$3500 Lemonade Stand: How Government Regulation Stifles Entrepreneurialism

It seems like a sweet, all-American story: A cute little girl starts a lemonade stand to earn money to buy a bike, or to take Dad to the waterpark for Father’s Day – and is shut down for lacking overpriced permits. There’s the little girl who tried to sell mistletoes a few years ago to help pay for her braces and was told no, that it was illegal, but she could beg for the money instead.

 These stories have been all over the news, and they outrage the public – as well they should, with that big, bad government picking on little girls selling lemonade. We are outraged because the idea is ridiculous when taken to this extreme. This situation and more is also taking place in the grown-up business world, too.

 Regulatory barriers to trade – not only on the federal level, but on the state and local levels as well – routinely hamper and drive up the cost of doing business of all kinds. “During the 2013 fiscal year, Washington issued more than 3,600 regulations,” Wayne Brough, chief economist and vice president of research at Freedom Works, wrote on the Real Clear Markets website. Government regulations are expensive, and according to “Ten Thousand Commandments,” the Competitive Enterprise Institute’s survey of federal regulations, “the cost of federal regulation exceeds half of what the U.S. [sic] federal government spends annually.”

 What all of that means is that everything you pay for costs you more because the government is involved. It also includes cities trying to drive out income opportunities such as Uber, Lyft and Airbnb, making it harder for people to earn a little more with what they already have. It includes the delicious tamales you buy from the lady down the street. Lemonade and cupcake stands, food trucks and hair salons. It means that if you decide to sell fudge to fund a summer trip, you could potentially be subject to fines and penalties.

 Occupational licenses are permission you are required to obtain from the government to do a given type of work. Sure, you really want this sort of thing for your doctor. That makes perfect sense; the job requires a high level of skill, and you want to be sure he is qualified for the job, because the stakes are pretty high. What about the lady who braids hair? Or your florist? Many regulatory requirements seem completely arbitrary.

 “In Texas, it takes just 33 days of training to earn a license as an emergency medical technician,” according to the Institute of Justice’s 2012 study on occupational licensing. But to become a licensed barber or cosmetologist requires 350 days. The same report also cites state occupational fees ten times the national average, as well as noting that Texas is one of the handful of states that licenses shampooers, requiring fees and exams “in order to wash somebody’s hair.”

 Even more appalling, many of them appear to be designed to protect those already in power, favoring those interests over yours. Compare taxi licenses, for example – which in New York City cost around $700,000. With Uber, the service is open to anyone with a car who meets a few simple qualifications. A number of municipalities (along with taxi drivers) are fighting to keep Uber out, because it threatens the government-approved monopoly.

 In addition to protecting the interests of Big Tobacco, the Food and Drug Administration’s August ruling concerning electronic cigarettes is also an excellent illustration of the way the government stifles innovation with regulations. Although the medical consensus is that vaping is unquestionably safer than smoking, the new FDA regulations will force manufacturers of electronic cigarettes to go through the same arduous and expensive application process as cigarette manufacturers do. Compliance, which could cost up to $1 million for each individual product, will unquestionably be too expensive for many small businesses that sell vaping supplies. A number of those have closed, and more will certainly follow, driving supplies down and prices up, in the end making smoking look more attractive again. The big tobacco companies, with their massively deep pockets won’t have any problem at all holding on to their place in the market.

 These burdens, like so many imposed by government agencies of all kinds, fall most heavily on the people who would see the greatest benefit from economic liberty. “A general economic principle is that any law or regulation that restricts market entry tends to impose the greatest burden on those who can be described as poor, latecomers, discriminated-against and politically weak,” wrote Walter Williams, professor of economics at George Mason University, in the Casper, Wyoming of the Star Tribune.

 So, sure, get mad about little girls being shut down. Stay mad, because it’s much bigger than that. There are real world consequences to government’s interference in almost literally every aspect of your life. Be aware of how much of what you pay is going to enrich government coffers instead of adding value to your life.





There is one comment

  1. Cecelia Buenaventura Navarro

    God help us all.
    How has our federal government become so overwhelmingly bloated. Frankly, it feels like this despicable, slimey, saggy, blob that's constantly oozing puss of regulations that bear heavy on people's chest.
    It makes me really, really incensed, as are more than half of the American populace, who have been clamoring for change --REAL CHANGE-- and want to try something new and different.
    We need to dismantle non-essential federal agencies that are intrusive to states' local culture, and its counties' differing culture for that matter. No town, city, county, state are created equal.
    The Department of Education is one big blob of a definitely non-essential federal agency! We don't have to collect taxes in order to pay the inept bureaucracy of its bloated salaries, tenure, retirement.
    Enough already!

Leave a Reply