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Federal Regulations: Are American Businesses Unduly Burdened?

Jupiterimages/Thinkstock(WASHINGTON) -- Whether it’s in a Republican jobs agenda, a presidential executive order or a think tank report, some government regulations have been targeted as unnecessary burdens.  And at a time when job creation is the number one goal of most lawmakers, decreasing businesses’ regulatory burden is one way politicians -- particularly Republicans -- are looking to inspire private businesses to create more jobs.

But despite cries that American businesses are over-regulated and over-burdened, the United States still ranks as one of the best countries to start a business.  Worldwide, only Singapore, Hong Kong, New Zealand, and the United Kingdom have a more business friendly environment, according to the 2010 International Finance Corporation and World Bank “Doing Business” report.

“When you see how the U.S. performs, it still is in the top five economies, so it is kind of difficult to do better than the U.S.,” said Jean Michel Lobet, a private sector development specialist at the World Bank who works on the Doing Business report.  An updated version of the report will be released in mid-October.

Lobet said regulations in this country are “adequate,” “relatively streamlined” and provide the “right balance.”  Compared to other countries, the rules around starting a business are simple enough that it takes on average just six days to create a business in America.  In Canada and China, the United States’ two largest trading partners in July, it takes five and 38 days, respectively.

Despite overall good rankings worldwide, regulations still pack a costly punch for American businesses, although the exact price tag for federal regulations is highly disputed.

One area where the United States has “a lot of room to improve” is in construction permits, Lobet said.  The report found that 19 procedures are necessary to build a warehouse and they take 40 days to complete, pushing the U.S. down to number 27 in the world rankings.

According to a Small Business Administration report, all federal regulations combined cost American businesses about $1.75 trillion in 2008, or $8,000 per employee.  More than $5,000 of those costs per employee stem from economic regulations, while more than $1,500 come from environmental rules, the report notes.  These findings have been disputed because some economists claim they are based on incomplete and out-of-date data.

“Regulations are costly.  That’s always true.  And that makes it more difficult to hire people and to conduct your business,” said Paul Schultz, the director of the Center for the Study of Financial Regulation at Notre Dame University’s Mendoza School of Business.

During Obama’s first two years in office, 555 new “significant” regulations, or ones that have a cost or benefit of at least $100 million in a year, have been enacted, according to the Office of Management and Budget.  Over the eight years that former president George W. Bush was in office, about 2,380 regulations were enacted, an average of 595 every two years.

Copyright 2011 ABC News Radio

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