Allison McCarty is a senior majoring in economics and political science at Pepperdine University and is Vice President of Pepperdine College Libertarians.
Teach a man to fish, and he will eat for a lifetime. But don’t tell a man to open a restaurant— or he will be eaten alive by self-serving politicians and bureaucrats.
A series of studies by the Institute for Justice, “The Power of One Entrepreneur,” describes how economies benefit when entrepreneurs are free to pursue their dreams. The series also documents political roadblocks that bring entrepreneurship to a grinding halt, thus slowing the recovery of the U.S. economy.
One study highlights the story of Seattle-area business owner Dennis Ballen. The founder of Blazing Bagels, Ballen started the business after being laid off from his job in office supply sales. Starting with a single homemade cart, Dennis developed a thriving bagel shop and deli with three locations and 50 employees. He credits his success to “work, work, work all the time.” Deliveries begin at 4:30 a.m., and Dennis rarely, if ever, takes a day off.
During the recession, Blazing Bagels expanded by 27 percent— providing vital employment and delicious bagels for the community of Richmond, Wash. According to the U.S. Small Business Association, small business owners represent 90 percent of employers and are responsible for 60 to 80 percent of annual net job growth. With unemployment rates hovering around 10 percent, we should encourage— not encumber— the growth of small businesses.
Too often, politicians and bureaucrats do the exact opposite. Entrepreneurship is never easy, but Ballen’s job is further complicated by heavy tax burdens and a complex web of regulations.
Unemployment insurance and workers’ compensation taxes substantially increase the cost of doing business. In Washington, businesses also face the state’s business and occupation tax— which is one of the highest taxes in the nation. Business owners must pay taxes on their gross income, even if they are losing money.
There are the taxes, and then there are the tax penalties. “I missed the deadline [for the unemployment insurance tax] by one day, [and] my quarterly unemployment insurance payment jumped from $850 to $4,500,” Dennis explained. Instead of hiring new employees and expanding his business, Dennis continues to pay off angry bureaucrats.
Excessive regulation is also costly for small businesses. Blazing Bagels must comply with guidelines from the Department of Labor and Industries, the Department of Licensing, the Department of Health, the King County Department of Health, the Department of Agriculture, the Department of Ecology, the state Human Rights Commission and the Department of Revenue.
The Department of Labor and Industries alone issues thousands of pages of regulation. Failing to comply with any given regulation could cost a small business hundreds, even thousands, of dollars.
Regulations may be intended to rein in “Big Business,” but they disproportionately harm everyday entrepreneurs in practice. Large corporations can afford to research and adapt to complex regulations. Small businesses get shafted, and must spend 45 percent more per employee to comply with federal regulation.
Sometimes conflicting or nonsensical regulations make compliance impossible. For example, the Department of Labor and Industries requires that workers be well-hydrated, but other regulatory agencies prohibit drinking water near food preparation areas.
Irrational government interference continually infringes upon Ballen’s right to earn an honest living. Thus far, Blazing Bagels has survived, but other small businesses are not so lucky. Many would-be entrepreneurs decide that the United States is no longer a land of opportunity and surrender their dreams.
To paraphrase Langston Hughes, what happens when an entrepreneur’s dream is deferred? The businessman undoubtedly loses out— and so does the overall economy. We cannot measure the ghosts of economic growth, but we know our economy is haunted by limited economic opportunity, high unemployment and sluggish growth rates.
Politicians seek a metaphorical job creation tree in costly corporate bailouts and stimulus packages. CNNMoney.com estimates that the federal government alone has committed more than $11 trillion to programs designed to revive the economy, but the only clear result is a skyrocketing national debt.
The job creation tree does not grow in Washington. Economies flourish when everyday entrepreneurs like Dennis can freely pursue their self-interest in a manner that benefits their communities. “The Power of One Entrepreneur” suggests that the best— and perhaps the only— way the government can aid economic recovery is to “get out of the way.”