Small biz fears end-of-administration regulations

By Kathy Hoekstra

While ironing out tax deals to keep Indiana-based Carrier and its 1,000 jobs in the United States, President-elect Donald Trump discovered something — taxes aren’t necessarily the biggest problem for job creators.

“Believe me,” Trump said last week. “These great leaders of industry, and even the small business people who are just being crushed, if they have their choice between lower taxes and a major, massive cutting of regulations, they would take the regulations.”

One such small business person is Ciara Stockeland, of Fargo, N.D. The third-generation entrepreneur is the owner and franchisor of 11 MODE boutique stores in the upper Midwest and South Carolina, with an eye toward a big future.

“Our goal has always been 75 stores by 2024,” Stockeland told Watchdog.org. “That’s what this team is really pushing toward.”

But government regulation has exacerbated that push. The Department of Labor’s “overtime” rule, which would double the threshold of overtime eligibility for salaried workers, had Stockeland scouring her budget to accommodate the extra pay. Like many other business owners, Stockeland’s only choice to comply and stay in business was to change some salaried positions to hourly.

“My team works so hard and they love being able to say they have a career that’s growing,” Stockeland said. “To have to then say, ‘OK, I’m sorry but when you come in on Monday you’re going to have to clock in. And you’re going to have to clock out. And you’re not going to be able to do something that you feel is necessary for your career after 5:30 on Monday night. That’s a hard conversation to have.”

While a court injunction put that regulation on hold, Stockeland is bracing for a host of others in the waning days of an Obama administration desperate to wrap-up its regulatory agenda.

Climate of uncertainty

Midnight regs and appointments are hardly the province of one party.

Presidents have engaged in such last-minute shenanigans almost since the beginning of the republic. President George W. Bush was criticized for a host of rules put in place in the waning days of his administration in late 2008 and early 2009. Many such rules can be reversed by the incoming administration without congressional action, but it’s a time-consuming process that distracts from the new president’s own priorities.

And, in the interim, regulatory uncertainty creates operational uncertainty for businesses.

The Small Business Entrepreneurship Council keeps a close eye on regulations that affect its 115,000 small business membership. SBEC Entrepreneur in Residence Kristie Arslan says these so-called “midnight regulations” can be extraordinarily hard on small business owners who lack the money and lawyers to deal with surprise regulations.

“Small business owners often wear many hats in their businesses,” Arslan said. “They’re CFOs, CEOs, heads of marketing, heads of H.R. – often it’s after the fact when they’re hit with a new regulation they need to comply with or a new bill for something as an impact of a regulation.”

“We’re really concerned,” she added.

The Competitive Enterprise Institute, which has been tracking federal regulations for more than 30 years, says federal agencies enacted 192 “economically significant” rules since May 1 — that is, rules estimated to cost at least $100 million per year. And at least 16 more are still in the hopper with December and two-thirds of January yet to go, “ranging from food labeling to school lunches to refrigerators.”

According to Arslan, rushed rulemaking is generally sloppier and less transparent, citing a Government Accountability Office report that found that between 2003 and 2010, federal agencies issued final rules without publishing a “notice of proposed rulemaking” (NPRM) for about 35 percent of major rules, and 44 percent of non-major rules.

“Midnight rules are poorly constructed and they often don’t go through extensive economic analysis to be able to truly understand the impact on small business,” said Arslan. “When you rush rulemaking, and you add that to excessive rulemaking which has occurred over the years, it just creates more confusion and more costs for small businesses.”

Congressional Republicans agree. The House passed the Midnight Rules Relief Act of 2016 to strengthen the little-used Congressional Review Act But the Senate has not considered the measure, and it has no chance of becoming law during the Obama administration.

The 1996 Congressional Review Act gives Congress 60 days to review and overturn a regulation. But because the CRA also requires presidential sign-off, it has been successful only once — in 2001, to overturn a controversial ergonomics rule. The measure is now under consideration by the Senate.

Critics say the GOP bill addresses a non-existent problem. Rep. Hank Johnson, the ranking Democrat on the Judiciary Regulatory Reform Subcommittee, argues that “once these rules have been invalidated through this process, the agency may not adopt a subsequent similar rule absent express authorization by Congress.”

But with a $4 trillion U.S. regulatory burden equal to the fourth largest economy on earth, CEI says beefing up the CRA is critical. The update would allow Congress to vote on multiple regulations at a time, which CEI says is vital because more than 1,000 regulations will be CRA-eligible in the next Congress, including any regulation finalized since late May. “And President Obama will not be in office to stop them,” said CEI’s Marlo Lewis, Jr.


On the same team

Not so fast, says Jerry Ellig, senior research fellow with the Mercatus Center at George Mason University.

He agrees that without comprehensive regulatory reform, we will continue to see administrations ram through their policy priorities regardless of the facts. “This is what the Obama administration did with the Affordable Care Act and what the Bush administration did with homeland security,” Ellig told Watchdog.org

But Ellig says even though congressional leadership and the incoming administration have promised to fix the regulatory process, his optimism is tempered.

“The bad news is that when the presidency and Congress are controlled by the same party, members of Congress tend to lose interest in regulatory reform because they assume the regulatory process will work fine when ‘their team’ controls the White House,” he explained.

For this reason, Ellig says, any wholesale reform needs to include legislative requirements for regulatory impact analysis and judicial review similar to what is taking place with the DOL’s overtime and blacklisting rules, and the National Labor Relations Board’s persuader rule.

“Because [judicial review] would help ensure that agencies are regulating based on facts rather than just good intentions,” he said.

In the meantime, Stockeland says she’s encouraged that a new administration might bring with it fresh energy and a new perspective, and put midnight regulations to bed for good.

“Anything we do in life if we rush it, is rarely done well, right?” she said. “If we rush through something without thinking through it and looking at all viewpoints, it’s rarely a great turnout. And that follows through with the government.”

This article originally appeared at Watchdog.org.

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