New legislation has just passed the House that will require regulators to assess the direct and indirect impact of regulations on small businesses, whether or not that impact seems obvious beforehand, bringing much-needed consideration to the impact of regulation on small businesses.
This bill would provide much-needed restrictions of federal regulators by requiring that they assess both the direct and indirect impact of all new regulations on small businesses, not just the direct impact of regulations which are deemed to have a “substantial” effect. The additonal hoops to jump through would prevent all but the most beneficial regulations from making it through to law, providing the added benefit of less regulation over small businesses in general as well.
This new legislation is an amendment to the 1980 Regulatory Flexibility Act, which previously stated that regulators would only have to examine their impact on small businesses if their impact was expected to be ‘substantial’. It is a modernization of the old 1980 legislation, moving it forward into the tech and startup-inundated business world of the 2010’s.
Furthermore, the bill streamlines and unifies existing Regulatory Flexibility statutes, where currently each federal agency interprets the law’s statutes in a variety of different ways, and not always transparently. This divergent reporting makes it easier for federal agencies to avoid fulfilling the RFA requirements, and the new legislation would hold them more tightly to the standards of the law.
More efficient regulation will simplify what it takes to do business, making it easier for small businesses and startups to perform every business function from making products, to marketing, to hiring employees, to doing their finances. Doing buiness as a startup can often be extremely difficult or even impossible due to loads of different federal regulations weighing them down, and this bill hopes to lighten that load.
However, opponents of the bill say that it is too broad and unspecific, as it doesn’t nail down what exactly qualifies as “indirect” impact. Technically, indirect effects can continue on down the line, so where does the bill draw the line at what needs to be examined? Regulators are concerned that the burden on them for this additional verification of regulations will end up being too high.
Opponents say the bill is similarly unspecific about what qualifies as a small business, and that without more specificity the bill could be co-opted by big businesses, as small-business panels so often are. Some say this will cause a well-meaning bill to end up becoming a vehicle to block much needed regulation and reform.
“The proof is that the bill will end up delaying or blocking rules that don’t have any direct impact on small businesses, such as Wall Street reforms that affect only the mega banks,” said Amit Narang, regulatory policy advocate for Public Citizen.
“Over the past ten years, the small business compliance cost savings due to the RFA is greater than $90 billion. These savings were derived from a small number of regulatory alternatives that were less costly to small businesses. If all federal rules with small business impacts included the type of analysis required by this legislation, the savings could be significantly higher and our regulatory system could more efficiently meet our objectives,” says the letter of support.