Trump’s “Two-for-One” EO and its Impact on Small Business

By: Kalli Wells

 

On January 30, 2017 President Donald Trump issued an executive order (“EO”) designed to decrease regulation and control regulatory costs– ultimately promising that every new incremental cost that stems from regulation shall be offset by the deduction of associated costs to at least two previous regulations.[1]

President Trump asserts that this particular executive order is meant to ease the opening and expansion of small businesses and notes that historically, these owners haven’t been treated fairly. Small business advocates remain cautious though, reminding the Office of Management and Budget that the extraordinary costs and complexity of regulation fall hardest on small and independent business.[2] In Motor Veh. Mfrs. Ass’n v. State Farm Ins., the Supreme Court held that the Administrative Procedure Act requires an agency to go through a process called “notice-and-comment” before rescinding a regulation, which requires that the “arbitrary and capricious standard”[3] for reviewing agency actions applied to rescinding regulations is the when enacting regulations.[4] So the question now is whether regulation reduction will actually prolong the regulations that are in place (attempting to combine several into one), inevitably making them more complex and confusing.

Trump firmly believes that overregulation is to blame for America’s lack in economic growth, specifically in the small business sector, and has since targeted explicit regulations such as the Waters of the U.S. Rule and the EPA’s Clean Power Plan. The EO also requires that the net incremental cost for the 2017 fiscal year be “no greater than zero,” which means the cost of the new regulations should be offset by the existing rules that will be rescinded. Paul Ryan applauded this EO, stating that the explosion of federal relations has “hamstrung” small business growth and crippled our economy.[5]

The goal of this EO is to put regulators on a budget as a means to address the cost that agencies can impose on taxpayers each year. Similarly, the National Small Business Association welcomed the new approach to regulation stating that, “the average small-business owner is spending at least $12,000 every year dealing with regulations.”[6] This is because regulatory compliance has a high fixed cost, leaving small businesses with a larger per-employee cost in order to adhere to government regulations; arguably unfair when compared with large businesses. In a report for the Office of Advocacy of the U.S. Small Business Administration, experts from Lafayette University – Nicole and Mark Crain, explained that under the last administration per-employee costs of federal regulatory compliance was $10,585 for businesses with 19 or fewer employees, but only $7,755 for companies with 500 or more.[7] Additionally, small businesses carrying such a large burden has been shown to have adverse effects on the economy – it reduces the opening of new businesses, it prohibits their growth, and decreases investment in smaller businesses while raising the cost of their activities. While concern surrounding what regulations will be rescinded and how it will affect issues such as the environment are certainly valid, almost everyone can agree that more regulations equal less business. Small business owners and Trump give this EO the “thumbs up.”

Photo taken by Chris Keane/Reuters, Donald Trump and the stages of grief, MSNBC (Jan. 15, 2016), http://www.msnbc.com/msnbc/donald-trump-and-the-stages-grief

 

[1] Exec. Order No. 13,771, 82 Fed. Reg. 87?? (Jan. 30, 2017).

[2] Robb Mandelbaum, Trump’s Regulation Order: What It Means For Small Businesses, Forbes (Feb. 2, 2017), http://www.forbes.com/sites/robbmandelbaum/2017/01/31/trumps-regulation-order-take-it-seriously-maybe-not-literally/#604616652c4a.

[3] See Motor Veh. Mfrs. Ass’n v. State Farm Ins., 463 U.S. 29, 463 (1983).

[4] See Motor Veh. Mfrs. Ass’n v. State Farm Ins., 463 U.S. 29 (1983); See also FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009).

[5] Noland McCaskill & Matthew Nussbaum, Trump sings executive order requiring that for every one new regulation, two must be revoked, Politico (Jan. 30, 2017), http://www.politico.com/story/2017/01/trump-signs-executive-order-requiring-that-for-every-one-new-regulation-two-must-be-revoked-234365.

[6] David William, Business Leaders Thrilled Over Trump’s Executive Order to Cut Regulations, Small Business Trends (Feb. 3, 2017), https://smallbiztrends.com/2017/02/executive-order-to-cut-regulations-small-business.html.

[7] Scott Shane, To Help Small Business, Cut Regulation, Entrepreneur (Jan. 10, 2014), https://www.entrepreneur.com/article/230727.

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