The final months of a presidential administration often witness a surge in regulatory activity as the outgoing power seeks to cement its policy legacy. This “midnight regulation” phenomenon involves a rush to finalize pending rules and regulations before the transition of power. While administrations argue these actions are necessary to address pressing issues, critics contend they often bypass proper scrutiny and impose significant costs on businesses and consumers. The current administration, facing the end of its term, is expected to follow this pattern, aiming to finalize as many of its preferred regulations and judicial appointments as possible before January 20, 2025. This flurry of activity raises concerns about the economic impact of these regulations and the potential burden they place on businesses, particularly small businesses, which often lack the resources to navigate complex regulatory landscapes.
The economic impact of regulations is substantial. The Office of Management and Budget (OMB) estimates the cost of existing regulations to be approximately $300 billion annually. This cost is ultimately borne by consumers through higher prices for goods and services, effectively acting as a “regulatory tax.” This financial burden is particularly acute for small businesses, which often operate on thin margins and have limited capacity to absorb increased costs. The National Federation of Independent Business (NFIB)’s 2024 Small Business Problems and Priorities survey highlights the challenges faced by small business owners. The survey revealed that “Cost of Supplies/Inventories” ranked as the second most burdensome issue, while “Unreasonable government regulations” ranked seventh, with 24% of respondents citing it as a critical concern. These findings underscore the significant impact regulatory burdens have on small businesses’ ability to operate and grow.
The sheer volume and complexity of regulations present a formidable challenge for small businesses. The Federal Register (FR), the official journal of the federal government, serves as the repository for proposed and finalized regulations. Recent administrations have exhibited a tendency to accelerate regulatory activity in their final terms, resulting in a deluge of new rules. The Trump administration finalized 119 significant regulations, while the Biden administration finalized 233. The 2023 Federal Register alone, spanning over 90,000 pages, contained 3,018 final rules and regulations, covering a vast array of products and industries, from microwave ovens and refrigerators to furnaces and heat pumps. This sheer volume makes it difficult, if not impossible, for small businesses to stay abreast of all relevant regulations and ensure compliance.
The challenge for small businesses is not merely keeping up with the volume of regulations, but also deciphering their often complex and technical language. The NFIB survey also highlighted the difficulty small businesses face in even learning about new regulatory requirements, ranking this issue 27th. This information gap places small businesses at a significant disadvantage. They must expend valuable time and resources to identify relevant regulations, interpret their requirements, and implement necessary changes to comply. This process can be particularly onerous for small businesses that lack dedicated legal and compliance teams. While some regulations are designated as “economically significant,” implying a greater level of scrutiny, all regulations impose compliance costs, both in terms of financial resources and the time required to understand and implement them. For small business owners, time is often their most valuable asset.
The regulatory process itself is often criticized for lacking transparency and accountability. Regulators, who are largely unelected, often pursue their specific policy goals without fully considering the cumulative economic impact of their actions or conducting rigorous cost-benefit analyses. This can lead to a proliferation of regulations that impose significant costs on businesses and consumers without commensurate benefits. A more streamlined and efficient regulatory process is needed, one that prioritizes transparency, accountability, and a rigorous evaluation of the costs and benefits of proposed regulations. This would ensure that regulations are truly serving the public interest and not unduly burdening businesses, particularly small businesses, which are the engine of economic growth and job creation.
The current administration’s anticipated push for finalizing regulations in its remaining months underscores the need for greater scrutiny of the regulatory process. While regulations are often necessary to address important societal issues, they should be implemented judiciously and with a full understanding of their economic consequences. The focus should be on developing regulations that are effective, efficient, and do not impose undue burdens on businesses, especially small businesses. A more balanced approach to regulation is essential for fostering a healthy and vibrant economy. This requires a shift towards a more transparent and accountable regulatory process that prioritizes cost-benefit analysis and considers the cumulative impact of regulations on businesses and consumers.
