Over the past several years federal legislators have added a large number of regulations that apply to small businesses. There are more regulations placed on small businesses today than ever before. The increase of regulations placed on businesses can hurt the economy. It’s estimated that economic growth has been decreased by two percent between the 1950’s to the early 2000’s. If conditions today were similar to the regulatory conditions that existed in the 1950’s, the US gross domestic product would be almost forty trillion dollars more than it is currently. While this huge number could seem like an exaggeration, a number of studies have shown this to be accurate. Increased regulations can act like a tax increase on the goods that businesses try to sell and can prevent people from opening small businesses.
Regulations act like a tax increase when they increase the cost of the good. For example, when higher fuel efficiency rates were mandated by the government, the cost of installing this new technology in newly manufactured cars made the price of the cars go up. To the average consumer this act just makes it look like cars are more expensive, when in reality the car is more expensive the government is telling manufacturers what features have to be installed in the new cars. Manufacturers could make cars that are less expensive without the regulation in place.
When governments place requirements to open a business, such as licensing, then it discourages people from opening businesses. The government can place requirements on licensing such as education or fees that may not necessarily be required to get a job done. These licensing requirements make entrepreneurs feel like they either aren’t able to complete the requirements to get a license, or maybe they cannot afford to pay the licensing fees that would allow them to open their own business. When competition is limited in a local market because of these regulations that discourage people from opening their own businesses, the consumer pays higher prices for a product of reduced quality.
Although we know that regulations make products more expensive for customers, it’s almost impossible to measure impacts to the exact dollar. There are a couple of different systems that have been invented that try to the increase in dollars or rate regulations in terms of how good or bad they may be for businesses, but each system of measurement has it’s flaws.
That’s why it’s more important now than ever to be a part of an association like afeUSA. We research regulations that are being talked about at the federal level and state level and think about the impact that it may have on our members. We are able to collect a broad range of voices and advocate for our members to policy makers so that no policy can pass without legislators knowing the impact on our affiliates. We raise your voice to a whole new level.
