August 20 is Lemonade Freedom Day and everyone who can do so is asked to set up a stand; everyone else is urged to imbibe. The reason? Authorities across America are closing down kids’ lemonade stands because, in many states and localities, they violate health codes, licensing laws, and other permit requirements. A recent headline in Reason online declared, “Lemonade-Stand Crackdown Continues: Cops Make Girls Cry From Georgia to Wisconsin.” (Reason’s archive is filled with news stories about similarly closed stands.)
Small business ventures in America are being regulated into bankruptcy. According to a report from the Heritage Foundation entitled “Red Tape Rising: Obama’s Torrent of New Regulation” (Oct. 16, 2010), “[T]otal regulatory costs [to business] amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year.”
It is not possible to measure an equally devastating consequence of regulation: namely, the small businesses that never open because they cannot meet the financial and other costs imposed by government as the “price” of entry. This is particularly painful during bad economic times when people naturally turn to cottage-industry or home-based businesses to sustain themselves. From selling lemonade to pet grooming, from cleaning houses to free-lance accounting, many people make desperately needed money through businesses that should require only sweat equity to establish. Instead, these people confront a choice. Meet complex requirements that add nothing to productivity or profit — e.g. fire and building codes, IRS compliance, health codes, permit or license conditions — or function illegally.
Health codes, licensing laws, and permits vary widely from state to state and from city to city. Many requirements are antiquated, some contradict each other, and many were passed in haste as a response to local disasters, such as a devastating fire. A common factor, however, is that they all discourage entrepreneurship.
Last January, President Obama prominently declared there would be an intensive review of business regulations to pare them down and relieve the burden they impose on business, especially small business. Skeptics quickly pointed out, however, that the president had just imposed an incredible number of new regulations through ObamaCare; with a slew of new health regulations being implemented incrementally, 2011 will also certainly see a sizeable increase in regulations. Indeed, the very speech in which Obama announced the review also stated that new regulations might arise from the process. In short, the review seemed to be more of a public-relations show than a sincere effort.
Meanwhile at the local level, where coffers are often empty, officials vigorously enforce regulations because they bring in revenue through expensive fines or permits. Certainly money seemed to be the motive behind the closing of a lemonade stand in Georgia which was being run by three girls; they were trying to earn money to go to a water park. Two officers drove by; they discovered the girls did not have the business license or the peddler’s and food permits, which were required by city law. Cumulatively, the three pieces of paper would have cost $50 a day.
A zero-tolerance attitude inspired by lack of cash may be why lemonade stands seem to be increasingly targeted by straight-faced bureaucrats.
Last May, a frustrated father wrote an article for the Los Angeles Times in which he explained how seriously some cities are regulating the stands. Nicholas Martin’s 8-year-old daughter wanted to participate in a national Lemonade Day which the organizers describe as an “initiative designed to teach kids how to start, own and operate their own business — a lemonade stand.”
Martin explained what happened:
I gave my kid a bedtime primer about starting a business. How much profit do you make after expenses? How should you promote your business?… She soaked it up and went to sleep all inspiration and smiles. Then I got to thinking about something I hadn’t discussed with her: government regulations. The next morning I began a three-day phone trek through the maze of government agencies that regulate businesses and food sales, and I watched my child’s All-American plan crumble like fresh-baked cookies.
After being rebuffed by the Parks Department who had jurisdiction over his daughter’s preferred selling venue, Martin finally reached a health-department official who assured him no prosecutions would take place on Lemonade Day — undoubtedly for public-relation reasons. On other days, however, “no child can legally operate a lemonade stand in our city. Nowhere. No time.” The official further declared that the lesson “Lemonade Day organizers should teach the children … is about the importance of learning and obeying the government regulations that prohibit lemonade stands.”
Martin’s efforts halted there. Had he continued to make calls, “my kid would have been stymied by zoning laws … [and] the daunting costs of business and vending licenses, not to mention taxes.” In a real sense, Lemonade Day delivered on its promise: Martin’s daughter learned what it is to be an entrepreneur in America.
Although it seems to be accelerating, the crackdown on lemonade stands is nothing new. In 1990, a California 13-year-old entrepreneur was slapped down by the authorities; among other health violations, Cody Gehrke was selling lemonade from a venue not “equipped with a sink and running water.” The eighth-grader applied for the necessary permits but the summer was over before they came through. Cody suspected a nearby business of filing a complaint against his lemonade venture because the briskness of his sales were cutting into its own. (In today’s economy, this may be a second reason some lemonade stands are being closed — complaints from competitors.) If so, then Cody also learned a lesson about how to do business in America. The next year, he set up a legal lemonade venture and turned in other children who competed with him illegally.
It is not merely young entrepreneurs; children doing charitable work also confront the state. Last month (June) in Bethesda, Maryland, an inspector closed down the lemonade stand of two boys who were raising money for pediatric-cancer charity; their parents were fined $500. Perhaps because of public backlash, the fine was dropped and the stand re-opened.
The Bethesda reopening offers a glimmer of hope. In many cases, when a bright light is shone upon the government quashing lemonade stands and children’s spirits, the backlash is so ferocious that officials back down. This is especially true of officials who are elected by the local populations with which they live. For example, in Oregon, one county chairman publicly apologized to a young girl whose stand had been shut down by health-department workers. Although he defended the workers, saying they had “followed the rules,” he also asked them to use “professional discretion” in the future.
In short, Lemonade Freedom Day has a chance of working, of highlighting the absurd depth and breadth to which America is now governed. It is a chance to teach children how to protest peacefully but firmly against the unjust regulation of their lives. This August 20, if you can, your family should take a stand and “make a stand.”