Bayou Business Review, 1/26/98 p. 28
A few weeks ago Congressman Sonny Bono died on a ski slope. Don't misunderstand, this is not going to be some tribute to Sonny Bono. I know very little about the man. However, I do recall an interview he did when he was first elected to Congress. He told the reporter that he was pretty much apolitical until he tried to open up a restaurant. He was so inundated with regulations, many of which made little sense, that he ran for political office to fight the over-regulation of small business in his community. Regulations, like taxes, have the power to drive costs up so much that otherwise profitable ventures become unprofitable, hurting both the entrepreneur and her potential customers.
It was not Congressman Bono's death that prompted me to write about regulation and its power to destroy, but a discussion with a local businesswoman, who runs a day care center. She told me that she was inundated by the many regulations with which she had to comply. She gave me two examples of what she has to deal with.
First, she told me of the gate to the playground. One agency requires that daycare center gates only swing in, so small children cannot open it and run into the street. Another agency required that gates swing out. This is the government's version of "heads I win, tails you lose," or "damned if you do, damned if you don't."
She said that one agency set limits on how many children her facility could handle, while another determined how many restrooms she had to have. The latter agency increased the number of restrooms per child, so she had to add a restroom.
Now with the new bathroom, the agency that determined the number of children then said she could not handle as many children because the agency does not include restroom area in its calculations of square footage which determines the number of children she could handle. I think you know where this story is headed. Now, since she can no longer handle as many children as she once did, she finds herself with one restroom more than she was required to have. She was required to install a new restroom for children she can no longer take care of.
You may recall the R.W. Grant's poem, "Tom Smith and His Incredible Bread Machine," that I quoted from in a previous column on antitrust law. "These very simple guidelines/You can rely upon:/You're gouging on your prices if/You charge more than the rest./But it's unfair competition/If you think you can charge less./"A second point that we would make/To help avoid confusion:/Don't try to charge the same amount:/That would be collusion!" The legacy of Tom Smith and his bread machine lives on, not just in antitrust law, but in the hordes of conflicting regulations at the federal, state and local level.
President Clinton recently unveiled a new proposal to help with child care. With a two-month old son, I know my wife and I can use all the help with child care we can get. Day care in Thibodaux costs about the same as college tuition at Nicholls.
Unlike many government give-away programs, I find day care funding less objectionable than most. It is asking much of mothers on welfare to get a job, when most can hardly qualify for any more than minimum wage work. Day care for one child in a week ($60) would cost 29 percent of the earnings of 40 minimum-wage hours ($206).
I am really not arguing in favor or against the President's proposal (I have not studied his proposal enough to offer an opinion, yet). Instead, I am suggesting that one reason we may be finding ourselves with too overly expensive day care is that day care centers, like most businesses, are just too heavily regulated. Heavy regulatory mandates are much like heavy taxes-they drive up costs, often to the point of destruction.
Often, the regulatory burden falls harder on small businesses than on larger ones. If a small and a large business were both required to add the one restroom, the burden of the regulatory cost, as a percent of revenues, is much heavier for the small business and much more likely to drive the small company out of business than the large company.
There would be more small businesses in general if there were fewer regulatory demands. With more small businesses tomorrow, there will be more large businesses next year. Large businesses seldom spring from nothingness on their own.
We could, without "busting the government's budget," give incentives to day care operators and other small businesses by re-examining our business regulations. Some need to be eliminated. If you know of burdensome, nonsensical or contradictory local regulations, please write to me at Nicholls State University, Thibodaux, LA 70310, or e-mail me at coatsm@cajunnet.com.