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The Cost of Federal Regulations on Maine Businesses

February 5, 2016 Posted by Liam Sigaud - No Comments

According to the Small Business Administration, the annual cost of federal regulations on business in the United States exceeds $2 trillion. Every year, about 8 billion hours (or the equivalent of 4 million full-time employees) are spent complying with the tens of thousands of tax and regulatory policies issued by hundreds of different federal agencies. These rules control the food we eat, the homes we live in, and the gas we put in our cars. They impact the air we breathe and the water we drink.

A 2010 issue brief by the National Small Business Association noted that, “Unlike big corporations—which have legions of accountants, benefits coordinators, attorneys, personnel administrators, and the like at their disposal—small businesses often are at a loss to keep up with, implement, or afford the overwhelming regulatory and paperwork demands of the federal government.”

Calculating the impact of federal regulation on Maine businesses is no simple task, but some straightforward arithmetic can begin to elucidate the scale of the problem. Maine, according to the Census Bureau, is home to a little more than 33,000 firms (0.58% of all U.S. businesses). Multiplying the $2 trillion nation-wide cost by the proportion of all businesses located in Maine reveals that federal regulations alone – not to mention the numerous state laws and local ordinances the businesses must follow – cost businesses in Maine about $11.6 billion every year. That’s equivalent to $8,900 for every Maine resident. Our total state budget in 2014 was $7.7 billion.

A few simple ideas have been proposed to address the constant increase in federal regulations. Tying government agencies’ budgets to some tangible metric of performance, like the average time taken to issue a permit, would go a long way in motivating bureaucrats to serve the sectors they regulate in a cooperative and business-friendly way. Another approach – which has successfully been implemented in Great Britain and Canada – is to cap the financial regulatory burden the government can impose on the private sector; if the cap were set at, say, $1 trillion, for every additional regulation lawmakers want to create, another would have to be eliminated to preserve budget neutrality.

When government intrusion into private enterprise is costing businesses more than the entire GDP of Canada or Italy, can we say we operate in a free market?