Howard Stern - The Envy of Every Small Business Owner

“We’re being regulated to death!” So said shock jock Howard Stern outside of WXRK radio in New York, following his announcement in October 2004 that he would be leaving the heavily-regulated no-cost radio industry and moving to the unregulated “pay for service” satellite radio medium. With that statement, Stern echoed the sentiments of millions of small business owners nationwide, who are similarly being crushed under the burden of over-regulation..

How bad is it? For businesses with fewer than 20 employees, the federal government’s heavy hand costs them around $7,700 per employee per year, according to the Small Business Administration. State and local regulations only add to that burden. For an average-sized member of the National Federation of Independent Business (five employees) this means an additional cost of doing business of nearly $40,000 per year. And that burden is only increasing.

It’s no wonder that Stern is leaving radio. Like every other regulatory scheme, the penalties for rule breaking are being ratcheted-up. But unlike Stern, when regulations are tightened for your average small business owner, they simply can’t make a jump to an unregulated industry. For most, when the burden becomes too high, they have to close up shop. It’s only their larger brethren who are able to shift their operations overseas (“offshoring” didn’t just happen in the last four years – it’s the result of, among other things, thirty-plus years of intense industry regulation).

Stern’s switch comes at a strategic time, too. While he finds the proposed penalty scheme much too harsh for him to be able to effectively (let alone happily) work, it will undoubtedly become even more difficult in the coming years for those who remain on the public airwaves. At some point, civil penalties will not be enough for some who want to see tight control over content, and they will suggest appending criminal penalties for those who wantonly break the rules.

This is how it has gone for countless other industries in the United States. Some segment of the population convinces a legislator that a law is necessary to inhibit some form of behavior, that law produces a complex regulation, and in subsequent years the law is tightened and tightened as that lawmaker is under pressure to do something to satisfy the question, “what have you done for me lately?”

In many cases, the initial impetus behind the regulation is a not a bad one. Everyone wants clean water, for instance, and in the early 1970s it made perfect sense for the federal government to severely restrict the water pollution. But nobody would have foreseen the possibility that a small business owner would eventually go to prison for putting dry sand on dry sand, as happened to Ocie Mills in Florida. That happened because the Clean Water Act’s scope was gradually expanded, and its prohibitions tightened, so that eventually a much wider net was cast.

This process is known in some circles as “overcriminalization,” and it presents yet another threat to well-meaning citizens who inadvertently run afoul of the law. With the Congressional Research Service being unable to even quantify the current number of federal crimes, according to the Heritage Foundation’s Paul Rosenzweig, this threat takes on an even scarier dimension. How can any small business owner possibly be aware of the multitude of criminal laws impacting them when the federal government doesn’t even know?

Businessman David McNab found this out the hard way when enviro cops swarmed his boat bringing in his shipment of lobster tails from Honduras, acting on an anonymous tip that the crustaceans were undersized. This was in violation of, among other things, the “Lacey Act”, which holds that it is a crime to import seafood caught in violation of any foreign law. The problem is that only 3% of McNab’s shipment was undersized, so the federal agents additionally claimed that McNab should have had his shipment packed in cardboard boxes, instead of clear plastic bags. Yes, that’s right – cardboard boxes that you can’t see into were legal, but clear plastic bags that you could see into were criminal. McNab was sentenced in 2001 to eight years in prison.

Stern’s absolutely right: small businesses are being regulated to death. The pressure on him is the same pressure faced by small business owners nationwide. But he is a giant in his business, talented enough to be able to take advantage of the crossroads at which his industry finds itself. He can do the extraordinary and be a pioneer in an arena in which he’ll make the rules. This makes him the envy of every entrepreneur in America. In light of his decision, and in light of the economic soul-searching we are doing this election year, the time is ripe for us to seriously address the problems of overregulation and overcriminalization.