Regulations disproportionally hurt small businesses

Federal agencies created 29,014 new federal regulations, averaging 70 a week over the past eight years. These regulations range from importation of kiwis from Chile, cost of living adjustments of royalty rates pay for published musical works, reporting and recordkeeping requirements, to health insurance and environmental protection. The Office of Information and Regulatory Affairs (OIRA), an agency within the Executive Office of the President, determined approximately 10% of these regulations adversely affect the economy by at least $100 million a year (i.e., economically significant rules).

 The Regulatory Flexibility Act requires federal agencies to determine if a rule would have a significant effect on a substantial number of small businesses. During the past eight years, federal agencies created 5,340 rules that affected small businesses, 841 of those were economically significant. In other words, small businesses have to use their limited resources to navigate 13 new federal rules every week. Centers for Medicare & Medicaid Services, Food and Drug Administration, and Environmental Protection Agency were among the most active agencies and the most common topics included reporting and recordkeeping requirements, administrative practices and procedures, and government procurement.

 Regulations are necessary to the society. Businesses have to comply with law and regulations to produce safe and sound products and services for their customers. But excessive regulations and red tape have shown to have severe adverse effects on consumers, competitiveness, and economic growth. Small businesses, the backbone of the U.S. economy, should not be using their scarce resources on dealing with red tape but rather to maintain, improve, and innovate products and services to compete at home and abroad. Deregulation and cutting red tape should be top policy priorities for federal as well as local governments to boost economic growth.

Open Data Will Solve the Regulatory Riddle

Governments are the original big data entities. Our governments have long gathered data and compiled statistics on individuals and populations. The value proposition of a government’s use of data is the ability to transform information into an outcome that benefits the public good. Making good public policy stems from the ability to collect and analyze data and information, then execute changes based on those observations. Much of the promise for future generations will emerge from the trend of open data, which has taken place across the globe. 

The most exciting transformations on this front in the U.S. are happening on the state and local level. The Sunlight Foundation’s Open Data Policy initiative has logged the efforts of 36 government bodies on the state, county, and city level that have passed open data legislation. A few states and cities have been the leaders in data-driven initiatives and program administration. Maryland set the bar for states with its StateStat program launched in 2007 by Governor Martin O’Malley and its open data program. New York City has refined and enhanced a comprehensive city-management program built on data and analytics for key performance indicators across the city. Above all, open data is leading the way for more effective and efficient government. 

Cities can use open data to improve performance on local regulation. Our recent report—Enterprising Cities: Regulatory Climate Index 2014—measures the regulatory environments for small businesses across 10 U.S. cities in 5 areas of doing business. Our project documents the advances and improvements on the local level that these cities have taken. City governments in Chicago, New York City, and Boston have made proactive changes to make data more available. These changes have led to improvements in the issuance of permits and licenses for entrepreneurs and small businesses. 

Our research just scratches the surface to the true potential of open data in transforming public administration. State and municipal governments now have the technology and data to improve the ability of businesses to receive licenses, accelerate the zoning and permitting process for construction firms, and expedite city inspections for restaurants and buildings. These transformations can reduce or eliminate unnecessary waiting time and cut administrative fees. The tools are available. It's just a matter of putting them to work to improve the regulatory environment on the state and local level.