Sunday night at a mixer, I engaged in a somewhat disturbing conversation with a gay former Republican. As we talked about the debt crisis and he heard my recommendations for drastic cuts, he feared what those cuts would mean for the economy and job creation. I explained that reduction in regulations and federal fees would stimulate growth.
I pointed to the shuttered storefronts in and around West Hollywood, saying that regulation and taxation (at the federal, state and municipal level) had made it more difficult for those entrepreneurs to stay in business during the economic downturn, even suggesting that those very regulations has caused the downturn.
In order to stimulate growth, I said, we needed to cut back on regulations, making it easier for new entrepreneurs to set up shop and for existing ones to expand. He countered that small businesses wouldn’t make a dent in the overall employment numbers. I reminded him what the president said, that “Small businesses produce most of the new jobs in this country.”
He groused that my plan was “negative” as I thought the government should do less. What I found troubling was how this man had evolved from a Republican to a statist, believing that in times of economic distress, the government must do something to fix the crisis. And that he dismissed anything short of increased state intervention as “negative” response to the problem.
But, as Timothy P. Carney pointed out earlier this week, the best thing government do to create jobs is to get out of the way and remove the burdens to bringing on new employees. “According to the Small Business Administration,” Iain Murray writes
. . . federal rules and regulations — from the Fair Labor Standards Act to the Polygraph Protection Act — cost small businesses $10,000 annually per employee in compliance costs. To put that in perspective: That would take a company with 10 employees from making a $100,000 profit to just breaking even.
Take away those rules and regulations and that firm could use those profits to hire another employee and reinvest the rest in the business (in raises or new office space, for example). With the bureaucracy in place, however, you might consider letting someone go in the current business environment.
Via Instapundit. So, maybe our approach is indeed a negative one, at least from the perspective of state action. But, that check on government would provide a stimulative effect on small business.