Industry lobbyists have their work cut out for them after the passage of Dodd-Frank in 2010, which introduced volumes of new regulations in an effort to overhaul the financial system after the collapse. In addition to helping to write regulations, lobbyists are stepping up their political contributions to both sides of the aisle.
Small companies are disproportionately affected by regulatory compliance costs. So it’s not really surprising that large companies often favor regulations that will also impact their small-business competitors. Consider Amazon (from The Foundry):
A few years back, Amazon was waging a scorched-earth campaign against states that attempted to collect sales taxes from internet businesses,” blogger Megan McArdle reminds us. Now the company is actually lobbying in favor of federal legislation that would force companies to collect sales taxes for the buyer’s home state.
In a cronyism twist, new regulations from 2010′s Dodd-Frank legislation will set aside certain businesses for special government oversight because they are too big to fail. (The official term is Systemically Important Financial Institution). This arrangement may devolve into a special benefit for the designated businesses because it will tell the public that the corporation has the government’s backing. From the American Enterprise Institute blog:
Now think about that when you hear the great hew and cry of the folks who purport to be worried that the big banks are too-big-to-fail (TBTF). They denounce the funding advantages these banks get because of the markets’ belief that the government will not allow them to fail… Who could resist buying insurance from a firm the government will not allow to fail?
Benjamin R. Freed at the DCist writes about a food truck that is going out of business because of proposed regulations:
Another D.C. food truck is leaving the road over the District government’s proposed regulations over the growing industry. Cori Bryant, the owner of the Pinup Panini sandwich truck, announced that today would be her last day serving pressed sandwiches out of the window of her light blue truck painted with the image of a 1940s-style pinup girl.
“The new regs are to much for this little startup,” Bryant wrote from her truck’s Twitter account this morning. And after serving today’s lunch crowd in Chinatown, Pinup Panini packed it up for good.
John K. Ross from Reason.com has recently reported about the egregious situation of corruption inside the Boston Taxi system. The taxi situation in Boston is basically a cartel; Boston arbitrarily limits the supply of taxis through a medallion system, price controls and by forbidding free-market competition for transportation.
According to Harvard economist Edward Glaeser, writing in the Boston Globe:
The purpose of taxi regulation is simply to protect passengers against being fleeced by unscrupulous cabbies, and to keep passengers, bystanders, and the environment safe. Yet the system instead has evolved mainly to enrich the holders of government-issued taxi medallions, even as taxi drivers struggle to earn a living and passengers pay some of the highest rates in the country.
Currently, officials have determined that “public convenience and necessity” dictates that there should be only 1,825 cab medallions in Boston, though there are 6,000 licensed cab drivers jostling for the opportunity to rent a car for 12 and 24-hour shifts. According to the Globe, those medallions can fetch $600,000.
Tad DeHaven from the Cato Institute’s initiative Downsizing Government has recently written the following article, about the Small Business Administration (SBA) and a recent investigative report by the Dayton Daily News that challenges the false notion that the SBA is a government agency that “helps” small business.
As the reporters explain, the SBA’s main job is to back loans issued by private lenders to small businesses that couldn’t get financing on market terms. The result is that taxpayers end up holding the bag when these naturally riskier loans go bad. And quite a few go bad as this Cato essay on the Small Business Administration explains.
Franchises are major consumers of SBA loans, according to the Daily News analysis — and sub sandwich franchises top the list. Subway and Quiznos franchises dominated the list of businesses borrowing the government guaranteed loans. Nationwide, the 50 franchises that cost the SBA the most totaled more than $411 million in discharged loans.
The inconvenient truth is that from the SBA’s inception it has existed for politicians to show that they “care” about small businesses. For politicians who support economic policies that are destructive to businesses small and large, demonstrating support for the SBA allows them to pretend otherwise.
Tim Carney at the Washington Examiner writes about new regulations being proposed in DC that would severely restrict the ability of food trucks to serve their customers in the city. Why the new rules? Cronyism. The restaurant industry doesn’t like the competition and is pushing hard to raise these barriers to entry.
D.C.’s restaurant lobbyists, along with many local politicians and bureaucrats, seem to think the government’s job is to save the delis and diners, bistros and brasseries from the scourge of falafel trucks, barbecue buses and weenie wagons.
Most of downtown D.C., according to the Food Truck Association of Metropolitan Washington, would be off-limits to food trucks under new regulations proposed by the Department of Consumer and Regulatory Affairs.
Christopher Palmeri reports that online gaming operators may lose to unfavorable state regulations - regulations that support existing casinos.
Zynga Inc. (ZNGA), the leader in social gaming, is running into obstacles in its effort to offer real- money gambling, as states such as New Jersey legalize Internet betting with conditions favoring existing casinos…
“I can’t tell you what games will be allowed or what the tax rates are going to be,” Bronson said. “But I can guarantee in all the states, it’s the existing stakeholders that will have their way.”