Sunday, August 28, 2011

Government Restrictions on Small Busnness's Growth

Being a small business owner for most of my adult life, I am especially sensitive to the hurtles that small business owners are subjected to in order to grow and survive. These hurtles become astronomical during an economic climate as we face today.

During the forty some years that I have been involved in various businesses, I have always been frustrated at how the government has continuously held me back due to many taxes, fees and ridiculous requirements and restraints.

My local congressman, Richard Nugent, gave his views on this subject in his “Situation Report” that I received today. I would like to share this with you.

Dear Friends,
  Last week, I had the opportunity to participate in an awards ceremony at the local UPS facility (United Parcel Service).  They were recognizing two of their drivers who have had no safety infractions or accidents of any kind after twenty-five years of driving for the company.
They asked me to speak at the event, so in preparation, I did a little research on UPS’s history.  As it turns out, it’s a pretty fascinating story.  I won’t get into the whole thing (UPS is over a hundred years old), but I do want to tell you about one chapter that I think is really instructive for where our economy is today.
In short, since its creation in 1907, UPS has been a pioneer in that industry.  Basically, they invented it.  In the early days, they were couriers running packages on foot around San Francisco, using bicycles for longer trips.  They were so efficient and reliable that demand grew pretty quickly and before long, they started buying a fleet of Model Ts. 
Year after year, demand for the company’s services kept growing and they wanted to expand their business.  But up until the 1950s, they’d mostly focused on delivering goods from retail stores to customers.  They’d kept themselves busy inventing conveyor belt systems for sorting and filing technology for tracking packages, but the better they got at their job, the more people wanted to use them.
In particular, individuals also wanted to be able to ship packages to other individuals.  Imagine Grandma wanting to safely send little Timmy a Christmas present in Iowa.  She couldn’t do it.  UPS could help.  But when UPS made the decision to enter that business, they were blocked by regulations from the federal Interstate Commerce Committee.  In short, UPS would have been in direct competition with the United States Postal Service and that wasn’t to be allowed.
The company wasn’t giving up though.  They spent the better part of the next thirty years fighting the federal government just for the right to deliver packages.  Finally, in 1975, UPS finally got the right to deliver door-to-door across America.
I don’t think it’s a coincidence that the drivers we were recognizing got a job with UPS just a few years after those regulations were taken down.  This isn’t to say that there is no place for regulations in our country (clearly the banks and others got away with things a few years ago).  But I do think it says a lot about the damage that frivolous, duplicative, and unnecessary regulations can do to job creation in this country.
UPS was blocked for thirty years – thirty years -  for no reason whatsoever, from becoming the world-leading American company that it is today.  Think about the thousands and thousands of people who are employed in this country who wouldn’t have been if the ICC hadn’t backed down in 1975.  Beyond that, think about all of the small companies all across this country who could not exist if they could not ship their goods to customers all across the country using a service as reliable and efficient as UPS.
Make no mistake about it, regulations like the one that blocked UPS still exist today.  It’s hard to know what we’re missing out on by not taking a closer look at the red tape we’ve got on the books.    All I know is, with double-digit unemployment in our area, and folks struggling to put food on the table, we don’t have a choice about ignoring impact of regulations on jobs.
One of the first things we did upon coming into the new Congress was to pass legislation requiring an inventory of all regulations and putting in new checks for any proposed regulations that would have a “major impact” on economic growth meaning more than $100 million cost across the nation.  The House Oversight and Government Reform Committee set up a website where small business owners could register their opinions about what regulations they can and cannot live with. 
It doesn’t come as any surprise that the compliance costs for federal and state regulations is more than four times more expensive per employee for small businesses than for large companies.  And since small business create two-thirds of all net new jobs in this country every year, that’s not a small drag on job creation, it’s a wet blanket that is suffocating a lot of small firms out there and some right in our area. 
As always, let me know what you think about all of this.  If you know any small business owners personally, or have a chance to chat with one when you visit their store, encourage them to reach out to me.  If I know the specific things that are holding their companies back, more than likely I can do something about it.  It’s plainly clear we can’t afford to have small businesses struggling when they should be growing and hiring more workers.  This economy will never recover without them.
Rich Nugent
Member of Congress

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