by Marshall Kirby, Public Policy Analyst
President Obama recently announced a move which has garnered significant attention in the political and business communities. The announcement amounts to a review of current regulations which the Federal government has placed on businesses and the way they operate. This move has come as a bit of a surprise, but was not entirely unanticipated. With the Democrats losing control in the House of Representatives and losing several seats in the Senate, and with the White House facing low approval ratings, most political insiders and commentators have expected Obama to adopt more centrist policies and work harder at improving a sputtering economy.
Since entering office, President Obama has been hit repeatedly from conservatives and the business lobby over concerns of higher taxes and a more encumbering regulatory environment as a result of health care reform and the proposed cap and trade legislation. Last year, the Administration engaged in a very public battle with the US Chamber of Commerce over legislation with the US Chamber of Commerce accusing the President’s policies of being job killing and unfriendly to business. Tom Donohue, the President and CEO of the US Chamber even went so far as to say that US based businesses were facing a threatening “regulatory tsunami” (Wingfield, Brian).
The President has turned to the media to elaborate and expand the message to the electorate and business leaders. Writing in an Op-Ed in the Wall Street Journal, he said that the goal is to remove both outdated and heavily burdensome legislation which hamper the efficiency of private sector operations. According to Obama, regulation can have “unreasonable burdens on business — burdens that have stifled innovation and have had a chilling effect on growth and jobs” (Yahoo). At the same time, the President also took a different tone in which he defended the need for Federal regulation and creating a smarter regulatory regime and even said that more regulation may be forthcoming to fill the gaps of removed legislation and to meet current circumstances where new regulation is warranted (Wingfied, Brian).
There is reason for businesses to be optimistic. Some legislation has already been removed, and there will be more to follow. However, it is important to note that the controversial Dodd-Frank legislation which regulates banks and the financial services industry will have immunity in this review process. Analysts like Jaret Seiberg at MF Global have told reporters that this can be very good for most businesses, but banks and investment firms will likely not be impacted. He added that for banks, some of these new regulations are “hampering their ability to expand credit” (Drawbaugh, Kevin). This is especially important for entrepreneurs and business owners, as gaining access to credit is a very important part of starting and expanding a business.
Attempting to remove outdated and politically unpopular regulations for business operations are not new to this Administration. However, with the economy mired in a deep recession, estimates show that Federal regulations starve over a trillion dollars of economic activity every year (Johnston, Nicholas). This number is staggering; it is around 7% of annual GDP for the United States. This is important as jobless rates are still near record setting levels despite a recovery in the stock market and GDP. As a result, the Obama Administration is definitely looking to improve their relationship with the business community and to change public perception regarding lackluster job creation.
The most promising aspect of the President’s review process is a portion of the criteria he has set for removing some regulations. He has asked that the review panel evaluate the impact which the regulations have on small businesses. As a result, he has received support from some Republican lawmakers including Darrel Issa of California who has said that this move is a step in the right direction of making American businesses small and large more “globally competitive” (Johnston, Nicholas).
While all regulations are burdensome for businesses, and efforts made to comply with them do hurt operation and the bottom line, there is an important aspect of regulations. Good regulations protect consumers, workers, and other businesses from unfair practices. President Obama has said all the right things in saying that striking a proper balance between regulation and free commerce is needed. He wrote in the Wall Street Journal: “Over the past two years, the goal of my administration has been to strike the right balance. And today, I am signing an executive order that makes clear that this is the operating principle of our government” (Montgomery, Lori).
Not everyone is happy with the new announcement. Progressive and consumer advocate groups have expressed their displeasure with the Executive Order saying that this sends the wrong message to Corporate America and consumers – that Federal oversight and regulation produce bad results. Rena Steinzor, of the Center for Progressive Reform was quoted as saying “Large corporations were at the bottom of all of the human damage listed above, not because they are intrinsically evil but because they cannot be trusted to regulate themselves” (Calmes, Jackie).
Entrepreneurs, small business owners, and advocates here at the National Puerto Rican Chamber of Commerce welcome President Obama’s Executive Order. However, this should only be the beginning of a push by the Administration to make American businesses stronger and more competitive globally. An overhaul of the regulatory regime would go a long way in helping small businesses to grow, become more profitable, and hire more employees. The overhaul should be a manifestation of the President’s call to produce smarter and more efficient regulations and oversight. While the President has been saying all the right things, action needs to be taken to implement the balance between strong consumer, worker, and business protection and the efforts which businesses must undertake to comply and report to the government. We have seen the positive benefits in reducing government requirements in Puerto Rico. Governor Fortuno, through simplifying the tax code, has been widely praised by business advocates. Doing the same thing with Federal regulation will help unleash the power of entrepreneurs for creating jobs and economic growth, which will enhance prosperity for all.
Mr. Kirby joins The National Puerto Rican Chamber of Commerce with an experienced background in Public Policy Analysis. He has worked for Americans for Informed Democracy, the Center for US Global Engagement, and for local governments in Virginia on issues ranging from international finance, national security, and other areas of foreign and domestic policy. He holds a Master of International Development Degree from the University of Pittsburgh.
Marshall can be reached at 866-576-5222 x 8, or MarshallK@NPRChamber.org.
Calmes, Jackie. “Obama asks for Review of Rules Stifling Jobs.” The New York Times.
January 18, 2011.
Drawbaugh, Kevin and Matt Spetalnick. “Obama Orders Review of Government Regulations.”
Reuters. January 18, 2011. http://news.yahoo.com/s/nm/20110118/pl_nm/us_obama_regulations
Johnston, Nicholas and Mike Dorning. “Obama Orders Regulation Review to Boost US
Growth.” Bloomberg Businessweek. January 18, 2011. http://www.businessweek.com/news/2011-01-18/obama-orders-regulation-review-to-boost-u-s-growth.html
Montgomery, Lori. “Obama Orders all Fed Agencies to Review Regulations.” The Washington
Post. January 18, 2011. http://www.washingtonpost.com/wp-dyn/content/article/2011/01/18/AR2011011801416.html
Wingfield, Brian. “Obama Orders Review of Regulations.” Forbes. January 18, 2011.