Uncertainty is killing the economy

Larsen

Award-winning columnist Richard Larsen, of Pocatello, is president of the brokerage firm Larsen Financial. He graduated from Idaho State University with degrees in history and political science.

Economic uncertainty is crippling to all who are caught in its grip. Individual Americans, uncertain about their job security in a “pink slip” environment are not as inclined to spend as they would be with real job security. They are worried about whether they can keep their homes, keep their vehicles, afford college for their kids, and afford health care if an illness was to befall a family member. Since 70 percent of the economy is driven by the consumer, this is one of the realities restraining the nation’s economy, and the reality most of us face daily.
That uncertainty has a tight grip on the private sector where free enterprise and entrepreneurship turned a third-world economy into the largest in the world in just a few generations. The economic freedom that once beckoned to the world for the astute, creative and talented to come to America, has rapidly dissipated. Regulation and government control over the private sector are on the verge of choking the life out of free enterprise.
And it’s not just future uncertainty over what shoe may drop next squash free enterprise, but more significantly, the uncertainty over what has already happened to the private sector in the past few years. Each year all new policies and regulations, created both by presidential executive order and legislative statute, are filed with the Federal Register. For years the Register has added over 70,000 pages of new regulations each year. Last year set a new watermark of over 81,000 pages of new federal regulations, including over 6,000 pages due to the federal government taking control of health care. And that’s just the beginning. Most analysts claim that by the time Obamacare goes into full effect over the next few years, it will be by far the most onerous regulatory boondoggle in history.
FinReg, the mammoth financial regulatory overhaul passed by congress ostensibly to define “too big to fail” and address the financial collapse of 2008, not only failed to resolve the subprime mortgage issue it was supposed to, but it will in the end, add 25,000 pages of new regulations to the Federal Register.
Every regulation created by Washington imposes new requirements and new costs on employers. Health care costs from the partial implementation of Obamacare have already run out of control with most employers facing 30-45 percent increases in health-care insurance costs as a result. Over 95 percent of the private sector employers in the country are small businesses with fewer than 500 employees, and are sole proprietorships, or partnerships, structured as limited-liability companies (LLC) or S Corps.
The costs imposed on small businesses by every page of regulation emanating from Washington is debilitating. Winslow Sargeant, chief counsel for advocacy at the U.S. Small Business Administration, recently shared some staggering facts with the Senate Small Business Committee. He testified that costs to meet Environmental Protection Agency rules average $22,000 per employee for a small manufacturing firm. This compares to only $5,000 per employee for the large companies they are trying to compete with. The average cost for all small businesses to meet federal rules is $10,585 per worker. Small businesses face costs of IRS tax regulations that are four times greater per employee than for large companies. For many small businesses, the cost of government regulation is greater than the cost of health-care insurance on a per-employee basis.
In a recent CNBC interview Jack Welch, the former CEO of General Electric, stated the obvious, that the economy will be moribund for the foreseeable future, primarily because of the anti-business regulatory environment fostered by Washington.
At the National Manufacturing Summit in Dalton, Georgia last month, speaker after speaker lamented the uncertainty of doing business in this era of inordinate regulation. Tom Fanning, Chairman and CEO of the Southern Company, said that increasing federal regulation is causing the costs of everything they do to soar. Norman Holmes, President of Southern Gas, said regulatory costs have increased by 40 percent just in the past few years.
Last week the President’s Jobs and Competitiveness Council wrapped four months of deliberation over how to improve job stability and growth nationally. They were charged to leave “no stone unturned” in the search of ways to boost the country’s anemic job growth. Since all the appointees were ideologically of like mind with the administration, the only suggestions they could come up with were more money to retrain workers, more tax dollars retrofitting commercial buildings to boost energy efficiency, and more government loans passed out by the Small Business Administration. This shouldn’t surprise us, as the president himself last week blamed job losses on ATMs! They’re all clueless, it appears.
It’s largely the uncertainty created by expansive government control over every aspect of private sector business operations that’s inhibiting job and economic growth. What a shame Washington is too myopic to see that!