Why has the U.S. not recovered from the recession after more than 5 years? Why has the average American lost purchasing power? Why has the average American lost income growth? Why is the middle class shrinking? The simple answer is the government.
How can we get Americans working and back on track? First, let’s analyze the problem. Job creation is mainly by large companies and mostly in the technology sector. Small company growth has been stifled and is also mostly in the technology sector requiring few jobs. The costs associated with starting a company in the manufacturing field are too great due to the onerous regulations that must be complied with along with the high tax rates. In addition, the government tends to crack down on innovative, growing companies which is counter intuitive.
Let’s take a look at an example in one industry. There are several companies that saw a problem with cigarettes and created a solution called the e-cig or vaping. Now that these companies are growing, the FDA wants to put restrictions on these companies much like the cigarette companies even to the extent of restricting any internet sales. I think we all can agree that cigarette smoking is detrimental to the smoker as well as others from the second hand smoke. Alternatives are to quit, which is very difficult for many people; nicotine patches or nicotine gum which may work but does little to alleviate the psychological addition effects; therapy which is expensive and may or may not work and e-cigs. E-cigs are the choice of many since it gives the smoker the same effects as smoking a cigarette without the carcinogens. In addition, e-cigs do not have the second hand smoke problems as cigarettes. Common sense dictates that the FDA would embrace this alternative and want companies to pursue this alternative to decrease cigarette use.
If you are an innovator and want to start a company, requiring a lot of time, hard work and cost, would you put your money in a startup and risk it all if you knew that if it succeeds the government will change the rules, try to limit your success, limit your growth possibilities, and limit your profit potential? This is exactly why most of the startups today are technology based employing just a handful of people. These startups are not subject to the extensive, time consuming regulations that other companies are subjected to so the cost to entry is less and the potential for profit is unlimited.
In the first nine months of 2013, there were 2,878 new rules which equates to about 10 per day. Businesses must retain the manpower just to find and review the new regulations to determine if they are in compliance and, if not, determine the cost of compliance. This is very time consuming and costly to a small business in times when profit margins are already tight. In 2013, the cost of compliance to businesses was over $1 trillion and with the current administration, this continues to grow each year. That is money not being re-invested in businesses by upgrading plant and equipment, business expansion, research and development, and hiring new employees and/or contractors.
I have devised a common sense 8 step plan to get Americans back to work.
- Place a moratorium on new regulations: Stop the bleeding now. Don’t add more fuel to the fire.
- Review all small business regulations: Create a business council from small business owners in varying industries to review regulations, detail the cost of compliance and the benefits and drawbacks of each regulation as well as come up with a list of regulations to eliminate.
- Remove regulations that are not cost effective, are politically motivated and have no tangible benefits.
- Revamp the regulation system: Create guidelines for any new regulations that include the potential benefits, potential drawbacks, cost of compliance and the reason or reasons the regulation must be enacted.
- Revise the Federal Tax System: The current system is too high, too cumbersome and onerous, and requires a complete overhaul to a system that lowers taxes, is simpler, easier to comply with, and reduces the chance of non-compliance.
- Allow companies to repatriate trillions of dollars without the onerous tax consequences: By establishing a period for companies to bring back money from overseas without a tax consequence will, in effect, create a stimulus like we have never seen before and it will cost the taxpayer nothing. We will see vast increases in infrastructure spending and job growth.
- Create an environment of industry self-regulation: Some industries are doing this today very effectively without government intervention.
- Increase the cost of non-compliance: Once the changes have been made and the system is company friendly, penalties should be increased for violations. There are still some who will try to skirt the law for the sake of the almighty dollar. Making it so onerous to do so will ensure compliance.
We are at a crossroad and the choices we make in the upcoming election will determine whether we become a country that is free market oriented with government and business working together to grow and innovate or a country that will retain the status quo, has limited growth potential, increased debt and punishes people for achieving the American dream. Let’s revitalize the American Dream for all Americans.