Few issues will likely be more important than policies that reduce barriers to job creation, the author writes. Why small businesses matter

Small Businesses for Sensible Regulations and the National Federation of Independent Business are joining with POLITICO Tuesday to discuss the presidential election.

Over the next 12 months, few issues will likely be more important than policies that reduce barriers to job creation and spur economic growth.


U.S. small businesses, which are responsible for almost two-thirds of new hires annually, are facing rising barriers and an increasingly hostile relationship with Washington due to federal regulations. As one Nevada small business owner recently said: “I feel like it’s them against us.”

His frustration is not only understandable, but also all too common among tens of thousands of struggling entrepreneurs.

A Gallup poll released last week found that compliance with government regulations is the single most important problem facing small businesses.

Since 2005, new federal rules costing in excess of $100 million have increased by 60 percent. Regulation has had a disproportionately negative impact on small businesses. Smaller firms pay 37 percent more in compliance than their larger counterparts. This disparity is both unfair and counterproductive to the goal we all share: returning Americans to work and stabilizing the economy.

It is imperative that this issue be addressed quickly. But rhetoric-driven calls to end regulations or abolish the Environmental Protection Agency are as unreasonable as they are unrealistic. A more practical step would be to temporarily halt new regulations while meaningful, and long-term, reforms are made to the regulatory process.

The fix is simple. In fact, most Americans may be surprised to learn that many the reforms that small businesses are now calling for have already been introduced by executive orders and other guidelines on the books today. Unfortunately, they have not been evenly applied across the federal government — and are increasingly ignored.

These five steps could have a meaningful effect in our common goal of helping small businesses — and thus our economy — succeed:

1) Increase small business’s voice in the regulatory process: Regulators generating rules have little to no contact with those who will be affected. They cannot be expected to understand the impact, feasibility or unintended consequences of their actions. An “open exchange of ideas” as President Barack Obama called for earlier this year in an executive order, would go a long way in creating a cooperative, well-informed rule-making process.

2) Help small businesses comply with complex regulations before assessing fines: Small businesses usually don’t have the cash on hand to hire a full-time compliance officer, and are often unaware of many new regulatory requirements imposed in any given week. Fining businesses for mistakes made in good faith only adds to their problems. It also makes it less likely they can afford to comply. Sensible reform would waive fines and penalties for first offences involving minor errors on regulatory paperwork.

3) Require regulations to undergo rigorous benefit-cost analysis. Regulators should estimate the long-term benefits and costs of new regulations using the best available economic models and adopt only those regulations that impose the least burden on the economy at large. Regulatory agencies often highlight indirect benefits of regulatory proposals, but should analyze and make public the indirect costs to consumers. In addition, the collective effects of more and more regulations on small businesses must be considered.

4) Ensure regulatory actions are based on objective data and hard science: Studies and analyses are released constantly inside the Beltway to advocate one point of view over another. But all too often, regulators cherry pick studies to support policy agendas, rather than allowing empirical data and hard science to shape public policy. Politics is injected into a process that should be straightforward and objective. So federal agencies should follow clear, consistent processes in evaluating scientific studies and models.

5) Increase transparency and accountability in the federal regulatory process: Federal regulators should share publicly the data, methods and models underlying federal regulatory decision-making. This includes any uncertainties resulting from their analysis. Congress and the courts should oversee the agencies’ work, and hold agencies accountable for following these principles.

Small Businesses for Sensible Regulations, a project of National Federation of Independent Business, has sent these practical measures in an open letter to the president calling for action now to bring commonsense reform to the regulatory process.

More than 60 small businesses from 11 states have today come to Washington to talking about the challenges they face and build bipartisan support for this reform.

Reform would help bring a level of needed certainty to America’s small businesses, and would eliminate the roadblock that many small businesses cite as their greatest impediment to growth.

That’s a sensible goal Republicans, Democrats and independents can all support.

Blanche Lincoln, a former senator from Arkansas, now serves as coalition chairwoman of Small Businesses for Sensible Regulations.