Legislation, Regulation and Impacts

For those of you that follow this blog, you have heard me discuss the unintended consequences of regulation before. But look at the following items:

According to GovTrack

The 113th Congress has passed 186 Laws

The 112th Congress passed 284 Laws

The 111th Congress passed 385 Laws

According to an article published in March 2014 - the 17,522 pages of regulations have been added to the Code of Federal Regulations since 2009 - essentially an 11% increase in the regulatory burden.

Just prior to this holiday weekend - the Daily Caller published a story that the current administration plans to finalize 3,415 regulations during the current fiscal year.

And if you are into statistics - you can go to an article published by CNSNews.com comparing the number of new EPA regulations - 2,827 since Jan. 2009. (There are some fun facts about the number of words as compared to the Gutenberg Bible, the Harry Potter series and the U.S. Constitution.) Since 2009, EPA regulations have seen the greatest increase since the institution of the Agency in the early 1970's.

While some regulation is necessary and warranted, one does begin to question the overall impact of these regulations. Are we essentially regulating ourselves out of existence? Certainly, we are hampering the economy, creativity, innovation, and the ability to be self sustaining.

With each new regulation, there is an opportunity for unintended consequences. The new definition of water - that is supposed to clarify "waters of the US" is going to greatly expand coverage of the regulation, and to items I don't believe are really intended. It is next to impossible for small businesses (even medium to large ones) to keep up with all the potential changes If you are a one to two person operation - how do you know if you have determined all of the potential regulatory implications of your operation? Do you meet the definitions for this regulation or that one? And, if you have ever tried to do a determination, even those of us with experience; it is not always clear exactly whether or not a particular definition applies.

Think about it - let's say I perform a physical separation of materials. Have I manufactured a new product? It depends. If it is a food substance perhaps, if I cream milk - I get cream and skim milk, right? Nope. I get cream and a milk product. To get skim milk - I may have to add in Vitamins which are depleted in the skim portion as they are concentrated into the cream portion. If I am dealing with petroleum fractions, I may still only have natural products. You see it can get complicated even for the simplest operations.

This does not even get into definitions of ozone depleting materials, volatile organic carbons, toxic/hazardous materials, off label uses, etc. Companies can get into difficulty with even the most benign operations because of a dust hazard, or because a material hasn't been used since the implementation of the Toxic Substance Control Act (See the case of many biofuels). And then there are the industrial specific regulations, if you have a wind farm operation these things apply, if you are an oil and gas operation then these apply, if you are an ag-business other rules apply. For fun, you might just want to scan leak detection technologies and see the variation.

This doesn't even get into the tax law, state regulations and occupational health and safety regulations. The maze of the Federal Regulatory structure is now such you can be in full compliance with one portion of the regulation but in violation of another as the rules are contradictory. In 2008, the Small Business Administration estimated the average cost of all Federal Regulations was $8,086 per employee. The bulk of the cost is economic regulation is $5,153 followed by environmental at $1,523. The estimate increased $9,991 in 2012. These numbers don't even take into account the new health care implications.

It now takes a great deal of determination, flexibility, and drive to start a business. If it is a manufacturing business, get ready for a slew of regulations. If individuals really knew the impacts of the regulatory requirements prior to starting their business, the number of new small businesses would drop. It has already impacted the number of business expansions.

As with all things moderation is key. Everyone is constrained by limited resources of some type - time, money, supplies, etc. Why are individuals asking for a $10 to $15 minimum wage? Because, we each are paying a piece of this increased burden. We pay for the inspections, we pay for the infrastructure, we pay for the regulator to write the rules, we pay for...... You can add to the list. Again, not all regulation is bad - I want to have some assurance that the food I purchase is safe, the water that comes from the tap is safe, and the air we breath is safe. But, it comes down to where we draw the line and a real understanding of risk.

We cannot legislate all risk away.

1 Comment to Legislation, Regulation and Impacts:

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