds of people have waited more than a year to take the required class and test to become a taxi driver. Rather than encourage these individuals to create jobs for themselves, the city has simply stopped offering the class and test.

When people ask what Republicans can do to help the economy give the constraints of large budget deficits, the answer should turn to a broad freedom-based agenda.  More specifically, just getting rid of the purposeful obstacles placed in the way of small businesses would do a lot to get our economy growing.  No fair minded American can oppose getting rid of these obstacles.  The challenge of course is shining the light of day on these regulations and the how/why they were ever passed in the first place.

Republicans have so low hanging fruit on this issue.  The Institute for Justice report is truly damning.  Deregulation of small businesses is a winner economically and a winner politically. Its time to give those who dream and strive some political momentum and legal cover.  I would humbly suggest to the DC Republicans that tackle the issue of deregulation on a weekly basis, identifying ways in which Washington DC places its firm boot on the throats of small business. Its a meaningful stimulus, and even the CBO won’t classify it as a cost to the federal government.