Lack of demand, not regulations, holding businesses back

• Tweet

We've all heard the arguments: Regulations are strangling U.S. businesses. It's been a staple in the Republican playbook for years.

But a funny thing happened last week. The American Sustainable Business Council, the Main Street Alliance and the Small Business Majority released a survey blaming the stagnant economy not on onerous regulations but on weak consumer demand.

"The level of government regulation came in [way below] weak demand. When asked what they believe would do the most to create jobs, the majority cited eliminating incentives for employers to move jobs overseas. Next was cutting taxes and then increasing consumer purchasing power. Reducing regulations ranked fifth on their list, behind improving infrastructure," the survey's executive summary said.

The Club for Growth, which describes itself as a national network of thousands of pro-growth Americans, gives Republican presidential hopeful Mitt Romney high marks for his efforts to reduce regulations in Massachusetts while he was governor, noting the Legislature often quashed his initiatives.

In his recent State of the Union address, President Barack Obama called for "smart regulations to prevent irresponsible behavior. Rules to prevent financial fraud or toxic dumping or faulty medical devices -- these don't destroy the free market. They make the free market work better.

"There's no question that some regulations are outdated, unnecessary, or too costly. In fact, I've approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his. I've ordered every federal agency to eliminate rules that don't make sense."

Eighty-six percent of the 500 small-business owners queried through the Internet Dec. 8 to Jan. 4 by Harris Interactive said they believe "some regulation is necessary for a modern economy" and 93 percent said they can live with "fair and manageable" regulation.

Seventy-eight percent of those queried said they think it's important for the government to level the playing field to allow small businesses to compete against bigger players and a like percentage said health insurance companies should be "held accountable" to eliminate excessive premium increases.

When it comes to clean air and water, 79 percent of respondents said it's important to support clean air and water efforts and 61 percent said they support moves toward energy efficiency and clean energy.

The survey concluded small-business owners "believe regulations should be as tough on large corporations as they are on small businesses and that instead of scrapping regulations already on the books, as some lawmakers have proposed, they should continue to be enforced. Small businesses can help pull the economy out of the doldrums, but they need government to be a partner that works to address their actual economic needs and creates a level playing field for small businesses to thrive."

Frank Knapp Jr., vice chairman of the American Sustainable Business Council and president and chief executive officer of the South Carolina Small Business Chamber of Commerce, likened deregulation, to some extent, to playing football without any rules.

"The winner would come down to which team was bigger or willing to play dirtier," he said. "From our perspective, the effort to kill regulations is big businesses' way of rigging the game in their favor."

Knapp said big business -- especially finance, petroleum and coal -- is invoking the words small business to get what it wants.

"We know that the good name of small business has been co-opted by the big-business community," Knapp said. "That's exactly what our poll results show. Our No. 1 issue is demand. We know and support a lot of regulations."

Knapp said partisan politics has gotten in the way of running the country. He said investing in infrastructure used to be a very traditional, Republican approach to helping the economy, but this time around, because President Obama proposed it, the GOP has been fighting the idea. Ditto eliminating incentives for companies to ship jobs overseas -- one of the key things small business owners said should be done to boost the economy domestically.

"The rhetoric is being driven by big business. … They really don't care what regulations affect small businesses. It's all about what's in best interests of big business. They're just using small business to get there," Knapp said.

Another interesting aspect of the poll was that small-business owners largely describe themselves as Republicans.

"Over 50 percent identify with the Republican party, 32 percent Democrats and 15 percent independents. Small business owners are by nature conservative," Knapp said. "When you ask them their opinions on specific issues, they make it very clear what they think is in their best interests.

"It's not a partisan thing. It's big business versus small business. Big business interests tell politicians what small businesses want. That's crazy. Small businesses don't like what big business wants."

The survey's margin of error was 4.4 percentage points.