Staples Founder Says Small Businesses are Being “Regulated to Death”

August 29, 2013

Yesterday I participated in a “Small Business for Sensible Regulations” event with NFIB and Senator John Braun.  The event was part of a statewide series spearheaded by NFIB to highlight the national coalition’s effort to reduce the regulatory burden on job creators. 

Patrick Connor, Washington State Director of NFIB, gave an overview of the burden of federal regulations and his organization’s commitment to turning back the regulatory tide.  Senator Braun offered some real world examples of regulations gone amok and the impact on his business.   I focused my comments on the five-foot tall stack of state regulations and how they are drowning small businesses.

Even the established corporate giants of business are saying the regulatory burden is just too much, particularly on small businesses.

Earlier this year, Fred DeLuca, founder and CEO of the Subway sandwich franchise that has created half a million jobs, said:

“If I started Subway today, Subway would not exist."

DeLuca said the environment for entrepreneurs in the U.S. has "continuously gotten worse because there are more and more regulations. It's tough for people to get into business, especially a small business."

And DeLuca isn’t the only rags to riches small business success story who says today's regulations are an obstacle to their small businesses and the jobs they create. 

Thomas Stemberg, founder of Staples, published an editorial last week saying:

“Launching a business like Staples in 2013 would be a much harder proposition, with success by no means certain. There are so many government impediments to business today that the next Staples—and its 50,000 jobs—might never get off the ground.

“Chief among those roadblocks: the blizzard of bureaucratic red tape that buries businesses and stifles job creation… The system that fueled entrepreneurship 25 years ago is now being regulated to death…The next Staples, and its 50,000 jobs, may not happen because of this burden.”

Given their success, and the hundreds of thousands of jobs these two businesses have created, the fact DeLuca and Stemberg say they could not replicate that success in today’s business environment, because of the “continuous increase in regulations,” should give pause to anyone who believes job creation is the key to recovering our economy. 

From Wall Street to Main Street, employers say government regulations are a serious problem, and there is ample evidence to support their claims.

Last year, a report by the Kauffman Foundation, a nonprofit organization that promotes and studies entrepreneurship, revealed small business owners in Washington peg our state as having the nation’s 10th least-friendly business regulations. 

Similarly, a survey by Chief Executive Group of 650 CEOs cited Washington’s “regulatory snares” as a factor in our state’s ranking as the 13th worst state for business.

More recently, Forbes’ “Best States for Business 2012” ranked Washington’s regulatory climate the 12th worst in the nation and the Mercatus Center at George Mason University ranked Washington 13th.

Even government officials acknowledge today’s layers of complex and confusing government regulations hurt businesses. 

  • A 2007 state Department of Revenue study on the business survival rate in Washington found that “taxes and costs of complying with government regulations are factors that contribute to business failure.” 
  • Governor Gregoire explained her moratorium on new agency regulations saying, “the time and effort small business owners would put into meeting new requirements would be better spent in improving their bottom line, and adding new employees.... We want businesses to create jobs.”
  • Washington’s State Auditor released a report last year on the state’s regulatory climate that repeatedly refers to the enormous impact state regulations have on businesses, especially small businesses, and government’s duty to ease the burden as much possible for the benefit of employers, workers, the government and the general economy.
  • Earlier this year the Washington Economic Development Commission issued a report declaring, “regulatory processes impose costs of doing business, and significantly influence investment behavior, location decisions, startup activity, expansions and hiring.”  That report concluded, “Washington’s overly burdensome regulatory system must be addressed as a top economic development priority.”

We must fix our state’s massive “overly burdensome regulatory system.”  Reducing our state's regulatory burden will improve the state’s competitiveness and foster job creation, which will breathe new life into our economy and generate more revenue for our state. 

The good news is the issue of over-regulation is finally getting the attention it deserves.  The Legislature made some progress this year in providing some regulatory relief, but much more is needed.  Let's hope that relief comes before it is too late for small businesses.  

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