Obama's Regulatory Moment

When you ask small business owners from Nevada to Pennsylvania what the greatest obstacle in the way of their success is, they echo what numerous studies have indicated for months: government regulations. They'll point to specific rules like the lead renovation, repair and painting rule, which impose costly and redundant training and certification costs on painters, plumbers and remodeling contractors. Or they might discuss new threats that are in the works, such as an EPA rule under White House review that could set new limits for commercial boiler emissions, which are already so closely regulated they can barely be measured.

But overwhelmingly, small businesses point out the paralysis and uncertainty they feel because of the nearly 4,200 pending regulations backed up in the pipeline. Over the last five years the number of rules costing $100 million or more has increased by 60 percent. In 2010 alone, the number of major rules introduced increased by over 20 percent from the previous year. These figures are a clear indicator of how out of balance the system has become, and it's having real consequences for the business community. Earlier this year, a Gallup poll found 85 percent of small businesses aren't hiring. Nearly half said government regulations were a reason why.

For many small business owners, a string of stories over the past several weeks has effectively confirmed theirs fears that the federal regulatory agenda is out of touch with today's economic realities, and even that it's not on their side at all. Lest it bog him down further, President Obama has an opportunity to address these concerns by reaffirming his commitment to creating a business-friendly regulatory environment.

Specifically, the issue emerged last month when a high-ranking EPA official, Regional Administrator Al Armendariz, explained his agency's philosophy of 'crucifying' oil and gas companies to make it easier to regulate private companies. Mr. Armendariz resigned days after his comments surfaced. He was scheduled to clarify his remarks in testimony before the House Energy and Commerce Committee today, but canceled his appearence late Tuesday night. Unfortunately, the issue won't go away by ignoring it. The administration needs to address the perceived "us versus them" attitude between federal regulators and the private sector, and allay the worries of countless small business owners who are watching closely.

Fortunately, there's reason to believe the course can be changed. By calling for greater transparency and accountability we can begin to again reverse the disconnection between Washington and the rest of the country. And the President has taken many steps to do that. In May he stated: "We will remain vigilant when it comes to eliminating regulations that are not necessary or that impose unnecessary burdens on America's families and businesses." This is welcome progress, but breaking the cycle and improving the process will take more than public statements and executive orders alone. The President needs to make practical reforms to clean up the regulatory process; many small businesses can't wait until November.

There are a number of commonsense steps the President could take to start. Ideas like requiring agencies to use a consistent process to evaluate new data and determine if new regulations are needed; including indirect costs when calculating the benefits and costs of proposed rules; and soliciting small business input throughout the regulatory process would go a long way in making the changes small businesses need. Just as importantly, taking these steps would signal to business owners that President Obama is fighting for the changes he promised.

When pitted against each other, both regulators and the business community suffer, and the mounting tension between the two could hurt the President's campaign. I don't believe the recent headlines from the EPA reflect the Administration's policies. But by improving the transparency and inclusiveness of the regulatory system, the President can both focus attention on what he is doing to bolster the business environment and ensure we are implementing smarter, more mutually-beneficial rules moving forward.