The trouble with regulations

I recently watched Max Borders’ video on regulation (watch it at http://www.youtube.com/watch?v=_gIGpzoZxuA). I completely agree with Mr. Borders’ stance. I was a small business owner who provided computer repair services in Las Vegas. It was almost mind numbing to start up and maintain this business. I had to register (and pay fees) with the State, with the county and with the city. I was operating this business out of my house, so I also had to get permission from the fire department. I was trying to do work with some larger corporations and every few years they would come out with new requirements for me to follow in order to do business with them. These business licenses and regulations, as well as corporate requirements, cost me thousands of dollars a year before I could even start making money. It was discouraging and, at times, caused me to not want to grow my business. I did hire a few employees when my business grew, but there were regulations (with their own compliance costs) to deal with for having people work for me. Ultimately, I decided it was not worth the cost of compliance and regulations of having employees and stopped hiring them. When employees stopped working for me I did not replace them and I got to the point of having no employees. I eventually sold this business and am now working for someone else, instead of myself.

We see this same problem in all areas of society.  A “problem” is discovered and government runs in to “fix” this problem.  However, these regulations rarely actually fix the problem but rather cause additional problems.

A great way to spur economic activity is not to create new regulations, like the 1000s of new ones the Health Care Affordability & Portability Act (“Obamacare”) contains, but rather by cutting regulations.   If one looks, for example, at some of the corporate supports of the healthcare reform law one will find groups like the AARP and major insurance companies.  Why?  Because of the regulations this new law contains, it will make it harder for new organizations to start offering health insurance, but at the same time, it requires most Americans to purchase health insurance.  This becomes a barrier to entry, thus helping the insurance companies, not the general public, like the public was told these new regulations would do.

In closing, I recently read A Tale of 2 States (below) that I believe really drives home the problem with regulations.

CALIFORNIA: The Governor of California is jogging with his dog along a nature trail. A coyote jumps out, bites the Governor and attacks his dog.

1. The Governor starts to intervene, but reflects upon the movie “Bambi” and then realizes he should stop; the coyote is only doing what is natural.
2. He calls animal control. Animal Control captures the coyote and bills the State $200 testing it for diseases and $500 for relocating it.
3. He calls a veterinarian. The vet collects the dead dog and bills the State $200 for testing it for diseases.
4. The Governor goes to hospital and spends $3,500 getting checked for diseases from the coyote and on getting his bite wound bandaged.
5. The running trail gets shut down for 6 months while Fish & Game conducts a $100,000 survey to make sure the area is free of dangerous animals.
6. The Governor spends $50,000 in state funds to implement a “coyote awareness” program for residents of the area.
7. The State Legislature spends $2 million to study how to better treat rabies and how to permanently eradicate the disease throughout the world.
8. The Governor’s security agent is fired for not stopping the attack somehow and for letting the Governor attempt to intervene.
9. Additional cost to State of California: $75,000 to hire and train a new security agent with additional special training re: the nature of coyotes.
10. PETA protests the coyote’s relocation and files suit against the State.

TEXAS: The Governor of Texas is jogging with his dog along a nature trail. A Coyote jumps out, bites the Governor’s leather boot, and attacks his dog.

1. The Governor shoots the coyote with his State-issued pistol and keeps jogging. The Governor has spent $0.50 on a .45 ACP hollow point cartridge.
2. The buzzards eat the dead coyote.

And that, boys and girls, is why California is broke…

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