Cato Policy Analysis No. 200 December 22, 1993

Policy Analysis

Taken to the Cleaners:
A Case Study of the Overregulation
of American Small Business

by Jonathan H. Adler

Jonathan H. Adler is an environmental policy analyst at the Competitive Enterprise Institute. He contributed the chapter "Clean Fuels, Dirty Air" to Environmental Politics: Public Costs, Private Rewards (Praeger, 1992).


Executive Summary

In today's regulatory environment, it is becoming increasingly difficult to maintain a small business; it is even more difficult to start one. The plight of local dry cleaners is indicative of that trend. Opening a new dry-cleaning shop can require filling out and complying with 100 forms and manuals. Environmental and other regulation can increase start-up costs as much as $138,700 and impose burdensome permitting and reporting requirements. The experience of the dry-cleaning industry with government regulation is indicative of the general concerns faced by today's small business owners and entrepreneurs. Because of the important role of small businesses and entrepreneurship in the creation of jobs and economic opportunity, the present trend should be of great concern to policymakers.

Many of the regulations affecting dry cleaners were promulgated to control the use of perchloroethylene (perc), the dominant dry-cleaning solvent in use today. Regulations cover workplace exposure to perc as well as its potential release to the air. When perc residues are discarded, they must be handled as hazardous wastes. Many of the regulations impose significant costs for minimal benefits.

In addition, dry cleaners must comply with a raft of occupational health and safety regulations, including regulations governing potential exposure to HIV and other blood-borne pathogens. Dry cleaners also face the specter of sudden inspection by regulatory agents. Today many dry cleaners are also finding themselves liable for the multi-million- dollar costs of cleaning up groundwater contamination that they may not have caused. The net effect of many of the regulatory requirements is that more dry cleaners close their doors and fewer are established to take their place.

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