Executive Orders and Small Business – Trump’s JanuOrder
Like an “Axe-Swinging Viking” in a video game, Trump is signing executive orders like a banshee. Faster than any other President in the history of our country, Trump is re-writing many laws and laying out his agenda. These Executive Orders are impacting your business, and I will outline the good, the bad, and the indifferent.
The best thing one can say about these executive orders is that he is making good on his campaign promises. The worst is that he is being reckless, his ideas are foolhardy, and he is a danger to us all. Either way, Trump’s executive orders impact small business owners.
To be fair, I had heard about Executive Orders before Trump, and they always seemed to be a bit unconstitutional. This week, I took to the internet to study this thing called the “Executive Order” and figure out how it worked.
In this article, I am not going to comment on my opinions of good vs. evil, nor am I going to give my political perspective on how Executive Orders work. Although I found it slightly partisan, here is a good explanation of the workings and the history of executive orders.
Now that part is out of the way, here I examine Trumps Executive Orders and opine on The Good, The Bad, and The Indifferent for small businesses.
- Healthcare (Executive Order 13765). Health insurance premiums are crippling small businesses. Unemployment is low (generally a good thing), but low unemployment creates a tight job market. Businesses are fighting for talent, and one of the weapons is health insurance as an employee benefit. Increasingly, Obamacare is proving to be a costly solution for small business. Premiums for health coverage are rising at 10-30% rates. This means that healthcare costs in the next few years will probably rise from 3% to 6% of a company’s overall expenses. In practical terms, for most businesses a doubling of health care costs result in a 30% reduction operating profits. Said another way, increasing healthcare costs are an additional 30% income tax on a small business’ profits. Healthcare in this country must change or small businesses will no longer be able to afford healthcare coverage for their workers.
- Regulatory Freeze. Regulation without enforcement is simply administration and bureaucracy. The increased regulatory compliance requirements (and increased associated liability) is impeding business formation. Today, small businesses are being created at the lowest level in 60 years (Insert Brookings Institute survey here). Less regulation could mean lower barriers to entry, increasing competition, and increasing innovation. It could also mean lower government spending and a balanced budget. Lower regulation could mean simplification of an ever-expanding prism of overly-complex laws that most business owners are incapable of complying with. Finally, less regulatory complexity could mean more law enforcement focus on white collar crime. (Caveat: If the regulatory freeze just lets large corporations off the hook for simple regulatory violations, this will be bad for small business…and everyone else.)
- Hiring Freeze – Trump’s plan is to reduce the overall size of government. The United States bureaucratic architecture needs an overhaul circa 1982. Less but more efficient government would mean a lower Federal Deficit. Lowering the deficit keeps the US dollar stable (maybe a little stronger). Less government workers means lower long-term government liabilities for pensions, vacation pay, etc. Finally, less government would provide the job market with talented former government workers to produce something valuable in the economy rather than being a part of the administration of the state. For more dialogue and discussion on this topic read Adam Smith’s “Wealth of Nations.” The passage around productive vs. non-productive workers is particularly relevant.
- Construction of the Dakota Access Pipeline – I am ignoring any of the political or social ramifications of this pipeline that is stretching across Native American lands and waterways. The positive part of this Executive Order is that Trump asked the Army Corps of Engineers to work more efficiently. Anything that gets government agencies working more efficiently helps small business. The retardation of the small business paperwork process at the Local, State and Federal level have been an increasing drag (read: hidden tax) on small businesses.
- Expediting Environmental Reviews for High Priority Infrastructure Projects – Once again, this executive order is making the government more efficient and putting the pressures of deadlines and timelines. Holding government accountable to support communities and business is positive for business. Additionally, American infrastructure needs an upgrade, and now Governors can ask the White House directly for assistance in getting them done quickly. As we saw with the Highway Act of 1956, enhanced infrastructure provided opportunity to trade, innovate, and compete across borders.
- Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing– This executive order requires the Secretary of Commerce to review all applications for domestic manufacturing within 60 days. This is a significant improvement and gives business owners the safety and security to take the risk of manufacturing domestically. Environmentalists may be concerned about this executive order, but there are numerous of strict environmental laws and regulations that must still be followed. This is an immediate cut in the unnecessary paperwork and will spur manufacturing in this country. Not to jump ahead, but this executive order will be wasted if Trump remains on a protectionist trade policy, because we may get manufacturing, but we will have no one to sell our products to.
- National School Choice Week – Regardless of whether you think school choice is good or bad, this is an extension of President Obama’s affinity for school choice. It is a direct rebuke to the teacher’s union. Without getting too political, the teacher’s union influence in our schools has been largely ineffective at increasing test scores or creating a workforce prepared for life in 2017. Small businesses will benefit from an increase in available skilled labor. Any additional dialogue about education, college, school choice, vouchers, private schools, parochial schools, trade schools, government funded college assistance programs, etc. will hopefully improve our antiquated education system. As of 2015, the US ranks 7th in the world in literacy. Finland is kicking our ass (they are #1), and they live in the snow 10 months of the year. This performance is pitiful and doing damage. We must do better. The burden of education and training is one where small business needs government support.
- Executive Order: Reducing Regulation and Controlling Regulatory Costs – The so called “one in two out” is beautiful in its elegance. It is a concept embraced by Stoicism, Buddhism, Christianity, Muslims, Minimalists, Space Planners, time management gurus, architects and industrial designers, and just about any other ism, ers, or ists you can think of. By requiring the government to solve problems by reduction rather than addition, government will achieve simple solutions, less overly-complicated regulation, and most importantly, the laws we have will be able to be followed and enforced. Equal competition is a critical guaranty that provides the safety and confidence business owners need to take risks. If business owners believe the system is rigged to favor one group or another, they will not participate (or worse, they will work around the system). This executive order risks losing some of the necessary regulation, but with a replacement of “one in, two out”, I believe lawmakers will be forced to simplify and create cleaner, more concise, and easier to follow regulations promoting fairness and competition.
- Executive Order 13767: Border Security and Immigration Enforcement Improvements – This is bad for business. Apparently, Trump is going to hire all the bureaucrats as wall builders and Border Patrol Agents. This executive order begins the immediate building of an order wall with Mexico and the hiring of 5,000 additional border patrol agents. This is bad for business. Mexico is a major trading partner with the US, and Mexico is the single largest supplier of unskilled, cheap labor. There is no other way to put it: This is bad for business.
- Executive Order 13768: Enhancing Public Safety in the Interior of the United States – Another devastating executive order for small business purports to increase safety in the Country. This order cuts Federal funding to ‘sanctuary sites” where illegal aliens are not being aggressively deported. Construction, manufacturing, service businesses, farming, fast food, retail, and a myriad of other industries are going to be negatively affected.
- Executive Order: Protecting the Nation From Foreign Terrorist Entry Into The United States – Another terrible idea. Immediate reprisals are already doing damage to our economy. Trade and human travel are linked. Limits on free travel are insulting, un-American, and not well thought-out. Offending people and making them feel unsafe is a sure way to hurt the economy.
Could Go Either Way:
- Withdrawal from the Trans-Pacific Partnership– I could see this as a good thing or a bad thing. If Trump’s withdrawal from these negotiations was a political negotiating tactic, it might work. The pacific is a huge trading region with the US, but small business owners need tighter enforcement of trade violations, intellectual property theft, and global financial crimes. Business owners need the safety to know that their inventions will be protected internationally (not just domestically). However, using trade as the hammer seems to be a risky negotiation strategy. If Trump continues down a path of protectionism, trade will suffer. Protectionism does constructive damage to small business by limiting markets, increasing intellectual property theft, limiting production capabilities, significantly increasing the cost of raw materials, and choking international capital flows. Any actions that look like Smoot-Hawley Tarrif of 1930 will crush the US economy. (Remember the Great Depression? Nope. None of us were alive for it…Study it, because Smoot Hawley reduced exports from the US by 50%. Protectionist trade policy sounds good, but it does more harm to American workers than it helps. Protectionism does not work…and history has a way of repeating itself.)
- Construction of the Keystone Pipeline– First, this executive order just set an accelerated timeline (60 Days) plus fast-tracking procedural requirements for deciding on the Keystone Pipeline. Increased speed in the system is probably warranted for something as hotly debated as the Keystone Pipeline. Second, if there are significant safeguards in place to eliminate any environmental damage (which many will argue are missing), construction of the keystone pipeline will likely create jobs. Finally, construction of the pipeline will have no significant positive or negative impact on gas prices (it will just take too long to have a measurable impact vs. today).
- National Security Presidential Memorandum 1: Rebuilding the U.S. Armed Forces– This could have the positive impact of increasing government accountability, but I am not sure there is a major impact to small business. That said, there is a significant amount of waste in government contracting for the military and any executive order that increases budgetary transparency and decreases graft benefits small business that wants to compete for those contracts.
- Ethics Commitments by Executive Branch Employees – This executive order imposes a lifetime ban on any administration officials lobbying foreign governments. In theory, limiting lobbying is good for small business who rarely has the means or political connections to lobby against foreign governments. However, sloppy drafting has left the door open for corruption. The ban only covers the activities of administration officials before they were appointed…not after. That probably needs a re-draft.
- Organization of the National Security Council and the Homeland Security Council – This Executive Order put Trump’s Chief Political Strategist on the National Security Council. It gives the impression of Crony Capitalism, but in practical terms, this Executive Order has little to no impact on small business.
- Plan to Defeat the Islamic State of Iraq and Syria– This Executive Order calls for the Secretary of Defense to develop a plan to defeat ISIS in the next 30 days. Generally, defeating a group of lawless pirates who just happen to live in the middle east (ISIS) is a good thing. However, this executive order probably has little impact on the small business community.