Regulations are good for good businesses

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Imagine you run a business, maybe a brick-and-mortar shop with a thriving online presence. You ship products to customers in all 50 states, maybe even internationally on occasion. The business is flourishing, enabling you to hire more people, contribute more tax revenue to your city, and generally enjoy the fruits of the American dream.

But all of a sudden, online orders start to decline. It’s not the product you’re selling. It’s that your customers can’t get to your website because their Internet service provider has decided to slow your loading speeds. Customers click away, you lose business, and just like that, your shot at the American dream starts to become a nightmare.

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Now here’s something you might not expect: Government regulations could prevent that from happening.

It’s not a perspective you are likely to hear at a House Judiciary Committee hearing on Wednesday called, “Triple Threat to Workers and Households: Impacts of Federal Regulations on Jobs, Wages and Startups,” but it’s true. Over and over, what we’ve found when talking to business owners, particularly small- or mid-sized businesses, is that they rely on regulations to help create a level playing field.

We’ve confirmed this with national polling. If anything, small business owners are fine with regulations: 86 percent said some regulations were necessary in a modern economy, and 93 percent said they could live with fair, manageable, and reasonable regulations.

There’s also an even stronger reason for this support for regulations: Businesses rely on regulations to protect their own operations.

Think of rules on air or water pollution or how or whether internet service providers can slow speeds to certain websites. In such cases, the government acts as a referee.

Without the referee, some companies might pollute, or use toxic chemicals, or make it harder to reach your favorite website. Those companies might benefit from such behavior, but many of the rest would suffer, and be forced to pay the costs imposed by those few businesses.

Or take tax loopholes, like ones that allow companies to buy a foreign competitor and re-incorporate in a country with lower taxes. That cheats the nation out of needed tax revenue, and forces consumers and other businesses to pick up the slack. And let’s face it: Your neighborhood bookstore or coffeehouse is probably not going to re-incorporate in Luxembourg.

These costs - what economists call externalities – need to be included in the market economy. A company that dumps waste into a public water source shouldn’t be able to avoid paying for the damage. The community shouldn’t be forced to pick up after that business. That’s why we have regulations - to stop things like that from happening, to set fair rules of behavior, and to ensure that no one can shirk their responsibility for breaking the rules.

Ironically, tougher regulations actually lessen the need to even have them. If our regulatory agencies are empowered to enforce the law and impose meaningful penalties on violators, you can bet those violations are going to become less and less frequent.

It’s a cliché that policymakers should think like business owners. But which business owners? The ones who are looking to weaken regulations so that they can cut a corner, get a leg up on their competition, or shift their costs onto everyone else? Or the ones who are trying their best to be responsible in their businesses and want regulations that ensure a level playing field?

There are plenty of responsible business owners doing their best to run good businesses. For them, regulations are vital to their success. Policymakers concerned about the impact of regulations on business should give them a listen.

McGannon is director of Policy for the American Sustainable Business Council, which has a membership network spanning more than 200,000 businesses.

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