If You're Lucky

During the latter days of the Soviet Bloc, many people in Eastern Europe were only able to get badly needed necessities through the black market. The black market was often the only reliable source for functional electronics, properly fitting clothes, or agreeable food. In order to avoid punishment, many merchants needed to "stay under the radar" of the government watchdogs in order to carry on business.

Unfortunately, many businesses in modern America must also "stay under the radar" in order to remain in business. For the last ten years, government regulations of business have become so arcane, convoluted and illogical, that the only wise and cost effective strategy is to simply avoid attracting attention of any kind. Thousands of new regulations are promulgated every year, and compliance is becoming ever more difficult. The only thing that allows for any breathing room on the part of private industry is the fact that personnel and resources within the regulatory agencies are limited by budgetary constraints. Very rarely are regulations eased or removed, so the average entrepreneur must simply play the odds that he won't end up on the "to do" list of some government agent.

With the rapid increase in the promulgation of regulations in the last decade, agencies like the EPA, OSHA, the EEOC, and the IRS have been unable to come up with the staff to enforce all the new regulations. As a result, they have been unable to fully create the army of government agents they would love to let loose on the American businessman.

Just imagine a world where the IRS was able to conduct all of the audits that are allowed by law. Any place that an agent saw even the most minute potential for squeezing a few bucks out of a taxpayer would be subject to audit. IRS agents would stop by on a regular business and have a look at the books anytime the opportunity arose. There is very little legal protection keeping the IRS at bay. The burden of proof is largely on the side of the accused. We are protected by little more than the fact that they simply don't have enough time and money to cheat everyone out of a little (or a lot) of money. A similarly horrific fate would await us if other agencies had more resources as well.

In 1999, when OSHA suggested that they might apply their regulations to home offices, more than a few eyebrows were raised. OSHA said not to worry because they simply did not have enough resources to inspect even a small portion of all the home offices within OSHA's jurisdiction. More than likely, inspections would be based on random home audits. Of course, OSHA didn't mention that if someone at the agency happened not to like someone, they could ruin his business with impunity. The home office regulation was eventually repealed, but non-home businesses continue to turn a profit at the pleasure of OSHA officials. Once again, the entrepreneur's only comfort is the fact that the OSHA budget simply isn't large enough to destroy all the businesses they would like to.

The same can be applied to any other agency whether it is an issue of "equal employment opportunity" or environmental protection. The legal leverage that these agencies have is astounding. When prosecuting an "offender", if one violation doesn't stick, simply use another one that exists somewhere deep down in the annals of the Federal Register. After all, ignorance of the law is no excuse.

Creating new regulations don't really cost much money, but fortunately for Americans, actually enforcing those regulations costs a lot of money. Every year, some high ranking official from each of the agencies goes before the budget committee and begs for a lot of money. In recent years they have been getting a lot less than they have been asking for. This is the only check that prevents any unlucky entrepreneur from becoming a statistic in some Justice Department legal record. When money is tight, there is still the chance that a lot of people will be able to "stay under the radar." On the other hand, any increase in funding would allow these agencies to grow more tentacles and to extend their reach to more and more remote places in the American landscape.

It became apparent during the Reagan administration that once an agency is here, odds are vanishingly low that it will be gone any time soon. Reagan was committed to destroying the Department of Education and to hobbling the Environmental Protection Agency. He failed. Congress kept sending them money, and all the bureaucrats had to do was wait a few years until Reagan either lost interest or was out of office. A president can last four or eight years. It's easy for a permanent bureaucrat to wait a president out.

In the end, a potential entrepreneur's only protection from omnipresent regulatory meddling is the budget constraints of the various agencies. The entrepreneur can gamble that the odds are low that he will be fined, harassed, sued, or shut down. If the average entrepreneur knew that he was going to be checked up on every few days by a government agent, he would be mad to ever go into business in the first place. Indeed, to assure compliance with regulations, regular and frequent visits must be the norm. If regulatory agencies were actually able to enforce all of their laws, the economy would come to a virtual standstill. As economist Ludwig Von Mises has pointed out, the more an enterprise is regulated, the more time and resources it must devote toward legal compliance and away from profit seeking. Private enterprise would be reduced to an army of accountants and lawyers forever trying to understand the laws and to comply with them. This type of expense would simply price many entrepreneurs out of business.

Even though, luck may keep the government away, a lot of business owners are not always so lucky. Confiscated property, levied fines, and gargantuan legal costs are the fare for those who don't manage to stay under the government's radar. For the unlucky ones, legal protections are few, and the laws are many. Those who avoid prosecution have no one and nothing to thank except chance, and the fact that members of Congress like to spend taxpayer money on things other than the bureaucracy. Naturally, the agencies have been kicking and screaming that they are unable to properly enforce the law due to a lack of funding. Thank God. If the Soviet regulators had been able to "properly enforce the law" regarding the black market, most Eastern Europeans would have spent their days eating salt cod and using toilet paper with the softness of a pinecone. Since we can find no solace in the law, let us be glad for the existence of the happy coincidence that for bureaucrats, there's never quite enough money to go around.

November 30, 2000

Ryan McMaken is a graduate student in American politics at the University of Colorado. He edits the Western Mercury.