By Brian Headd, Research Economist
Detroit was built by new small businesses. Entrepreneurs like Motown founder, Berry Gordy and assembly line pioneer, Henry Ford, built their own empires there. As the world sang Detroit’s praises, the automotive industry crafted cars that literally connected the world. Automobile manufacturing provided a ladder to American workers providing good-paying blue collar jobs. Not only did automobile manufacturing provide a stable standard of living for its employees, but also propelled Motown (Motor Town) aka the Motor City to drive the largest economy in the world.
Now some 100 years later with the auto industry maturing and developing into a global industry, the Detroit metropolitan area is at a crossroads. About 1 in 10 small business employees are still in transportation/metals/manufacturing in Michigan. With the industry becoming ultra-competitive, the local Detroit economy needs new industries to get its economy back on track.
Detroit was built not only on cars and Motown, but pizza; so much so that an almost billion dollar arena built downtown is named after one of its pizza companies, Little Caesars Pizza, a top 3 in the U.S. pizza chain. But even that company was founded in the 1950s.
The arena offers a good analogy for why the Office of Advocacy hosted a regulatory roundtable in the Detroit area. In sports, you can accept when your opponent wins, but you cannot accept when the referees determine the outcome of the game. Allowing referees to choose winners and losers defeats the entire purpose of the game.
In the competitive world of business, governments are the referees. This roundtable offered small businesses an opportunity to sound off about the referees so cities like Detroit can nurture not only small businesses, but nascent industries.
Here is what they said.
If one were to try to title the roundtable, it would be a pretty close race between “Unintended Consequences,” “Unnecessarily Confusing,” and “Introduced Uncertainty.” These are terms that if you are trying to start, grow and run a business, you don’t want to hear. If the government is trying to support the economy, it shouldn’t want to be the genesis of these terms. In essence, it is believed that the referees are stifling the small business community in Detroit and to small businesses, the game feels fixed against them.
Examples of federal regulations that have been viewed as not smoothly implemented include:
- the Department of Labor’s overtime rule
- Environmental Protection Agency’s rules related to Methyl tert-butyl ether (MBTE) and Ethanol in gasoline
- the Department of Health and Human Services’ Affordable Care Act (ACA)
- the Consumer Financial Protection Bureau’s rules on small banks
There is a feeling that rules are written in a nebulous way, evolve into something that was not the goal, are retroactive and do not take into account how real businesses need to operate to stay in business and comply with the rules. In addition to the Byzantine set of regulation with which small business must comply, they are also saddled with increasing mounds of paperwork.
It was also mentioned that a federal view to fix regulations was often more regulations that requires more paperwork which can lead to an eventual throwing in the towel or stated another way, less compliance. The message here for regulators is that simple is not only better, but that simple should be the only path.
Small businesses often feel like they are left in the dark about the rules that the federal government creates and how they are to be interpreted. Fortunately, it was pointed out that the Federal government does try to be transparent through its www.reginfo.gov site. Of course, small businesses should be (but are not) forgiven if they don’t habitually read, learn and memorize federal rules and regulations.
Also mentioned at the regulatory roundtable were rules related to participating in federal procurement contracting. There was a view that the focus on the prime contractors and not disadvantaged businesses themselves caused distortions. Essentially, primes work with the same two or three disadvantaged businesses merely to meet a government goal rather than actually supporting disadvantaged businesses by bringing them into the Federal marketplace. It was believed that a bottom up approach would be more appropriate rather than a top down approach through the primes.
This bottom-up approach is needed by regulators if we as a country are to stop snuffing out small businesses and the competition that they bring to support capitalism. Regulators need to bridge the gap in their knowledge of how their rules affect small businesses like those in Detroit. Overall, regulators need to produce rules and regulations that minimize unintended consequences, minimize unnecessary confusion by being clear and concise, and minimize uncertainty by being enacted at a speed that allows owners to adjust their small businesses to comply.
Advocacy was in Detroit for a Regional Regulatory Reform Roundtable and NAFTA Modernization Outreach Meeting on March 13.
Can’t get to a roundtable near you? Fill out this form and tell us about your federal regulatory burdens. We will pass this information on to the appropriate agency and use it in the planning of upcoming Regional Regulatory Reform Roundtables.
Brian Headd is a Research Economist. He can be reached at brian.headd@sba.gov.
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