Donald Trump and the 115th U.S. Congress ride into Washington as crusaders battling a business-strangling regulatory apparatus. Small-company owners and entrepreneurs have faith in their rescuers: The optimism index of the National Federation of Independent Business jumped 38 points in December, reaching its highest level since 2004. Experts agree that the rate of new regulations will almost certainly drop over the next few years. How much headway the government will make slashing existing rules, however, is less clear. Six administrations have made similar pledges, with scant success.

"I've been hearing about reduction of regulations for 30 years, and it has never happened," says Brian Hamilton, co-founder and chairman of Sageworks, a financial information company. "Even Reagan said that the nearest thing to everlasting life is a government program."

Virtually no one questions the pain for small companies, which spend an average $83,000 on compliance in their first year of operation, according to new numbers from the National Small Business Association. But the regulations first in line for the new administration's firing squad appear chiefly onerous to large corporations, particularly in industries like energy.

"We may see some especially controversial provisions go, but by and large these will not be the ones that affect small business," says Larry Downes, senior industry and innovation fellow at Georgetown University and co-author of Big Bang Disruption: Strategy in the Age of Devastating Innovation. "For them, the prospects for regulatory relief are, as always, well-intentioned but unlikely to get very far."

The House, at least, is moving early. Recently it passed a package of regulatory reform bills including the Small Business Regulatory Flexibility Act that instructs agencies to consider the indirect costs and cumulative impact of new rules on small business. The package also contains bills directing agencies to craft the least costly rules possible, to publish cost estimates for rules in development, and to publish "plain language" summaries of proposed rules online, a salvo at the impenetrable verbal thickets that confound small-business owners, who typically handle compliance themselves.

Philip K. Howard, an expert on law and bureaucracy who has been advising the Trump transition team, applauds such efforts. "For the first time in decades there is an opportunity to change the status quo," he says, citing as another positive sign Trump's promise to cut two regulations for every one issued.

But he cautions that eliminating old rules is magnitudes more complex and daunting than slowing the rate of new ones.

"When you are talking about 100,000 regulations in the federal government, many of which have many facets to them, it would take hundreds of years to clean them up, using that technique," he said of the two-for-one formula. "These are approaches to reducing the future burden. What hasn't happened yet is a coherent approach to lifting the burden we have now."

Regulation watchers are naturally focused on early action to repeal the Affordable Care Act. But that law--whose impact, particularly on growth companies, is significant--may be too vast and too political to accurately foreshadow outcomes for other endangered rules.

Perhaps a better bellwether is the disposition of the overtime rule, which a Texas judge stopped in its tracks in November, nine days before the scheduled rollout. The new rule raises the salary threshold for employees earning overtime to $47,476, making 4 million more people eligible.

But overtime presents its own set of obstacles for the incoming administration. Simply killing the rule by declining to defend it risks alienating workers.

While in August Trump told the online publication Circa that he would like to see "a carve-out of sorts for our small-business owners," that may be too late for entrepreneurs who were already well down the road raising salaries or switching workers to hourly non-exempt, says Jacqueline Breslin, director of human capital services at TriNet, an HR outsourcing company.

In those cases--and there are many--reversing course could be "chaotic, confusing," says Breslin. "It's also a morale issue if you increased somebody's salary, and now you're not going to."

As for the fate of the overtime rule, "what is anticipated is that they will be looking at things from square one," says Breslin. If the Trump administration issues its own rule, "the new threshold could be higher. It could be lower. It could be exactly the same."

Paid family leave is among the few new regulations Trump supported during the campaign. He included a fairly modest plan--six weeks for new mothers--in his first 100 days agenda, released in the fall.

But Congress and Andrew Puzder--assuming he is confirmed as labor secretary--may bridle at that.

"I don't think small-business owners have to worry much about paid family leave," says Harry Holzer, a professor of public policy at Georgetown University. "My sense is that Congressional Republicans will not want to spend any new tax money on that. They might want to carve it out of existing taxes--make unemployment insurance less generous, which of course would be very controversial."

Trump has been more equivocal about an increase in the minimum wage: He has called at various times for eliminating it and raising it somewhat. But Puzder, who is CEO of the Hardees and Carl's Jr. restaurant chains, is a foe.

"There is no indication of support for raising the minimum wage," says Thomas Kochan, a professor of work and employment research at the Massachusetts Institute of Technology.

But where the federal government stays pat, states and localities push forward, a trend that will only grow, says Kochan. "If the Trump administration becomes aggressive in rolling back regulations--whether it is minimum wage or overtime or safety or health--you will see increased activity at the state level, and not just in California," says Kochan. "That means more variation between states over time, which makes life more complicated for companies doing business in more than one place."

No matter what comes down the pike in coming months, Howard urges small business owners and entrepreneurs to get out and agitate for change like they've never done before. This time, he says, they might find a responsive audience. "In the past, small business was trying to prevent bad things, like too high a minimum wage," says Howard. "But now they have the chance to say, what would a reasonable and effective structure look like? There should be an organized effort to propose changes through NFIB or chambers or industry groups. The wind is at their back."

Published on: Jan 23, 2017