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Saturday, May 25, 2024

Overregulation Stunts Growth

Is the economy up … or down? Are business conditions improving … or deteriorating? Different economic indicators tell different stories, but here’s a fact to chew on: Our current so-called economic “recovery” is officially the weakest in U.S. history. Since the recession ended in June of 2009, the economy has sputtered along at an average annual growth rate of just 2.2 percent — far slower than past recoveries. Here’s another fact: The National Federation of Independent Business Owners’ Small Business Optimism Index recently hit a two-year low, falling in February to 92.9. In 2015, it averaged 96.1. This indicates that small business owners, for their part, aren’t falling for the economic rah-rah we hear from the Obama administration. These owners, the lifeblood of the U. S. economy, are clearly worried about and lack confidence in the future of our economy. Why might this be? Let’s start with the regulatory quagmire that has been created over the past seven years. In 2015 alone, 3,300 new federal regulations were issued, according to the U.S. Chamber of Commerce. And another 3,000 are in the pipeline for this year. Regulations suffocate businesses, stunt growth, discourage hiring, boost uncertainty and ding owners’ confidence and optimism. More regulation equals less business activity and lower economic growth. The granddaddy of all regulations created by this administration, of course, is Obamacare. It is an ongoing burden to business owners due to the myriad filing, paperwork and accounting requirements. And it has cost jobs due to businesses striving not to grow above 50 employees so they aren’t subject to many of Obamacare’s mandates. Imagine that: A law that encourages small businesses not to grow! But Washington isn’t the only source of growth-killing government meddling in the economy. Just last year, Sacramento passed laws mandating a higher minimum wage, mandatory paid sick leave, immigration-related protections, and increased liability for employers that contract for labor. California now has legislation in place to ensure that by 2022 it will have the highest minimum wage in the country. In Los Angeles, there is the costly and burdensome city business tax. This tax, which ranges from $1.01 to $5.07 per $1,000 in gross receipts, is applied to the revenues of most businesses located in Los Angeles. Local real estate developers have been fed up with the city’s costly and cumbersome permitting process for years, and the county recently added another layer of approvals for obtaining conditional use permits. The city won’t even leave food trucks alone, passing laws restricting what and how they can serve food. Finally, much to the chagrin of the Valley Industry and Commerce Association, Los Angeles County has proposed the Los Angeles County Pharmaceutical EPR Ordinance, which would impose more regulation and requirements for the disposal of pharmaceutical and sharps (needles and related) waste. All of this reminds me of what President Ronald Reagan once said about the government: “The most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’” Reagan also described the government’s view of the economy as: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” If I can paraphrase Reagan’s quote, it’s clear that the government we have now is not going to do anything to help small businesses grow and prosper. In fact, it will do the opposite and create as many growth-killing regulations, roadblocks and taxes for businesses as possible. So what can small business owners do in light of this? What they’ve always had to do: Use their ingenuity, intelligence, persistence and sheer willpower to survive and thrive in spite of the government. Here are three suggestions for doing this: First, invest in your business. Make the required capital expenditures needed to upgrade, improve and streamline all your processes, including your finances and accounting. Also, train and incentivize your people so you have the most efficient and stable workforce possible. Next, assess your risk management. Look at this not only from the standpoint of what you can insure against, but also identify alternatives to guard against supply chain or similar interruptions that could be catastrophic to your business. Finally, make sure you’re providing great products and the highest levels of service to your customers at all times. The best way to thrive in business hasn’t changed today from what it’s always been: Create happy customers who will come back time and again and tell others about you. Even the government can’t do anything to snuff this out. Mike Menerey is a partner with CFO Edge, a provider of outsourced CFO services located in Pasadena.

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