Lincoln * Institute

Ralph R. Reiland

Ralph R. Reiland

The B. Kenneth Simon Professor of Free Enterprise at Robert Morris University

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of Public Opinion Research, Inc.

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Harrisburg, PA 17112

Phone: (717) 671-0776
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Reflections

Government vs. Small Business

by Ralph R. Reiland
 

The Eggs Benedict on a thick slice of Italian toast with a side of German potato pancakes at the Dor-Stop Restaurant in Pittsburgh is one of the best breakfasts in town.

We were at a sidewalk table reading the morning newspaper and the guy at the next table was talking about the closing of the Hollywood Theater across the street. "Closed for now," reads the marquee. "Hope to open soon."

The mom-and-pop grocery store a few doors from the Hollywood was also vacant. "There used to be a pharmacy on the street too," said our waitress. "The mortgage company also moved out. There was a Minuteman copy place that's gone. The telephone service company left about six months ago. There was also a photography studio."

That business turnover on just those two short blocks of one street demonstrates the fragility of small businesses, the sector of the economy that creates two-thirds of the nation's new jobs.

Unfortunately, we have a government at every level that's overloaded with lawmakers who don't have a clue about the impact on the small business community, on both owners and employees, of their legislation and enactment of regulations, taxes and mandates.

Small businesses with fewer than 20 employees, for instance, currently face regulatory costs that average nearly $7,000 per employee per year, according to the National Federation of Independent Business (NFIB), the nation's largest small-business association.

That's not counting the cost of lawsuits. "Litigation has become a big business, and it is putting small companies out of business," says NFIB. "One frivolous lawsuit can force a small business to close its doors forever."

With cookie companies now being sued by fat people, NFIB argues that "individuals and attorneys who file baseless claims and victimize innocent people should be held accountable for their actions."

Unsurprisingly, the nation's legislatures, overpopulated with lawyers, haven't been quick to reform a legal system that's increasingly spinning out of control.

Overall, the number of civil lawsuits in the United States has tripled since 1960. That puts American businesses at a clear disadvantage in the global economy with companies in nations where the level of victimhood, litigiousness and grievance-mongering is less rampant.

Roy Pearson, for example, an administrative law judge in D.C., sued his neighborhood dry cleaners after the business allegedly lost his pants, demanding $65 million in damages ($65,462,500 to be exact, more than the payroll of the entire roster of the Washington Nationals, the city's pro baseball team).

The millions, said Pearson, were to compensate for his "mental suffering, inconvenience and discomfort," plus his legal costs (hiring himself as his lawyer, Pearson said he spent more than 1,400 hours on his case).

Citing the "Satisfaction Guaranteed" and "Same Day Service" signs on the wall of the dry cleaners, Pearson, breaking down while testifying, said the store violated two written contracts.

"Never before in recorded history have a group of defendants engaged in such misleading and unfair business practices," said the missing-pants judge in his opening statement.

Pearson presented a series of witnesses who told of their unhappy experiences with the store. "An 89-year-old woman in a wheelchair told of being chased out of the cleaners by an angry owner," reported The Washington Post. "She compared the South Korean owners of Custom Cleaners in open court to Nazis."

Said a German television reporter who was sitting next to a Washington Post reporter in court, "I knew it: It's all my fault."

The case ended with the store going out of business and Pearson losing both the case and his job. Out of work after not being reappointed to his judgeship, Pearson has now filed a lawsuit against the D.C. government, seeking unspecified damages for "unlawful demotion and subsequent termination."

Reports NFIB, "Our members say that being sued is one of the most threatening experiences for a small business, and it is even more frightening for the smallest of the small, companies that can be put out of business by one lawsuit."

If none of the above succeeds in killing a business and jobs, there's always the estate tax, a "death tax" that weakens the incentive to expand a business and can literally tax a family business right out of the family.

Barack Obama's solution? Higher business taxes, more regulations, a hike in the estate tax, a near doubling of the capital gains tax, and a federal crackdown on what he says is "excessive pay."

And in the battle for tort reform? With the trial lawyers disproportionately filling the coffers of the Democratic Party, it's unlikely that Obama will bite the hand that feeds him.

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Ralph R. Reiland

Phone: 412-884-4541

E-mail: rrreiland@aol.com

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