
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, December 15, 1994                   TAG: 9412220005
SECTION: EDITORIAL                    PAGE: A22   EDITION: METRO 
SOURCE: BILL CORBITT
DATELINE:                                 LENGTH: Medium

THE INFLATION CULPRIT: OVERREGULATION

THE COST of money (loan interest) has increased at astounding rates this year, thanks to the feds. This businessman has yet to hear a realistic reason why. Bankers say that loan demand is down. Is the economy heating up? Are inflation fears rampant? Just what do these terms mean? Could it be that economists are looking too closely at numbers but really don't know what they're seeing?

I contend most price increases that consumers are seeing, and will continue to see in the near future, are a direct result of legislation enacted by government which increases the cost of manufacturing a product or providing a service. These unfunded mandates have been phased in annually since 1986.

Instead of increasing taxes (very unpopular with voters) to pay for social programs, government creates a regulation making it mandatory for small businesses to accomplish the change. That mandate then becomes law. Small businesses either comply or get forced out of business by fines, or by the cost of defending themselves in court.

Where does money come from to pay for compliance with these regulations? Most of the time it's borrowed from a lender or internally from business funds needed for hiring, training and creating jobs.

Small businesses absorbed these increases in the cost of operating because the economy in the early '90s wouldn't allow them to be passed on as price increases to consumers. Markets for most products were soft, and the buyer sought cheap prices. These absorbed increases left little funds to hire, train, expand and buy equipment. Unfortunately, many small businesses didn't survive the cost of compliance long enough to recoup their losses. They are, in fact, losses because these mandates have always reduced productivity and increased the cost of producing the product.

Those businesses that have managed to survive have done so only because they're able to pass on quickly the costs of compliance to consumers. Is this inflation? If so, it's government-mandated inflation.

The economy is showing signs of growth. Small businesses are starting to pass increased operation costs, due to previous government mandates, on to consumers. Government economists view these increases as inflation and are literally coming unglued. Did they really think small businesses could be forced to accomplish social change via unfunded, federally mandated regulations without passing increased cost on to consumers?

Economists' time would be more productively spent assisting Congress in determining the real cost impact of mandates as part of the legislative process. If Congress had honest numbers to look at, and these numbers were made known to our citizens, many regulations would never have been passed these past eight years because their cost would have been deemed excessive.

Small business has been the great job creator for decades, but we've been severely hampered in recent years by unfunded federal mandates imposed upon us. The sooner we pass these increased costs of doing business on to the consumer, the sooner we can start creating much-needed jobs.

I welcome to the real world those members of Congress who lost their jobs this past election. May each of you start up your own small business and be forced to comply with regulations you so readily forced upon the rest of us. We do our country and elected officials a great disservice when we allow them to become professional politicians. In doing so, we deprive them the experience of living in the real world. I hope term limits will be imposed upon all public-office seekers. Even the most dedicated public servant needs to return home for a shock of reality every so often.

Bill Corbitt of Vinton is chairman of Blue Stone Block, Inc.

by CNB