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Washington red tape cost $1.8 trillion

Regulations Growing Like Topsy


By —— Bio and Archives February 11, 2014

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The cost is $1.8 trillion. That’s the price of complying with Washington red tape—and that’s not a misprint, reported Tom Price in 2012. (1)  It clearly has to be higher today.  For the first time this amounted to more than half of total federal spending. It is more than the GDP’s of Canada or Mexico, notes Wayne Crews. (2)

These costs are embedded in nearly everything Americans buy. Wayne Crews calculates these costs at $14,768 per household, meaning that red tape is now the second largest expense in the typical family budget after housing. This regulatory cost of almost $15,000 is 23 percent of the average household income of $63,685. In the past 20 years, 81,883 final rules have been issued. That’s more than 3,500 per year or about nine per day. (2)

Another way to measure the regulatory burden is by pages in the Federal Register, which includes new rules as well as proposed rules and supporting documents. By that measure the Obama Administration did not break the all-time record of 81,405 pages it set in 2010. But the 78,961 pages it churned out in 2012 means that the President has posted three out of the four greatest paper work years on record. And to be fair, as The Wall Street Journal reports, if Mr. Obama were ever to acknowledge that this is a problem, he could reasonably blame George W. Bush for setting a lousy example. Despite the Obama myth that the Bush years were an era of deregulation, the Bush Administration routinely generated more than 70,000 pages a year in the Federal Register. (3)

President Obama boasts that he has taken major steps to improve America’s regulatory climate. The truth is that his administration has expanded the federal government’s reach and oppression. He has instituted four times the number of major regulations as President George W. Bush, and they cost five times as much. (1)

A ‘major regulation’ is one that federal agencies estimate will create an economic impact of more than $100 million annually. Since taking office in January 2009, Mr. Obama has instituted 106 major new federal regulations, adding more than $46 billion in compliance cost for American families and businesses. That’s $46 billion taken out of a productive economy. No wonder jobs aren’t returning notes Tom Price. (1)

The most comprehensive source of data on new regulations is the Federal Rules of Database maintained by the Government Accountability Office (GAO).  During President Obama’s first term there were 131 prescriptive rules (regulations that imposed burdens on private-sector activity). This compares to 52 such rules imposed during George W. Bush’s first term. (4)

Some other observations:

  • In 2011 The American Council for Capital Formation estimated that the new EPA regulations will result in 476,000 to 1,400,000 lost jobs by the end of 2014. (5)
  • Management Information Services Inc. predicted that up to 2.5 million jobs will be sacrificed, annual household income could decrease by $1,200, and gasoline and residential electricity prices may increase by 50% by 2030. (5)
  • The American Action Forum (AAF) reports that regulations that went into effect in 2013 cost Americans $112 billion—or $447 million for each of the 251 days the federal government was open. They predict that the regulatory burden will increase to $143 billion on 2014. (6)

Small Businesses

Environmental regulations and tax compliance paperwork are particularly disproportionate in their effect on small businesses. Such regulations impose about 40 percent of the total business regulatory burden report Mark Crain and Thomas Hopkins. (7)

For firms employing fewer than 20 employees, the annual regulatory burden is $6,975 per employee—nearly 60 percent more than that of firms with more than 500 employees, at $4,463. The data for the study only goes through 2008. It cannot be appropriately used to inform discussion about any regulatory costs that have or have not been incurred since 2008.  That said, in 2012 Tom Price reported that complying with federal red tape costs small businesses approximately 36 percent more than large corporations (1), not far from the earlier prediction of Crain and Hopkins. (7)

England

Winston Churchill once said, “If you have ten thousand regulations you destroy all respect for the law.” (8) Perhaps David Cameron believes this. In England on January 27, 2014, Cameron boasted of tearing up 80,000 pages of environmental protections and building guidelines as part of a new push to build more houses and cut costs for businesses of up to 850 million pounds (1 billion Euros) per year. In a speech to small firms, the prime minister claimed that he is leading the first government in decades to have slashed more needless regulations than it introduced. Cameron argued that the new rules will make it ‘vastly cheaper’ for businesses to comply with their environmental obligations. (9)

Wouldn’t it be nice if a similar action was undertaken in the United States? Dream on.

References

  1. Tom Price, “Price: Regulations are choking small business engine of growth,” washingtontimes.com, July 25, 2012
  2. Wayne Crews, “Ten thousand commandments 2013: An annual snapshot of the federal regulatory state,” Competitive Enterprise Institute, cei.org, October 15, 2013
  3. “Red tape record breakers,” The Wall Street Journal, May 19, 2013
  4. Erika Johnsen, “Heritage study: Almost $70 billion in new regulatory costs from Obama’s first term” hotair.com, May 2, 2013
  5. Larry Bell, “An uncritical view of EPA: Why I agree with Obama,” Forbes, October 10, 2013
  6. Barbara Hollingsworth, “In 2013, regulations cost Americans $447 million each day government was open,” cnsnews.com, January 9, 2014
  7. W. Mark Crain and Thomas D. Hopkins, “The impact of regulatory costs on small firms,” Small Business Research Summary, ISSN 1076-8904, October 2010
  8. Bill Kovacs, “Rebuttal to ‘The Wonky Liberal’”, freeenterprise.com, December 9, 2011

9. “David Cameron pledges to rip up green regulations,” The Global Warming Policy Foundation,  gwpf.org, January 30, 2014



Jack Dini -- Bio and Archives | Comments

Jack Dini is author of Challenging Environmental Mythology.  He has also written for American Council on Science and Health, Environment & Climate News, and Hawaii Reporter.

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