'Fourth branch of government' is costly and despotic

When enterprising Americans innovate or start new businesses, many are stunned by the intrusiveness and barriers imposed by government bureaucracies. These encounters with our “fourth branch of government” - as law professor Jonathan Turley calls it - sap entrepreneurs of the time, capital and energy required to grow a successful business in a challenging economy.  Indeed, small businesses can attest to Turley’s view that the fourth branch “now has a larger practical impact on the lives of citizens than all the other branches combined.” 

The intrusiveness and complexity of the federal regulatory state is getting worse. It continues to beat on the confidence of entrepreneurs as they work hard to navigate the weak, post-recession economy.  The scope and scale of new regulation – impacting everything from health coverage to financial resources, the workplace to energy, technology to telecommunications, trade to tax compliance – has unfortunately impaired investment, economic growth and job creation.  Our “fourth branch” is not only churning out new rules at a rapid clip, but doing so with complete indifference to the needs of small businesses and ordinary citizens. 

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Regulations affecting every aspect of people’s lives are crafted in secrecy or with limited citizen input, and have resulted in exclusive deals with special interests.  There is suppression of scientific data on which rules are based, which prevents the public from understanding the rationale for the regulations they are forced to live under. And the costs are adding up: Americans now pay over $14,000 annually in regulatory costs.  

Thankfully, Americans are waking up to the regulatory insanity.  A new survey released by the Center for Regulatory Solutions of the Small Business & Entrepreneurship Council reveals that an overwhelming majority of the public is deeply concerned about excessive regulation and the process itself.   A solid majority (61 percent) of Americans agree with the statement that government regulations on business are more likely to “harm the economy by interfering with the free market, preventing business from growing and hiring new employees, and increasing prices for consumers.”   And over 65 percent of respondents said that regulations have “mostly hurt” (rather than mostly helped) the economy and America’s competitiveness with the rest of the world.  

More than 60 percent agreed that regulations are crafted behind closed doors without accounting for real-world impacts.  As for the regulators themselves, 68 percent of respondents said they are out of touch and more concerned with pursuing political agendas than seeking the public good.

These concerns and views are not partisan ones: In the poll’s sample of 1,000 Americans, 47 percent were Independents, 29 percent Democrats, and 22 percent Republicans.

The federal bureaucracy is growing more detached from the realities of the contemporary marketplace. As we’ve seen with Obamacare, the lives of hundreds of thousands of Americans have been disrupted by impractical health insurance rules designed by regulatory elitists.  Though regulatory agencies are required to open proposed rulemakings to “public comment,” the voice of small business is often ignored. This impenetrable process favors select voices that happen to agree with the ideology of the regulators. In fact, 72 percent of Americans in the survey said that regulations are created in a closed, secretive process rather than in an open, transparent one (21 percent.)

Beyond access and real input, it’s appalling how regulators conjure up ways to game the system.  Officials from several federal agencies and departments, for example, have cooked up a formula to ensure that the Environmental Protection Agency’s greenhouse gas regulations will always pass the cost-benefit test.  This estimate of the “social cost of carbon” was not adequately peer-reviewed and it even failed to conform to the federal government’s own criteria for developing sound science.  This estimate will justify nearly every rule crafted in the name of climate change. No matter how you feel about climate change, shouldn’t the federal government conform to its own standards?  Should regulators be allowed to cook the books to favor the outcome they want, and on an issue that will impact every American citizen?  

The rigging of regulations in favor of a more powerful and intrusive government has consequences for our economy.  The slide in U.S. competitiveness, for example, has been well documented in various global studies.  In the 2014 “Doing Business Report: Understanding Regulations for Small and Medium-Size Enterprises,” the World Bank and International Finance Corporation found that the U.S. trails countries like Portugal, Romania, Panama, Hungary and Belarus in terms of how easy it is to start a new business.

Some believe that a dysfunctional Congress endlessly fighting with the president is bad for business.  That may be.  But when it comes to the future of entrepreneurship and the health of U.S. small businesses, we cannot overlook our costly and despotic regulatory state.  The broken and unwieldy regulatory system, and its lack of transparency and accountability, poses the most serious challenge to free enterprise and democracy in America.

Kerrigan is president and CEO of the Small Business & Entrepreneurship Council.