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How Trump's Executive Order to Cut Federal Regulations Could Affect NYC

By Jeff Mays | February 2, 2017 2:46pm
 Donald Trump, a real estate developer and reality television star, has called government regulations a hindrance to business growth.
Donald Trump, a real estate developer and reality television star, has called government regulations a hindrance to business growth.
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DNAinfo/Ewa Kern-Jedrychowska

NEW YORK CITY — Among the myriad executive orders President Donald Trump has signed in his first few days in office, one vowed to help small business by cutting regulations.

Under the order, federal agencies must cut two regulations for every new one put in place, and there must be no new costs for federal regulations in 2017. Trump, a real estate developer and reality television star, has called government regulations a hindrance to business growth.

"We want to make life easier for these small business owners," Trump said.

A 2015 poll from Gallup found that 49 percent of Americans believed there was too much government regulation of business while 21 percent said there was too little regulation. Another 27 percent said the amount of regulation was just right.

A 2017 survey from the National Small Business Association found that one in three firms said they spent 80 hours per year dealing with federal regulations. The average business owner also spends $12,000 per year dealing with federal regulations, according to the survey.

“Every hour a small-business owner is reading, commenting or complying with a new regulation is time...she isn’t spending on growing the business and creating more jobs," NSBA President and CEO Todd McCracken said in a statement.

But some argue that more, not less, regulation of business is needed.

Nick Benson, spokesman for the NYC Department of Small Business Services said that "consumer and worker protections" are a priority.

“We focus on streamlining regulations to help businesses comply rather than face fines," Benson said.

Experts say they like the idea of cutting some regulations but the ultimate usefulness of the order depends on how its implemented.

Here's what Trump's executive order on regulation could mean for businesses in New York City.

What does the executive order say?

The order calls for two regulations to be eliminated for every new one that is implemented. The order, commonly called a “two-for-one” approach, also calls for the net cost of all new regulations to be zero, meaning the cost of a new regulation can be offset by the elimination of previous regulations.

Exempted regulations include "military, national security, or foreign affairs function of the United States" and "regulations related to agency organization, management, or personnel." The director of the Office of Management and Budget will determine what makes a new regulation and how the cost of the regulation is calculated.

Kathryn Wylde, president and CEO of the Partnership for New York City, said the business community "welcomes" Trump's attempt to cut regulations.

"From the standpoint of the business community and taxpayers it makes good sense to reduce federal regulations, many of which have been on the books for decades and designed for a different era," Wylde told DNAinfo New York in an interview.

What type of New York City businesses are most affected by federal regulations?

Companies creating new products are often the victim of a long wait to get patents approved.

"Young companies living off venture capital money spend three years trying to get a patent," Wylde said.

Getting a decision on whether a new drug can be approved can take a year in Europe but up to five years in the U.S.

Both the city and state have recently invested millions of dollars to boost the development of medical research and the life sciences industry in the city. There's the Cornell Tech campus on Roosevelt Island, Mayor Bill de Blasio's plan to invest $100 million to develop a life sciences campus along the East River and Gov. Andrew Cuomo's $650 million plan to develop a life sciences cluster in New York City.

New infrastructure projects are also subject to over regulation, said Wylde. Projects such as the much-needed and long-awaited Second Avenue subway have to clear many regulatory hurdles beforehand.

"With regards to action by the Army Corps of Engineers and the Environmental Protection Agency it can take 10 years to get an important project through the federal regulations," Wylde said.

What are the risks of Trump's order?

The order to eliminate regulations must be part of an overall strategy to deal with regulation, said Marcus Peacock, a professor at the Regulatory Studies Center at George Washington University.

If not, you could end up implementing new regulations that require more effort or cost more money without improving outcomes compared to the two regulations being eliminated.

"It would be important for the Trump administration to consider its overall goal(s) regarding federal regulations and how two-for-one may fit into a larger effort," Peacock wrote in a December working paper on the issue.

Wylde agreed.

"The key will be setting up a process to allow input from industry and independent experts about which regulations are appropriate and top priority for elimination," Wylde said. "When it comes to regulation, the devil is in the details. You have to have people who are experts in this area."

But Benson says it doesn't appear that the Trump administration has done the necessary work.

"Eliminating two regulations for every new one without any thought on what’s working is not the most effective way to prioritize consumer and worker protections,” he said.