Legal & Regulatory

Midnight Regulatory Power For Small Business

December 20
7:34 AM 2016

One thing that shouldn't contribute to the uncertainty is government regulation, along with the murky process for developing rules that small businesses must ultimately comply with.

Unfortunately, many small-business owners find themselves completely cut out of the rulemaking process, learning of new regulations that will impact their business only after the rules have been stamped "FINAL." However, small business owners are hopeful that a new administration propelled by the regulatory agenda that President-elect Donald Trump campaigned on will change this dynamic. That is, result in a federal regulatory process that is more fair and rational.

Over the last 70 years, the Federal Register, which documents new rules, has contained roughly 17 percent more pages for the months between presidential elections and inaugurations. Unfortunately in the current era, the midnight regulatory madness is shattering new records. According to the American Action Forum, the current output of midnight rules is up 42 percent over 2008, and 48 percent over 2000.

An analysis by George Mason University's Mercatus Center found that midnight regulations often suffer from flawed analyses, less transparency and other shortcuts. Specifically, they concluded that, "During the [midnight] surge, the agencies' regulatory analysis quality drops and regulatory oversight by the Office of Information and Regulatory Affairs (OIRA) weakens. As a result, federal agencies produce ineffective regulation and waste public resources."

The study also found that these midnight regulations "are more likely to be ineffective and excessively costly."

The midnight regulatory season, with the lower quality and poorly vetted rules it churns out, represents a flawed system in general, one that can easily betray fairness and public trust. As the clock ticks towards midnight, it remains to be seen how many total rules President Barack Obama and his administration will finalize before Inauguration Day. It's not too late to put the brakes on unnecessary rulemaking and to keep in mind that though their time in office ends in January, the impact and expense of new regulations will continue to weigh on small businesses long into the future.

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