POLITICS

The Overhead Smash: Complexity crushes

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Politics,Beltway Confidential,Timothy P. Carney

Small business is typically hit hardest by government regulation. Often, this has to do with the overhead costs that the regulations impose on businesses, and how small companies are less able to absorb those costs.

We've seen the big guys often supporting the proposed regulations that will crush their smaller competitors. See the regulations of toysemployer-based health-insurancefoodtax preptrucksminimum wagetobaccoemissions rules, for a few examples.

But often more damaging than the costs of doing what the regulations tell you to do is the cost of figuring out what the heck the regulations want you to do. A small banker discussed Dodd-Frank with the Washington Post's Suzy Khimm, and she came away with this:

The new regulations are so complex that no one on Main Street knows what’s really going on, and it’s going to cost them to figure it out. “The whole financial regulations act. … What is it, 2,500 pages?” Stebal said, trooping toward Durbin’s office in a small rally that the chamber had organized. Corporations have in-house lawyers and accountants to help them puzzle out complex new laws. But small businesses don’t. “Just the size and scope of it — [companies] will have to spend so much money to make sure they’re aware of what’s going on,” Stebal said. “They don’t have teams of attorneys to read them.”

Exactly. Liberal blogger Kevin Drum at Mother Jones wrote about why big business likes complex rules:

Complex rules, conversely, are the meat and drink of $500-per-hour lawyers and whiz kid engineers. If the rules are complicated enough, smart lawyers can always find ways around them. And American corporations employ lots of smart lawyers...

Drum should have distinguished between small business who can't afford those $500-per-hour lawyers, and the big guys who can.

We saw this dynamic play out on a very granular level with the federal tobacco regulation law, which Philip Morris supported. A trade group for small tobacco retailers and wholesalers filed a comment with the FDA pointing out

Most of our retail members are small business owners who do not have the wherewithal to hire counsel to help interpret letters issued by the FDA.

And regarding a proposed a ban on flavored cigarattes, the retailers' rep wrote:

The very first enforcement action by the FDA is a letter which creates confusion over which products are banned. It requires us to somehow interpret the letter correctly or, as the letter so clearly warns, possibly face confiscation of inventory, monetary fines and criminal prosecution.

Many Americans who distrust big business the most are also the ones who call for government regulation the most. These two impulses often clash.

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