Small business is the designated beneficiary of President Trump's executive order, signed yesterday, that requires federal agencies to cut two regulations for every new one issued. The small-business community and experts reacted favorably to the goals. But many expressed doubts about how effective the new system would be, given the difficulty of identifying which rules to remove and preserving those which genuinely protect the public.
Surrounded by small-business owners, a group the president has characterized as community stalwarts unfairly burdened by excessive rules, Trump called for "normalized control, where you can open your business and expand your business very easily. This will be the largest ever cut, by far, in terms of regulation," he said.
Every president since Jimmy Carter has issued directives meant to restrain the metastasizing federal register. Trump's approach--similar to one already used in Britain and several other countries--orders agencies to identify two rules for the chopping block every time they promulgate a new one and sets at zero the cost of new regulations for the rest of the fiscal year. The order excludes rules related to the military, national security, or foreign affairs.
In a statement, National Federation of Independent Business president Juanita Duggan called the order "a good first step on the long road toward eliminating ball-and-chain regulations" and urged agencies and the Office of Management and Budget to keep small companies top of mind as they proceed. The NFIB is the largest association of U.S. small-business owners, representing 325,000 companies.
Small-business owners, of course, don't yet know how two-for-one will affect them specifically. But some liked it conceptually. "I would love to see them say, 'Hey we are going to pass this thing and it costs [small businesses] $200 million a year,'" says Mark Strumwasser, CEO of Sunshine Rentals, a Vista, California-based provider of housekeeping and other services for corporate housing, with annual revenues of $3.9 million. "But they would also say, 'Here are two things we're going to take away that will save [small businesses] $200 million--or even better, $300 million.' If we can make that happen, boy, I would say that is a win-win-win."
However, Democrats on the Small Business Committee immediately vowed to reverse the order, which they called "arbitrary" and "bad policy." In a statement, Representative Nydia Velazquez described it as a "meat cleaver" and said it would "create a permanent state of regulatory uncertainty, making it difficult for businesses to plan ahead."
Wendy L. Patrick, a business ethics lecturer at San Diego State University, says the order may have the salutary effect of forcing government and small business to order their priorities. But she worries how it will work in practice. She cites regulations that are used infrequently but still serve an important purpose and may lose out to rules governing emerging areas of business, like technology. "How are we going to make sure that important regulations are not dropped simply in pursuit of an out-with-the-old-in-with-the-new philosophy?" Patrick asks.
"We will be watching which regulations go by the wayside," says Patrick. "Will they be safety standards? Financial regulations? What do we think we can do without?"
Without a system for identifying regulations damaging to small business and addressing them in a targeted way, the executive order is meaningless, says Michael Mandel, chief economic strategist at the Progressive Policy Institute, a Washington, D.C.-based think tank that seeks nonpartisan solutions to national challenges. Trump's order "offers no guidance to agencies about what they should cut," he says. "It does not encourage rational decision making. It's mostly showmanship and not really getting something that could help small business." (Trump in the past has singled out a few rules--such as the Waters of the United States, which regulates water on private property--as especially onerous.)
Mandel also says that with a Republican president and Congress in charge, two-for-one is largely superfluous. "If they want, they can pass fewer laws," he says. "If he wants to tell agencies to undo existing ones he can tell agencies to undo existing ones." Mandel adds that if rules are evaluated by economic impact alone, those affecting large companies may get prioritized.
But a surprising source says two-for-one may have some merit. In an article for Bloomberg View published shortly after the election, Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs under President Obama, called the idea "pretty dumb" and said it would be extremely difficult to implement and require so many exemptions as to leave its scope narrow. However, he also said it is "likely to deter new rulemaking." That, wrote Sunstein, "may be its main goal."