Yesterday the host interviewed former Solicitor General Paul Clement and wrote a WaPo column on the overwhelming nature of regulation in our current state and the legal doctrine (known as Chevron Deference) that underlies it.  Clement is currently trying to get SCOTUS to take a case that could, properly adjudicated, overturn Chevron.  Both men are constitutional attorneys and attack the issue from 50,000 feet.  I have spent my career at the bottom of the regulatory stack – the view from here might be helpful.

The host notes in his WaPo column that the Chevron Doctrine came down in 1984, as my career was beginning.  Unknown to me, its consequences became almost immediately apparent.  I was the chemist in a manufacturing plant employing more than 2000 people.  As environmental regulation after environmental regulation landed on the plant, the plant manager reasoned “chemical issues => chemist” and so, slowly, all the regulations pouring down soon became my responsibility.  Then I changed jobs and ended up at a plant employing less than 100 people.  That created quite a different picture.  Now my employer could not afford to have me focus just on regulation, I had to do all the chemist duties in quality control as well.  It soon became overwhelming and as I negotiated with the bosses for more people it became apparent the budget for more people did not exist.

And thus my consulting business was formed.  I could sell my regulatory expertise, developed the hard way, to small manufacturers that could not, as the large plants could, afford a full-time regulatory staff person.  It became a passion for me.  Many firms like mine sprang up, but few focused as I did on the small fry.  I kept my prices low and focused on a few select industries.  I refused to let the regulations become my mission and instead made it my mission to keep the little guy in business.  In the early days my clients were really small, less than $1M/year gross.  Manufacturers that size have become untenable – the only ones I know of are completely underground and if discovered will end up in jail.  There simply is no way to profitably operate a manufacturing business that small and comply with the regulatory burden in California.  As I retire, my average client is less than $10M with a couple of fat cats thrown in.

There are two important things to note about that story.  Firstly, small manufacturers were once the economic bedrock of this nation.  Sure, the focus was on the big guys, the automotive industry or the aerospace industry, but those monstrous plants needed parts, so they needed suppliers – often one guy in a 5000 square foot bay in an industrial development with a couple of mills cranking out one part over and over and over again – it was just slightly more sophisticated than a guy selling furniture out of his garage that he built himself.  That kind of business still exists in some parts of the country, but in regulation heavy, blue states like California it is impossible.  The regulatory burden on a manufacturing business would require such a company to have, at a minimum, a compliance officer than handled employment, safety and environmental regulation.  Such a person comes with a six-figure paycheck and a business that small cannot afford that.  They cannot even afford to outsource that expertise to companies like mine, because they would need at least two and perhaps three such companies (safety and environment can coexist in a firm, but employment law is a whole different animal) and that outsourcing soon adds up to more than they can afford.

And so the critical mass to operate a manufacturer has grown exponentially as regulation has grown exponentially.  That requires access to capital.  It used to be that a guy that had worked for a big for a decade or so could get a loan to buy a machine and set up his own small operation, but no more.  Such a guy simply would not have sufficient credit to borrow the amounts he would need to buy equipment, staff up and operate at a loss for a year or two while he got his feet wet in all the stuff he had not a clue about when he was working on someone else’s floor.  I do not have a count, but in the last decade or so, my expert advice has often been, “Shut it down. You do not have the resources to operate in the current environment.”  It used to be fun trying to help a business cope; it is no fun crushing a person’s dreams of independence – but someone has to tell them.  All the regulators will do is play “Hand me another brick.”

Regulation is killing the American Dream.  Entrepreneurship is the backbone of our economy – not the GM or Boeing plants, but the hundreds and thousands of 1-10-man operations that exist in their orbit, employing far more people than the large plants themselves.  Entrepreneurship continues in this nation, but it is in the fields that require high levels of education.  The opportunity for a person without higher education, but with a few years of real experience and a lot of native intelligence, to set up shop just does not exist anymore – thanks to regulation piled on more regulation.

One final note – early in my career I worked with industry associations to lobby the regulators.  But as Chevron Deference took hold that became a pointless exercise because the agencies no longer had to listen, so they didn’t.  Most of the industry organizations that were aimed at smaller manufacturers simply do not exist anymore because there is no point.  I quickly turned my focus and advice to figuring out the least expensive and most expeditious way to comply – and figuring out what was coming down the pike next – because there simply is no negotiation with the various regulatory agencies.

BTW, in all these years I have never had a client ask me how to cheat – never.  Nobody wants to pollute or harm their employees.  These companies are not evildoers looking to exploit anything.  Sure, accidents happen, and problems arise, but nobody is in this to harm anybody.  That narrative is just an excuse to regulate more, and more, and more.

YES! SCOTUS should take up Clement’s case.  YES! SCOTUS should overturn, in bold letters, Chevron.