For those of us who identify as libertarian or fiscally conservative, government regulations tend to get a bad reputation. "Regulations are burdensome, onerous, cumbersome." We tend to view them as obstacles rather than rules to improve our lives. While I don't have a knee-jerk reaction to regulations, I can say that based on past research on regulatory impact, I remain skeptical of regulatory efficacy. Few regulations, I have found over the years, can actually yield more benefit than cost.
Speaking of cost, that is major factor of regulations that gets a bad reputation. If you look at the price tag, can you blame people? The free-enterprise think-tank Competitive Enterprise Institute (CEI) just released its annual Ten Thousand Commandments study, which attempts to take on the arduous task, a task certainly with methodological difficulties, of measuring the scope and impact of federal regulations. The CEI study found that federal regulatory cost in 2015 was $1.885T, which came out to $15,000 per household. In 2015, Congress enacted 114 laws, while bureaucratic agencies enacted 3,410 new laws. This added to the Federal Register, which now totals to 80,260 pages of regulations. There are those from the Washington Post and other media outlets who have criticized CEI in similar past studies, arguing that their method is too back-of-the-envelope.
Even so, the CEI is not the only organization to come up with comparable figures. The National Association of Manufacturers found in 2014 that federal regulations cost $2.028 trillion. In 2010, the Small Business Administration (SBA) ran a similar study, and found that federal regulations cost $1.75 trillion. Since it is the SBA, it did also illustrate how these regulations disproportionately affect small businesses. Keep in mind that the SBA is not some organization preserving its self-interest, but is a bureaucratic entity presently under the Obama Administration!
Price tag set aside, one has to wonder how it affects the economy. Fortunately, the Mercatus Center answered that question with a study they released a couple of weeks ago. The Mercatus Center found that the distorting effects that regulations cause resulted in an economic slowdown of 0.8 percent per year, which caused the economy to be $4 trillion smaller in 2012 than it would have been absent the growth of regulation since 1980. What this means is that the regulatory growth since 1980 has translated into the average American being $13,000 poorer. This economic loss makes it more difficult for smaller businesses to grow and also means higher prices, which disproportionately affect lower-income households (Chambers and Collins, 2016).
This is not anywhere near as damning as the 2013 report in the Journal of Economic Growth that found that federal regulations over the past six decades have caused the average American household to receive $277,000 less per year as a result of federal regulations (Dawson and Seater, 2013). Even if you want to take the Office of Management and Budget's (OMB) generous estimation that government regulations cost $80 billion while creating $800 billion in benefits, the Journal of Economic Growth findings factored in still means that the American economy has foregone about $33 trillion in economic growth over the past six decades, which roughly comes to $550 billion lost annually.
Cost is not the only metric in evaluating regulations. There is also monitoring, enforcement, compliance, and overall success in terms of intended results and effects of the given regulation. While looking at regulations from a more macro view can be instructive, it can still be limiting because each regulation has different metrics with different weightings. As the Chamber of Commerce points out, "different regulations affect the economy in different ways. No typical regulation or cost exists." This is why we should still analyze each specific regulation on its own merits to understand how individual regulations work and affect the economy and society. Nevertheless, what we can take away from all this is that regulation, and that overregulation in particular, overall comes at a heavy price.
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