Thursday, July 19, 2018

The "nanny state" and small business

Having recently formed a company to act as an umbrella for my books and book-related dealings, I was struck by an article in Ricochet about the issue of small businesses and over-zealous government regulation.

Kaitlyn (not her real name) just moved here from Georgia. Her husband is an auto mechanic. “He can fix anything with four wheels! Well, except my car – it runs like crap!” She went on at some length about how good he was at fixing things. His plan was to start his own shop once they moved here. They moved into a double-wide trailer that had a nice pole barn out back, which he planned to outfit with electric and a high-end air compressor, maybe even a grease pit, and start his own business.

He spent almost a year working on permits, licenses, inspections, and so on. He spoke to people from the county, city, state, feds, and the EPA. He talked to attorneys, accountants, and consultants to help wade through all the red tape. After about a year, he realized that the start-up costs were more than he was willing to gamble on the eventual success of a business that did not yet exist, so he got a job with the city, maintaining their trucks and mowing equipment. It doesn’t pay very well, but it has good benefits. It’s not a bad job, she says. Nothing to complain about. Everything is ok.

Kaitlyn did a great job on my hair, was very pleasant and personable, and is clearly very intelligent. She said that a few miles from their house, a barber recently retired. She considered buying his shop. She’s always dreamed of owning her own business. She said that’s the whole reason she went to cosmetology school. I said that sounded great – the shop is already set up, it has a large group of established customers, and she could expand from there.

She said that she spent several months looking into it, but she would need permits, licenses, inspections, and so on. I pointed out that it has been a barber’s shop for years, so the inspections, permits, and so on would already be done. She said that it would be a new business, and she would have to pay for all that to be done over again. She spoke with attorneys, accountants, and consultants to help wade through all the red tape – some of the same individuals that her husband had just consulted. She soon realized that the start-up costs were more than she was willing to gamble, so she got a job with a chain. The pay is not very good, and the benefits are lousy. One reason her husband took a government job was for the health insurance for their family. But she doesn’t mind working for Sport Clips – it’s a decent job, she says. Nothing to complain about. Everything is ok.

So how does this story end?

Well, in my view, it’s already ended. This young couple from a modest background has all the potential in the world. They’re both ambitious, intelligent, and very good at a valuable skill. They’re devoted to their family, their dreams, and each other. They dream of better things and are willing to gamble, willing to work hard today for a better tomorrow, and willing to take on the additional responsibilities that come with owning a business. They’re savvy enough with modern government to hire attorneys and consultants to help with the red tape.

And even they can’t open a new business, to do something they already know how to do.

There's more at the link.

This is a critical shortcoming from an overall economic perspective.  There are many articles and studies underlining how important small businesses are to the US economy.  I won't repeat them all here - a simple Internet search will produce more than you can easily digest.

Contrast the problems highlighted in that article to Miss D.'s and my experiences in forming a startup company here in Texas.  It seems to us that this state bends over backwards to make it easy, simple, cheap and convenient to set up your own business.  I was frankly amazed at how little red tape there was, not to mention the eagerness of more than one department of state government to help us understand what was required, and assist us to navigate the laws, regulations and rules governing small businesses in Texas.  It's like they actually want us to succeed, rather than put obstacles in our way!  Even registering vehicles, getting new drivers' licenses, and so on, was easier and simpler here than we'd encountered in other states, with a minimum of bureaucratic formalities.

Of course, that's why Texas is a top destination for internal immigrants in the USA right now.  It's got its economic head screwed on right.

Riding the rising tide of energy prices—and the job growth that goes with it—Texas claims the top spot in CNBC’s 2018 America’s Top States for Business rankings.

This is familiar territory for the Lone Star State, which becomes the first four-time winner in our annual study, now in its 12th year.

. . .

Texas has added more than 350,000 jobs in the past year, with the largest increase in the energy sector. Put another way, 1 in 7 jobs created in the United States in the past year was created in Texas.

. . .

But Texas is no one-trick pony, notching top 10 finishes not just in Economy but in five of our 10 categories of competitiveness, including Workforce (No. 7), Infrastructure (No. 1), Technology and Innovation (No. 9) and Access to Capital (No. 3). The state finishes with 1,651 out of 2,500 possible points.

. . .

Since we introduced our rankings in 2007, Texas has never finished outside the top five overall, always following the same basic formula. It started under former Gov. Rick Perry, who is now U.S. Secretary of Energy, and has continued under his fellow Republican successor, Gov. Greg Abbott. The state prides itself on business-friendly regulations, smart spending and low taxes. Texas levies no individual income tax and no corporate tax.

Again, more at the link.

It's nice to live in a state that's falling over itself to help us succeed.  Very refreshing!



Paul, Dammit! said...

Florida, too, is... not bad. Not as good as TX, from what I have seen. My commercial fishing/scientific support services company in MA was a living hell of permitting, even 20 years ago. Though it sold with my boat, the business collapsed on the new owner within months. Too many hoops to jump through.

Now that I'm a FL resident, I'm toying with starting a boatbuilding company. Hurdles to entry as a boatbuilder are industry-made protectionism, not state made. The state of FL makes great money as a boating state, they know a golden goose from a dump duck. Having to kiss hands and shake babies in order to get the Mandate of Heaven from competitors rankles considerably.

Ray - SoCal said...

The book 3 felony’s a day documents the craziness...

Coyoteblog is a great read. About the travails of a camp ground services owner.

Glenda T Goode said...

Personal freedom seems to me to be the common denominator of the states that encourage businesses. People who assume personal responsibility for their lives do not require a heavy burdensome government to manage them. As a result the bureaucracy resembles the people and is welcoming to business.

States like New York where there is huge dependency on the state with the government mitigating every and all disputes along with strict regulations leaves an environment far better suited to lawyers, engineers and accountants than for citizens.

Freedom is the defining characteristic of great places to live and work.

Sherm said...

I was working at a tire shop in California once when a guy showed up from the state to be sure the air compressor license was up to date. Air compressor license? It's not like he inspected anything to make sure it was in safe operating order, or checked the electrical hookup, or even made sure nobody could trip over the hoses. Nope, count the compressors (1), so the fee is correct. Oh, by the way, do you know of any other compressors in the neighborhood?

Nuke Road Warrior said...

Most "professional" licensing schemes are designed as state/local revenue enhancement and as a way to control competition for the established practitioners. This is said by a retired Licensed Professional Engineer. Yes a PE serves to screen out the wannabes, but doesn't really guarantee competence. The exams measure test taking ability and ability to solve problems from college classes. Almost nothing on judgement, or the ability to solve real world problems without knowing all the relevant variables. I really can't imagine why a barber or auto mechanic needs a state license. Professional certification, perhaps, but a state license?


Not very related, but the best place I could find w/o scrolling down too far, is this article about a massive debt default in China.

Gorges Smythe said...

When I was self-employed as a small sawmill owner and Christmas tree grower, the state set up a new program where all sawmills had to be inspected for drainage into streams. I told them that I was a one-man operation, produced almost no accumulation of sawdust and was in the middle of a meadow on top of a hill. None-the-less, I had to pay them $900 to perform an inspection and tell me exactly what I told them. At the time, there 17 licenses, permits and taxes that I either had to pay or find some legal way to avoid. When I gave it up, they were trying to get two more.

Dave said...

I had an argument with a friend of mine along this vein.

Now I don't hate this person, but it was like there was this conceptual block she simply couldn't get around. She couldn't admit how regulations could be misused or abused to benefit big business at the expense of smaller ones, even though she complained about 'big corporations crushing the little guy'.

I swear, I'd have had better luck arguing with a Flat Earther. *sigh*



Very familiar with this mental blockage syndrome. At the risk of shameless self-promotion...

Teflon Intellects

TGIF everyone.