Businesses Feel Uncertainty

Storm clouds are gathering on the horizon for small business owners, courtesy of federal lawmakers. A mountain of new and proposed rules and regulations introduced by Congress, the Obama administration, and federal agencies are fueling uncertainty among businesses, choking off investment, and stifling job creation.

Legislative overhaul of the nation’s health care and financial regulatory systems are just two examples of recent regulatory action overtaking business. Each law is rife with new mandates, rules, fines, fees, and government red tape. In addition, policy initiatives are under way to cap greenhouse emissions and reshape workplace rules.

Businesses are reacting by sitting on capital, afraid to invest or hire. “We’re not hiring because we don’t know what’s going to happen,” says James Vitrano, general counsel and vice president of corporate affairs at
New Orleans-based Blessey Marine Services Inc. In fact, a June Federal Reserve report says that U.S. businesses are sitting on a record $1.8 trillion in cash reserves.

Vitrano, who spoke at a recent Chamber event on government regulation, says that two departments at Blessey Marine Services are devoted entirely to scouring Federal Register notices for possible regulations. He estimates that the 700-employee company is currently facing $40 million in additional costs due to regulations from the Environmental Protection Agency (EPA), the Coast Guard, and the Equal Employment Opportunity Commission.

“All of this has injected tremendous uncertainty into our economy,” says Chamber President and CEO Tom Donohue. “Uncertainty is the enemy of investment, growth, and jobs. Banks, investors, and companies are all worried. They don’t know what is going to hit them next.”

The Small Business Administration’s Office of Advocacy estimates that complying with federal regulations now costs the economy $1.1 trillion per year. The smallest of businesses bear a disproportionate share of regulatory costs. SBA research shows that they annually pay 45% more per employee to comply with federal regulations than do big businesses.

Across the board, small business owners feel that this administration’s policies are not having a positive impact on the country’s economic situation. According to a recent independent poll released by the Chamber, 46% of small businesses think that this administration’s policies are making the economy worse. Just 30% believe that its policies are making the economy better.

The economic uncertainty created by the federal government cuts across a broad swath of policy areas, including the following:

Health Care—Thousands of pages of new regulations aimed at individuals, businesses, health care industry providers, and states will be issued to implement the 2,500-page health care law. The law calls for hundreds of billions of dollars in business taxes and includes a requirement that businesses file 1099 forms with the IRS when goods or services purchased without a credit card from another business exceed $600 in a year. The law’s long implementation time frame (some provisions don’t kick in until 2018) makes business planning difficult.

Financial Regulatory Overhaul—Similar to the health care law, the 2,300-page financial regulatory reform law will require thousands of pages of implementing regulations. A Chamber review of the law discovered that it calls for 520 regulatory rulemakings, 81 studies, and 93 reports. By contrast, the Sarbanes-Oxley corporate governance legislation passed in 2002 required only 16 rulemakings and 6 studies. There are $20 billion of costs associated with the financial reform bill.

Energy and Environmental Policy—The House last year passed an unworkable climate change bill that would create some 1,200 new programs and mandates and carry a price tag of well over $1 trillion. The Senate may take up its own climate change bill in a lame-duck session. In addition, EPA is moving forward with 30 major economic rules and 172 major policy rules, an unprecedented level of regulatory action. Meanwhile, a flawed permitting process for energy projects is responsible for roughly $560 billion in lost private energy investment and 250,000 jobs. The drilling moratorium off the Gulf Coast has cost 20,000 jobs in Louisiana alone.

Labor—The Labor Department is considering several burdensome policies, including a new record-keeping regulation pertaining to employee classification. The Occupational Safety and Health Administration is moving forward on an expansive safety and health program regulation that could require businesses to revamp their existing programs. Meanwhile, the newly appointed National Labor Relations Board is expected to make sweeping changes in rules governing every facet of union-management relations.

Taxes—Individuals and small business owners are facing trillions of dollars in tax hikes come January 1, 2011, unless Congress acts to renew tax relief, including lower marginal income tax rates on capital gains and dividends enacted over the past decade.

Chamber Works to Ease the Burden

The Chamber, with input from employers, is urging the administration and Congress to demonstrate regulatory restraint with a mix of commonsense rule writing and corrective changes to laws and mandates that have yet to take effect.

The Chamber will work through all available avenues—regulatory, legislative, legal, and political—to minimize the potentially harmful impact of the new health care and financial reform laws. The organization will remind voters how their elected officials voted on anti-business legislation. “Through the largest issue advocacy and voter education program in our history, we will urge citizens to hold their elected officials accountable when they choose a new Congress this November,” Donohue says.