Regulation is essential to market economies. It establishes the rules of competition, ensures a level playing field, governs participants’ behavior, and protects consumers, public health and safety, private property, and environmental resources. Without question, innovation, economic growth, and wealth creation depend on the promulgation and enforcement of regulation.
But regulation isn’t free, or without consequence. Regulation imposes costs – costs borne by businesses. A wave of new, inconsistent or outdated regulations, or complex and confusing regulations can distract business owners’ focus and time away from their product line and the marketplace. They can impose costs that consume resources that could otherwise be invested back into businesses. Regulation can also create economic distortions, entrenched interests, and powerful constituencies, and lead to cronyism and dependency. Perhaps most insidiously, regulation and its costs operate like an invisible and, therefore, easily overlooked, tax.
The stifling effect of regulatory burden and complexity is particularly acute for startups. New businesses lack the resources and scale of larger firms over which to absorb and amortize the costs of compliance. Moreover, their very survival, especially during the initial years, depends on the energy, focus, and flexibility of their leaders.
The Trump Administration has made regulatory reform a central feature of its economic agenda and has made significant progress in its first 18 months. CAE is of the view that even more fundamental reform is possible that would significantly improve the prospects of startups and the U.S. economy more broadly.