Captivity and the Need for Regulatory Flexibility

Monday, 20 October 2014

A big story in the news this week was on “regulatory capture,” a relatively foreign term to many outside the field of economics. NPR aired secretly taped recordings between bank examiners from the New York Federal Reserve and executives at Goldman Sachs, exposing the regulators as timid and deferential to the bankers. The tapes suggest federal regulators had “become more oriented to the institution they are supervising than to representing the public interest.” The very definition of regulatory capture.

More importantly than the standard definition of “regulatory capture,” though, situations like this display the larger, systemic problem of design of institutions.

According to, “The scandal is less about Goldman’s behavior and more about the Fed’s inability or unwillingness to uphold the rule of law. Reasonable people can debate whether specific regulations are necessary, but even the best set of rules is totally insufficient if paired with an enforcement system that applies them inconsistently or not at all. Fair and consistent application of regulations is a prerequisite for having a regulatory regime of any kind. When regulators act the way the TAL/ProPublica report show New York Fed regulators acting, it suggests that we need to reform or revamp regulatory institutions before we can expect any new rules they’re charged with enforcing to do much of anything.”

This story raises the question: What is the best way for an agency to ensure industries comply with regulations?

If a federal agency wants to create a rule, they can enforce the rule by A) monitoring the industry through each step to reach the desired outcome or by B) ensuring that the industry achieves the outcome. In the Goldman Sachs story, the Federal Reserve followed the first option, and the agency’s rigged, time-consuming process of monitoring became an institutional problem, susceptible to the influences of the bankers.  Examples like this, therefore, appear to give credence to the need for greater flexibility within the regulatory process; an approach more like option B.

Endemic problems of regulatory capture should remind us that the outcome of a regulation is more important than the process or means of regulating. As a result, flexibility in pursuit of the right outcomes should be a virtue for the regulated and regulators alike.

NFIB Files Comments on the Clean Water Act

Thursday, 16 October 2014

The National Federation of Independent Business (NFIB) filed comments with the Environmental Protection Agency (EPA) this week about the controversial expansion to the Clean Water Act. The new rule, which extends the agency’s authority over streams, farm ponds, and puddles, will be particularly troublesome for small businesses and farmers.

According to the comments, “Landowners will be more hesitant to engage in development projects or to make other economically beneficial uses of their properties.”

Read NFIB’s comments here.  

Nobel in Economics Awarded

Wednesday, 15 October 2014

The week’s economic news was dominated by the announcement of the latest Nobel Memorial Prize in Economic Science.  The most recent laureate, Jean Tirole, has contributed to his field across several subdisciplines including the application of game theory to regulatory systems.  Many commentators have focused on the emphasis given to his work on what are called platform markets and regulation.  A more nuanced understanding would get past the polemic exercises of politicos to see that while Tirole is rightly famous for developing tools for creating and understanding regulatory incentives, he is perhaps more importantly a critic of great swaths of governmental regulation.

Humility and skepticism in the approach to rulemaking would serve everyone well.

Sensible regulation is something we can all agree on. It is essential to create a system that strikes the right balance between protecting our communities, while allowing our businesses to grow. Sadly, the current federal rule-making process does not live up to this standard.

With more than 3,300 regulations in the pipeline, small businesses across the country struggle with the burden of overregulation. And, this challenge is negatively affecting economic growth. In the last 30 years, the growth of regulations has lowered the rate of new business startups by nearly 30 percent.

For centuries, economists have advanced our understanding about the relationship between low economic growth and excessive regulation. It’s time Washington understood the problem and work together for a solution.

Read more here.


NFIB Small Business Jobs Report

Monday, 13 October 2014

Small business job creation plans faded in September, according to the newly released NFIB Small Business Optimism Index. Moreover, the report, which surveys over 600 small business owners across the country, suggested potentially weaker job creation in the coming months.

According to NFIB Chief Economist William Dunkelberg, “Job creation plans also faded however, suggesting weaker job creation ahead…  The September NFIB data anticipate new jobs in the low 200,000 range and an uptick in the unemployment rate. Reports of past hiring were very strong, suggesting a good jobs number, but job openings and job creation plans faded, casting a shadow over the job market outcomes.”

Check out the entire survey here.

EPA welcomes more comments on water regs

Monday, 6 October 2014

The EPA announced this week that the agency is extending the comment period for the controversial Clean Water Act rule, which would give agencies a greater authority to regulate water, including small farm ponds and ditches. This is the second extension the agency has granted to the comment period and will now run through November 14.

According to reports, “The EPA’s Scientific Advisory Board is wrapping up a report on the connectivity of small bodies of water such as streams and wetlands, the agency noted, and the EPA wants to give the public more time to comment on the results of the report once it is released.”

Read more about the extension here.

NFIB: New Study on Regulations Should Trigger Alarms Washington

Wednesday, 10 September 2014

NFIB: New Study on Regulations Should Trigger Alarms Washington
 Study by manufacturers shows how regulations siphon capital from economy and hurt small businesses 

Washington, DC (September 10, 2014) — The National Federation of Independent Business (NFIB) today said that a new study released by a group representing American manufacturers should force Congress to get serious about taming a regulatory system that is increasingly, and perhaps prohibitively, expensive for small businesses.

“The real cost on small manufacturers, and therefore the larger cost to the economy, is staggering according to this research,” said Dan Bosch, NFIB Manager of Regulatory Policy.  “The relationship between federal regulations and economic policy is badly out of balance and it’s undermining everything that the Administration and Congress say they want to accomplish.”

The report, by the National Association of Manufacturers, finds that the average American company with 50 or fewer employees pays nearly $12,000 to comply with regulations.  Remarkably, the average small manufacturer (those with 50 or fewer workers), must pay nearly $35,000 per year, per employee to be in compliance.

“A small manufacturing firm with 10 employees must spend $350,000 per year, before they make a single dollar in profit, to comply with federal regulations,” said Bosch.  “That’s a massive barrier to entry for small businesses and a powerful incentive to invest and create jobs outside of the United States.”

President Obama and every member of Congress claim as a central economic policy the revitalization of the manufacturing sector, which has shed millions of jobs over the past decade under withering pressure from overseas competitors whose regulatory costs aren’t nearly as high.  That’s the right goal, said Bosch, because manufacturing jobs generally pay more than service sector positions.  Clearly, though, that goal is undermined by the bewildering proliferation of regulations and the costs they impose on small businesses.

“It’s always been one of the main pathways to the middle class for Americans and the federal regulatory bureaucracy is now blocking it,” he said.  “We’re not going to have a serious jobs policy, or a serious economic policy, unless we get serious about reigning in the regulatory system.”

NFIB is part of a coalition of organizations calling for sensible regulations.  Its website provides research on the rules affecting small businesses and their effect on the economy.  For more information about NFIB please visit

Small Businesses for Sensible Regulations Coalition Applauds House Committee’s Hearing on Regulatory Oversight

Wednesday, 25 June 2014

WASHINGTON – Dan Bosch, manager of regulatory policy for the NFIB, made the following statement today regarding the House Oversight and Government Reform Committee hearing, “Management Failures: Oversight of the EPA.

“While President Obama pledged early in his Administration to promote an “open exchange of ideas” and greater public participation in the regulatory process, his administration – especially the EPA – has regularly failed to take into account small business input or direct or indirect impacts to their business. Too often newly proposed rules including recent changes to Clean Water Act permitting do not include required analysis of undue compliance burdens to small businesses.”

“As a top issue facing America’s small businesses, improving the regulatory process to be more transparent, accountable and less burdensome should be a top priority of EPA Administrator McCarthy and the entire administration.  The Administration’s Unified Agenda of regulations released over Memorial Day weekend shows nearly 3,300 regulations in the federal pipeline.  While small businesses are steadfastly committed to regulatory compliance and ensuring environmental, worker and public protections, in recent years, the regulatory burden has grown and threatened our members’ ability to create jobs and expand their businesses.  The current regulatory process at agencies like EPA is not working and requires reform.”


For more information on the campaign, visit

NFIB Fights EPA’s Expanded Definition of Navigable Waters

Wednesday, 11 June 2014

The National Federation of Independent Business’ Small Businesses for Sensible Regulations coalition applauded the House Transportation and Infrastructure committee today for shining a light on the controversial Administration proposal to expand the definition of navigable waters – in some cases to include even small depressions or farm ponds – that receive federal protection under the Clean Water Act.

Dan Bosch, manager of regulatory policy for the NFIB, said the proposed rule, with its vague definition and potential for onerous fines and stiff penalties on small businesses, would unfairly impact small business owners:

“Only in the bureaucracy of the Environmental Protection Agency would it make sense to reclassify land as a ‘federal water’ if it accumulates water at any point in a year.  But that is what EPA is proposing with its vague new definition of what constitutes waters of the United States.  This proposal stands to deter small business owners from land development and investment with the specter of thousands of dollars in permitting fees or fines,” Bosch said on behalf of the coalition.

NFIB’s review of the proposed rulemaking on “Definition of Waters of the U.S.” finds that it will have a tremendous impact on small businesses across virtually every sector. EPA has alleged that since this is a simple definition change, there are no major costs directly imposed on small businesses. However, there will certainly be costs directly imposed on small businesses through the permit process and other compliance requirements. In addition, the proposed rule makes it clear that many waters will need to be determined on a case-by-case basis, therefore providing little, if any, additional certainty.  NFIB successfully petitioned for a longer comment period earlier this year and EPA is now accepting comments through October 20, 2014.

Added Bosch, “Sadly, this proposed rule is just another unfortunate example of the backwards nature of the modern regulatory process; one devoid of transparency and any consideration of the impact of new regulations on small business owners and manufacturers across the country. Simple, common-sense improvements can be made today to change the rule-making process so it benefits everyone – from consumers and the environment to the small business owner looking to build a new shed on his land right near a pond full of yesterdays’ rain water.”


Under the Clean Water Act, the EPA and Army Corps of Engineers (ACE) have authority over “waters of the United States,” even those on private property. If land is defined as a wetland, or has another significant connection to downstream water quality, the owner must get a permit from EPA/ACE in order to do any kind of development or alteration to that parcel. As of a decade ago, the average cost of a Clean Water Act permit was more than $270,000. Altering land without a permit can lead to fines of up to $37,500 per day.

Under the proposed rule, the EPA is seeking to vastly broaden the definition of what a wetland is. In the proposed rule, the agencies are aiming to go so far as to regulate and with a ditch or hole that collects water for as little as a few days per year. Additionally, under federal law, if a rule will have a significant impact on small businesses EPA must analyze it and meet with a group of small business owners to get feedback before it is published. However, EPA never conducted such a meeting because it wrongly claims the rule will have no harmful impact on small businesses.

For more information on the campaign, visit And read NFIB’s letter requesting that the agencies extend the written comment period.

Delaware Business Leaders Featured In “Small Businesses for Sensible Regulations” Campaign

Wednesday, 5 March 2014

For Immediate Release                                        Contact:

Delaware Business Leaders Featured In “Small Businesses for Sensible Regulations” Campaign


DOVER, DE – March 5, 2014 –Delaware business owners Tim Boulden and David Lyons have been chosen by the National Federation of Independent Business (NFIB) to be featured in the Small Businesses for Sensible Regulations national video series.

Both men were also among 30 state business leaders who met Friday morning with U.S. Sen. Tom Carper to thank him for his stalwart leadership in Washington on the issue of regulatory reform and to urge him to advance balanced, sensible regulatory solutions in the months ahead that help small businesses.

Boulden is president of Boulden Brothers Propane, Boulden’s One Hour Heating & Air Conditioning, and Boulden Brothers Plumbing headquartered in Newark. Lyons is president and CEO of the Lyons Companies, based in Wilmington.

Jessica Cooper, the NFIB state director for Delaware, said, “We are thrilled to have these exemplary Delaware small business owners showcased in our effort to have a national conversation about the broken federal regulatory process. With more than 90 years of combined experience creating jobs and running successful businesses in Delaware, Mr. Boulden and Mr. Lyons talk directly to the challenges posed by a regulatory process that places a greater emphasis on enforcement over compliance. We strongly believe that their stories will help more people realize that the regulatory process, as currently situated, benefits no one – neither the businesses trying to create jobs nor the public’s safety.”

Boulden said of his participation in the video, “It’s always been troubling to me that we only hear Washington lawmakers and the Administration talk about the concerns of small businesses during an election year.  To my 50 employees and their families who feel the burden the regulatory process places on my businesses, this is an issue that deserves year-round attention. Discussing the various common sense, bipartisan ways of improving the regulatory process is something that should always be on the agenda regardless of when the next election is taking place.”

Added Lyons, “Regulations are critical, but we can have a system in place that does things smarter and benefits everyone. I’ve seen how the current regulatory process has negatively affected entrepreneurs and also forced new start-ups to go about doing business in a different manner. There’s no reason we shouldn’t improve a regulatory process that both political parties agree needs to be modernized.”

Click here to watch Tim Boulden’s interview or here for David Lyons.

About Small Businesses for Sensible Regulations: Small Businesses for Sensible Regulations is a national effort focused on protecting small businesses and American jobs from the impacts of regulations recently proposed by the Obama administration. Learn more at


Delaware Businesses Leaders Discuss Partisanship in Washington and Federal Regulation with U.S. Sen. Tom Carper

Friday, 28 February 2014




FOR RELEASE: February 28, 2014
Emily Spain (Carper) (202) 224-2441 or [email protected]
Cheryl Corn (DSCC) (302) 576-6572 or [email protected]
Jack Mozloom (NFIB) (609) 989-8777      

Delaware Businesses Leaders Discuss Partisanship in Washington and Federal Regulation with U.S. Sen. Tom Carper 

WILMINGTON, Del. – More than 30 small business owners, manufacturers and community leaders met this morning with U.S. Senator Tom Carper (D-Del.) to discuss partisanship in Washington and federal regulation.

In a tour and business roundtable at Masley Enterprises in Wilmington, local business leaders shared their stories and offered input on the Affordable Care Act and how regulations could be issued, reviewed, and enforced to ensure worker and environmental protections while also enabling local businesses to grow and create jobs.  Sen. Carper and the participants also discussed the challenge of getting things done in an increasingly partisan Washington.

Senator Carper, the senior senator from Delaware, who chairs the Senate Homeland Security and Governmental Affairs committee, which oversees personnel and management issues across the federal government said, “One of the best parts of my job as a Senator is getting to meet regularly with my constituents to hear about the issues that are important to them and how I can be helpful.  Today’s conversation with local business leaders about the challenges and opportunities they face, and how my colleagues and I in Washington can help create a nurturing environment for job creation, was valuable and informative.  I have always believed that we don’t have to choose between having strong economic growth and strong regulations to protect our workers, our environment and our public health; we just need to strike the right balance between these important priorities by using some common sense. The Obama Administration has taken some meaningful steps to improve federal rule making to ensure that they are as efficient and effective as possible, but I always appreciate getting feedback from my constituents on what is working and where we can continue to improve our efforts. I think today’s conversation was helpful in that regard.

Richard Heffron, the interim president of the Delaware State Chamber, said “Our members aren’t looking to get rid of regulations; we just need a smarter regulatory process. We need a system that does a better job of anticipating the impact that a new rule will have on businesses and manufacturers before it is implemented. A streamlined process, with greater transparency, will give our job creators the freedom to reinvest and expand their operations. I appreciate Senator Carper’s willingness to meet with our members today.”

Added Tim Boulden, of Newark-based Boulden Brothers Plumbing, Propane, and Heating & Air Conditioning,  “The U.S. Small Business Administration’s study, ‘The Impact of Regulatory Costs on Small Firms,’ said the total annual cost of following the rules for a small business is $10,585 per employee, or about $2,830 more than a large business. That can be a huge burden.  The number of new and existing regulations we face every day  put a significant strain not only on me, but also the people I work with. I’d like to thank Senator Carper for meeting with us and listening to our concerns and our suggestions.” 

Jessica Cooper, the Delaware state director for the National Federation of Independent Business (NFIB), talked about her organization’s focus on making sensible changes to the regulatory process.  “Regulations play a critical role in safeguarding our member businesses, their customers and the community at large,” Cooper said. “But increasingly, the regulatory process has been more of an impediment to businesses with more than 3,000 federal rules in the pipeline today. New rules are drafted without consideration or review of the compounded impacts with other regulations. We need to ensure that the government works with businesses of all kinds to better address their needs.”


U.S. Sen. Carper (D-Del.) meets with members of the Delaware State Chamber of Commerce and the National Federation of Independent Business (NFIB).

Former Senator Blanche on MSNBC’s Jansing and Co.

Friday, 14 September 2012

Former Senator Blanche Lincoln appeared on MSNBC’s Jansing and Co. to discuss regulations and the economy.

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