OAKLAND, California — The regulatory burden on business — much of it unwarranted — has been increasing for decades.
One way to help restore America’s once robust competitive edge is to clean out the executive branch’s Augean stables from which heavy-handed regulations issue nearly every day.
Complying with regulations now costs individuals and businesses, both large and small, about $4 trillion every year, according to economists at George Mason University’s Mercatus Center. That’s about $13,000 per person.
Money spent keeping records, hiring regulatory compliance officers and dealing with the bureaucrats who promulgate and enforce these regulations, which affect nearly every aspect of daily life, is money not available for families to spend on their own needs and for businesses to invest in buildings, equipment and jobs.
They would be jobs for people who actually produce something, rather than simply shuffle paper around their desks.
Regulations are like a tax on economic activity — and that tax is “regressive” — falling much more heavily on low-income households and small businesses than others.
Suppose a new safety regulation for cars and trucks — requiring all new vehicles to be equipped with backup cameras, for example — adds $500 to the cost of every vehicle sold and that most of the added cost is passed onto consumers in the form of higher prices.
Who is hurt worse by the price increase: the government bureaucrat making $131,000 a year or an apprentice electrician earning $30,000 annually?
Most regulations are one-size-fits all. The anti-money laundering provisions of the USA PATRIOT Act, passed soon after 9/11, required all financial institutions to adopt procedures and internal controls to prevent money from ending up in the hands of terrorist groups.
Because the costs of complying with that law essentially were the same for a hometown bank as for a big Wall Street bank, some 3,000 small financial institutions were forced to shut their doors or merge with larger competitors in the next few years.
So-called “midnight regulations” are another growing problem. That term refers to rules issued by an outgoing administration between Election Day and Inauguration Day.
Every president since Ronald Reagan has signed executive orders requiring government agencies issuing “major” regulations to conduct cost-benefit analyses prior to finalizing them.
“Midnight regulations” are rushed through the review process and published without full consideration of their economic impacts.
One shouldn’t put too much faith in regulations issued less hastily, however, since federal agencies routinely overstate the benefits and understate the costs of the rules they issue.
A district court judge recently reprimanded the Environmental Protection Agency for failing to comply with a Clean Air Act requirement that it estimate the number of jobs that would be lost as a result of new regulations.
President Obama’s EPA Administrator, Gina McCarthy, responded to requests for such job loss estimates by stating that they are of “limited utility.” To whom, one wonders?
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EPA’s Mercury and Air Toxics Standards
The EPA’s proposed Mercury and Air Toxics Standards (MATS) was sold as a public health measure that would cut mercury and acid gas emissions from coal mines and power plants.
The rule will cost electric utilities almost $10 billion per year — a cost that will be passed on to customers, while promising annual benefits of $4 million to $6 million.
Unless cancelled, MATS will help fulfill Mr. Obama’s goal of shutting down America’s coal industry — inflicting deep economic pain on states like Wyoming, West Virginia, Kentucky, Illinois and Pennsylvania.
President Donald Trump has pledged a “two-for-one” policy requiring the elimination of two existing regulations for every new rule issued. Because not all rules impact the economy equally, the policy will require careful and thoughtful implementation. But it’s a good starting point.
Let’s get moving. Pruning back the regulatory state will go a long way toward doubling the economy’s annual rate of growth from 2 percent to 4 percent.
William F. Shughart II is research director of the Independent Institute and the J. Fish Smith Professor in Public Choice at Huntsman School of Business at Utah State University. Readers may write to him at the Independent Institute, 100 Swan Way, Oakland, CA 94621.
