Federal regulations are choking America’s small businesses, says Frank Holmes CEO of U.S. Global Investors – a publicly traded money management firm with $2.6 billion in assets under management.
“There are so many unknowns, that's what's shown up in the marketplace, this unknown cost factor,” Holmes tells Tech Ticker. “It makes us uncompetitive, especially for small business, for manufacturing, that's why business are going to other places.”
According to a recent Wall Street Journal op-ed by Nicole and Mark Crain, “the annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008, a 3% real increase over five years, to about 14% of U.S. national income.”
And that's before Congress passed the sweeping health care law and the new 2,300 page Dodd-Frank financial overhaul.
To Frank's point, small businesses do bare the brunt of the regulatory costs, according to The WSJ:
“...small businesses—those with fewer than 20 employees—incur regulatory costs 42% greater than firms with between 20 and 499 employees, and 36% greater than firms with more than 500 employees. The regulatory cost per employee for small businesses was $10,585, compared to $7,454 for medium firms and $7,755 for large firm.”
Sarbanes-Oxley and other recent regulations have added bureaucracy and failed to improve business conditions, in Holmes’ opinion. It’s “great for lawyers and accountants,” but does little to improve competitiveness, he says. “You don't have to have a gazillion regulations in every part of the economy.”
If government were serious about protecting the economy, they would simply limit leverage. From the 1994 Mexican peso crisis to the 1997 Asian financial crisis and Russia's 1998 debt default, as well as America's recent housing and banking meltdown, “leverage is the one single pattern” at the center of it all, says Holmes.
Instead of clogging the system with more laws, existing regulators need to monitor leverage and off balance sheet activity. This will go a long way to preventing another crisis, without stifling innovation, he says. |
