Small-business leader Kerrigan says Obama rules stifle innovation

How are the Obama administration's regulatory policies affecting innovation and competitiveness within the small-business sector? During today's OnPoint, Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, discusses a new initiative challenging the effectiveness of the administration's regulations. She explains why she believes they have stymied economic growth and discusses the impact of new energy and environmental rules on innovation.


Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council. Karen, thank you for coming on the show.

Karen Kerrigan: My pleasure.

Monica Trauzzi: Karen, you're behind a new initiative called the Center for Regulatory Solutions, which are launching ahead of President Obama's State of the Union address, and you're making the case for why you believe the regulations coming out of this administration are out of touch. Why do you think the current regulations are stifling innovation?

Karen Kerrigan: I think first of all, just the sheer number of regulations that are coming out of the agencies. Over 3500 were finalized last year, another 4000 are in the pipeline, but also the type of regulations. I mean, regulations that are impacting the economy on an economy-wide basis in the financial space, in the health care space, certainly in the energy space. And all of these impact the cost for doing business, if you're a small business, the competitiveness, as well as we feel the strength of the economic recovery. We're just not getting back there yet. And this is really weighing down on small business owners and entrepreneurs.

Monica Trauzzi: But there are so many factors and elements weighing into the way that the economy looks today, so why do you think the regulatory element is so important?

Karen Kerrigan: I think the uncertainty. Well, two reasons. One, the uncertainty, and in terms of businesses' willingness and confidence to invest in their business. Certainly there's regulations in the financial sector, for example, that are impacting the cost and availability of capital money that small businesses need to grow and to operate their businesses. And then there's just the ability of small businesses to deal from a compliance perspective. A lot more time, energy, resources, money is going into regulatory compliance. And so that's less money that they have to invest in their businesses, to create more jobs, and really to compete in this very tough economy right now.

Monica Trauzzi: So specifically on energy and environment regulations, one of the most controversial at the moment are EPA's regulations of power plants. We've seen the new source standard, we're waiting on the existing power plant standard. How do these standards affect small businesses?

Karen Kerrigan: Well, I think in a couple of ways. Number one, if there is going to be, if the regulations pretty much outlaw, if you will, the new coal plants being constructed, I mean this is going to impact the cost of electricity for business owners and entrepreneurs, and for many business, particularly energy-intensive businesses, energy costs are the highest. So that is going to have a direct impact on businesses in terms of costs. And then of course you have businesses in the energy sector, you know, the energy sector is dominated by small businesses, oil and gas for example, 90 percent of the businesses that actually do business in that sector are small businesses. So many small businesses are dependent on a vibrant coal industry, for example. So construction-wise, the businesses that are in these communities, all of them will be impacted by these regulations. But by and large, clearly, I think the cost of electricity is going to impact most small businesses.

Monica Trauzzi: And you don't think these regulations will push industry to innovation towards carbon capture and storage technology? I mean, that's one big argument that once these regulations are in place they'll have no choice but to move in that direction.

Karen Kerrigan: Well, I think again, I think the industry itself, even minus the regulation, and entrepreneurs and innovators in this industry are doing a lot to innovate and to come up with technological innovations. And I think the argument can be made that if you do have this uncertainty, that if you are driving capital out of the country by more regulation, including on power plants, that there's less capital to go into innovation. So from our perspective, it's a negative.

Monica Trauzzi: We had representatives from the American Sustainable Business Council and Business for Innovative Climate and Energy Policy on the show recently, and they think that regulatory change can be a boost for competitiveness, that it can foster innovation, and that it can also level the playing field. And they specifically said on EPA's power plant regulations that it could be a boon to small businesses. Why such a difference between what they're saying and what you're saying?

Karen Kerrigan: Well, obviously they're an association that's made up of businesses that do this type of business, right? That are developing the type of technological innovation. So they might see the regulations in a way that helps their particular industry. But I think if you look at the broad array of businesses and small businesses and the impact more broadly on the business community in terms of the cost of energy, we still believe it's going to be a negative. And we do believe that innovation, technological advancement, can happen without these burdensome and intrusive type of regulations.

Monica Trauzzi: One of the reasons why we're seeing so many regulations coming on line right now is because Congress simply isn't acting on policy. Are you pushing lawmakers to move policy and are there specific policy proposals that you support?

Karen Kerrigan: Well, obviously, not that much is coming out of Congress because of the partisanship in Congress right now. We think that there can be a consensus, for example, on regulatory reform, regulatory relief across the aisle if it's done more on a piecemeal type of basis. But we don't think that the regulators should be regulating to the degree that they are, to the extent, the number of regulations and of course the broad array of regulations, because they're not as accountable as Congress is. So we would like to see Congress having more accountability when it comes to the regulatory process. That is, for example, signing off on some of the major rules and the regulations, and we would like to see some of the reforms that Congress is considering on the regulatory front be enacted.

Monica Trauzzi: Do you think the small business community has a voice in Washington in front of the Obama administration? Are they listening?

Karen Kerrigan: Well, I think on some issues they are. Certainly we've been to the White House and met with some of the agencies on some of the key initiatives they're working on, immigration reform, healthcare reform is another one. I think they're listening sometimes but they're not acting on what they want, and that is a big concern. And I think particularly in the regulatory front, they may be going through the motions in terms of meeting with stakeholders, meeting with small business owners, listening to them, but not really taking their concerns into full consideration when they are pushing through on the final rules. So that's what needs to happen I think more in the regulatory process is the voice of small business really does need to be listened to on a more serious basis.

Monica Trauzzi: All right, Karen, we'll end it right now. Thank you so much for coming on the show.

Karen Kerrigan: Thank you so much.

Monica Trauzzi: And thanks for watching, we'll see you back here tomorrow.

[End of Audio]



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