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Mentzer: The size of Swiss-cheese holes, and other regulations (column)

10:45 AM, May 8, 2013  |  Comments
Get out the calipers. The government regulates the size of the holes in Swiss cheese.
Get out the calipers. The government regulates the size of the holes in Swiss cheese.
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The government, I learned last week, regulates the size of the holes in Swiss cheese.

Classic bureaucratic overreach. Big government run amok.

Except it's not. It's actually a rule the state's dairy industry wants, and would fight if it were changed. The size of the holes in Swiss cheese is a measure of quality. If some subpar cheesemonger out there were selling a lousy product and slapping "Genuine Wisconsin Cheese" stickers on it, that would tend to harm the whole industry.

So it's a good regulation, something everyone benefits from. It's also a fine example of just how complex and thorny the question of what counts as an "unnecessary" regulation can turn out to be.

I talked to two people who are at work on trying to sort out the wheat from the chaff - the cheese from the hole? - in the state's massive book of regulations. Nancy Mistele, director of the state's Office of Business Development, explained the Swiss cheese example to me, and also a bunch of other examples of regulations that are no less labyrinthine but are much less justifiable. I spoke with Mistele and Joe Knilans, another director of the office, when they were in Wausau to speak at an event hosted by the Center-Right Coalition of Wausau and the Wisconsin Institute for Public Policy and Service.

Cutting red tape

Mistele and Knilans head up a task force that is collecting opinions from small business owners on burdensome regulations that need to be changed. (There's a simple website, www.smallbusiness.wi.gov, where you can go to recommend a rule change.) They are traveling the state meeting with business owners and asking about how best to cut red tape.

A few examples:

? Businesses have to pay a $30 fee to update their address in the state's system - an online form, which provides the basis by which the state will eventually send out their tax bill. Why does that cost $30?

? There are a bunch of complicated and perhaps outdated rules around raising capital. If you're a small-business owner, you cannot call 10 friends and ask if they want to invest in your project, and you certainly can't engage in any kind of crowdfunding. You need to call "accredited investors" worth $1 million or more. That's a barrier to many businesses.

? Mistele also is looking at streamlining the occupational licensing system. In the real world, do we really need to require a bunch of continuing education for cosmetologists to keep their licenses? Couldn't their clients just, you know, look in the mirror and decide if they want to come back or not?

Jobs impact?

Here's the trick, though. I pressed Mistele and Knilans on what I think is the obvious question: How many jobs are we talking about here? If they have maximum success in unclogging the state's regulatory regime, how many points does the unemployment rate go down?

Well, it doesn't quite work that way.

"I don't think we are in a position to quantify that," Mistele said.

"I can't guarantee you that it will mean this many jobs," Knilans said. "It takes a while for this to come down."

I think that's true. There is a beneficial effect to the economy from cutting red tape - over-regulation is the definition of economic inefficiency. And besides that, perceptions matter. If Wisconsin is perceived to be a state with a high regulation burden, that will affect the decision-making of businesses considering locating here or entrepreneurs deciding where to start up.

But it's just not simple. And it's almost certainly not something that will reap huge short-term benefits.

In fact, some of what they described could do the opposite.

Mistele twice brought up unemployment benefits and how companies feel they have to pay them even in cases where an employee was terminated for good reasons. Well, OK. There clearly are cases where unemployment benefits are awarded even when there was pretty egregious behavior on the employee's part.

But wouldn't lifting those requirements actually make it easier for companies to fire people? Wouldn't that actually mean fewer jobs?

(I know, I know: Those companies would be able to reinvest their UI benefit savings into more jobs. I get it. I don't believe for an instant that it would be a net gain of jobs in the near term.)

Everyone knows that unnecessary regulations abound. But if the holes in Swiss cheese don't count as a crazy, unnecessary regulation, it's a real challenge to understand what does.

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