IJ’s New City Studies: Want to Create Jobs? Remove Red Tape.

November 23, 2010

By Dana Berliner

Let’s face it: American government at every level works diligently to stop entrepreneurs from ever getting their small businesses off the ground. Sure, government officials claim they support entrepreneurship. But in reality, they often just support a few hand-picked or politically connected businesses, granting virtual monopolies to favored businesses while shutting out newcomers. They do not support true freedom or entrepreneurship.

Since our founding in 1991, the Institute for Justice has litigated to free would-be entrepreneurs from arbitrary and abusive government action. In that span, we have represented hairbraiders, casket sellers, computer repair techs, book peddlers, florists, vacuum vendors, interior designers, bagel and doughnut shop owners, eyebrow threaders, taxi drivers, limo drivers, van drivers, tour guides, people who file horses’ teeth and even a person who massages horses for a living.

Watching the alarming growth of regulation and red tape imposed on small businesses, we recognized that even more needs to be done to protect the rights of small business-people. IJ launched a nationwide campaign to promote economic liberty, which, of course, includes more litigation. But we also thought it was vital to expose how government barriers affect individual entrepreneurs throughout the country. And so, thanks to a grant from the Diehl Family Foundation, the Institute for Justice spent the past year conducting studies identifying barriers to entrepreneurship in eight cities around the nation—Chicago, Houston, Los Angeles, Miami, Milwaukee, Newark, Philadelphia and Washington, D.C.

The studies found entrepreneurs who are sources of boundless energy, bursting with ideas for new businesses and the determination to put their plans into action. These people act as engines for job creation, economic growth, and new products and services. Unfortunately, all too often, their pursuit of an honest living is burdened or banned by big government. These are individuals like Laura Sue Mosier, who transformed an historic building in Milwaukee into a bed and breakfast only to be socked with more than $100,000 in extra operating expenses due to government mandates, and Jim Purtee, who created a vibrant new market for inflatable advertising in Houston, Texas, until the city rewarded him by banning such ads altogether.

Cities and states throughout the country hamper entrepreneurship and job creation at virtually every turn, burying them in mounds of paperwork; lengthy, expensive and arbitrary permitting processes; pointless educational requirements for occupations; or even just outright bans.

In every city we studied, overwhelming regulations destroyed or crippled would-be businesses at a time when they are most needed. For example, to operate a used bookstore in Los Angeles, the government demands that the owner get a permit from the police; record the personal information of everyone who brings in books for exchange or resale, including their names, addresses and book titles; and make this information available to the police. In some cases, the bookstore owner even has to thumbprint patrons who bring in books and file daily reports with the police. In Washington, D.C., to give sightseeing tours for compensation, the city requires you to first get a government-issued license. Similar requirements exist in Philadelphia and elsewhere. So, as tour guides pass the National Archives, which houses originals of the Constitution and the Bill of Rights, they don’t have the freedom to describe those charters of freedom without first getting the government’s permission.

Time and again, these reports document how local bureaucrats believe they should dictate every aspect of a person’s small business. Government officials want to choose who can go into which business, where, what the business should look like and what signs will be put in the windows. And if that means that businesses fail, or never open, or can operate only illegally, or waste all their money trying to get permits so they have nothing left for actual operations, that’s just too bad. This attitude would be bad enough in prosperous times, but in a period of financial strain and high unemployment, it’s also incredibly foolish.

The studies were released in October and have already received significant media coverage, including an editorial from The Wall Street Journal, an op-ed I co-authored with Chip Mellor for USA Today online, and op-eds and news pieces in the cities studied.

In the coming months, we will use these studies as a source for new litigation, to advance the cause of entrepreneurs nationwide and to remove some of the barriers that crush entrepreneurs struggling to start or grow their businesses.

Dana Berliner is an IJ senior attorney.

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