Regulation

The United States of Regulation: Compliance Costs Consume Huge Chunks of Our Economy

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This is the paperwork needed to request the paperwork needed to comply with the Paperwork Reduction Act of 1995
Credit: Aldegonde Le Compte | Dreamstime.com

If the money spent in America on enforcing and complying with federal regulations was used instead to start a whole new country, this new country would be a major economic player on the world stage. So calculates Clyde Wayne Crews at the Competitive Enterprise Institute in his annual survey of the state of federal regulation, titled "Ten Thousand Commandments."

Though there's no easy way to quantify private regulatory costs because they're not the kind of things that show up on budgets, Crews calculates that Americans paid a grand total of $1.863 trillion in federal compliance costs for 2013.  That's more money than the entire Gross Domestic Products of countries like Australia, Canada, and India.

Just imagine the paperwork you'd have to fill out to run for president of this country.
Source: Ten Thousand Commandments

Working through Bureau of Labor Statistics data calculating the number of households in America and an average household income of $65,000, Crews attempts to calculate how much of each family's budget is consumed by the cost of federal regulations, assuming logically that businesses pass the costs along to consumers. Crews acknowledge his attempted calculations aren't fully scientific, but he estimates that if the costs of regulation are completely passed through to consumers, each household pays nearly $15,000 a year in hidden regulatory costs. That's nearly a quarter of the average household income before taxes and higher than any other expense outside of housing.

Hmmm … wonder why people buy clothes from retailers who turn to sweat shops?
Source: "Ten Thousand Commandments"

Crews is only focusing on the costs of federal regulations, by the way. Imagine what additional burdens are faced by residents of high-regulation states like California and New Jersey.

Crews' report focuses a lot more on just these figures. There are all sorts of terrifying numbers in his 89-page report. Some highlights from his summary:

  • This is the 21st edition of Ten Thousand Commandments. In that time, 87,282 final rules have been issued. That's more than 3,500 per year or about nine per day.
  • The "Unconstitutionality Index" is the ratio of regulations issued by agencies compared to legislation passed by Congress and signed into law by the president. The ratio stood at 51 for 2013. That means there were 72 new laws and 3,659 new rules – 51 rules for every law, or a new rule every 2 ½ hours.
  • The top six federal rulemaking agencies account for 49.3 percent of all federal rules. In 2013, these were the Departments of the Treasury, Commerce, Interior, Health and Human Services, and Transportation and the Environmental Protection Agency.
  • Small businesses pay more in per-employee regulatory costs. Firms with fewer than 20 employees pay an average of $10,585 per employee, compared to $7,755 for those with 500 or more employees.

Read the full report here (pdf). Despite the length and subject matter, I find the report very accessible.

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52 responses to “The United States of Regulation: Compliance Costs Consume Huge Chunks of Our Economy

  1. I know I’ve said this before, but I think waste, fraud, regulatory compliance costs, and whatever other sleight of hand the government does with money, is higher than we can actually wrap our heads around. You can look at studies like this and see insane numbers, but I think it’s higher than that. The government is so incredibly huge and out of hand at this point that we really can’t know what’s going on. Think of how many offices there are throughout the country and even the world where there are incompetent or even criminal government employees, every one of them trying to justify their job, get more budget money, re-carpeting their office, hassling citizens, wanting a job-provided car, and so on. Think of all the accounting mistakes they make, or theft they commit. Think of every dollar siphoned off to cronies or relatives or themselves.

    Because they can. Because there is no accountability, no oversight. The government parasite steals more from us than we can comprehend.

    1. It’s for your own good.

    2. Which is why I promote the summary trial & execution of all federal government employees.

    3. It’s the cost of civilization.

    4. The failure of the Oregon ACA site is a good example of this. Early estimates put the cost at somewhere around $300 Million. When it’s all said and done I bet it’s more around a billion easy.

      A BILLION FUCKING DOLLARS. FOR NOTHING.

      And yet people aren’t storming the castle because our gargantuan behemoth of a government shrugs off a billion as it’s nothing.

      To take another example, I help people deal with ID theft and during this time of year I’m on the phone a lot with the IRS. They estimate that the IRS has handed out over $20 BILLION in fraudulent federal tax return checks in the last five years. I would argue that’s not even close to the real amount. But again, this is just ignored as a problem and nothing gets fixed. We have the same issues EVERY SINGLE YEAR with this problem and I’ve been doing this for 8 years.

      1. “Foreseeable consequences are not unintended.”

      2. A BILLION FUCKING DOLLARS. FOR NOTHING.

        What are all those JOBS, chopped liver?

    5. There’s no doubt it’s over $1 trillion/year. And I think that’s an incredibly low estimate. It’s in the hundred billion or so range just for tax compliance alone.

      Trillions. Wasted. Annually. With nothing useful to show for it. Just image what a good portion of those trillions could do for the economy if held by consumers and businesses.

      1. Environmentalists would have a hissy fit at the rate of growth.

        They see stifling growth as a -good- thing.

        Yes, they’re that fucking stupid.

        1. I’ve never understood that point of view. More advanced technology would allow us to operate with less total detriment to the environment. Compare the U.S. with China or India, for instance.

          If we were to take a big technological jump, with let’s say fusion power, that would eventually end most fossil fuel use.

          1. You mistake their purpose….it is not “stopping pollution” or “preserving nature”, it is stopping human activity, clean or not.

            1. Okay, fine. Then advance spacefaring technology and ship humanity somewhere else. Technology is here to solve all of your problems.

              1. And pollute the cosmos the way we have mother gaia?

                We only have one planet one universe, you know.

                1. There are people who think strip mining an asteroid is bad.

                  1. There are people who think strip mining an asteroid is bad.

                    Yep, had a enviro in my office once that had a conniption fit over my poster. It was basically this:

                    http://notrightinthehead.net/2…..sh-planet/

              2. And pollute the pristine environment of The Moon/Mars/Outer Space!!!!!!!!!!

                Isn’t 1 screwed up planet enough!!!!!!!

                1. Don’t worry. With my various other business interests, I can just… “dispose of” that asteroid, so then it won’t have a ruined environment anymore.

  2. The cost of regulation isn’t just dollars and cents. It is in lost dreams.

    Think of all the businesses that fail, or never get started, because of regulatory compliance costs. The baker with a home bakery business who can’t afford to rent a commercial kitchen, and so gets shut down. The toy maker whose Ebay toy business closes because she can’t afford to test every single item for lead. The underground restaurant, that only operates one night a week out of a home kitchen, because renting a commercial space would make it unprofitable. The hair braider who is forced to close shop because she hasn’t spent two years in cosmetology school.

    All of that means fewer options and higher costs for consumers. And it means fewer options and higher costs for human beings trying to pursue happiness.

    1. This. I laugh every time some fucking politician makes a show of shedding crocodile tears for the poor small businesses that they ruthlessly crush.

      1. By “laugh,” you mean “rape,” right?

        1. Yes. I rape tears of sadness at the injustice of it.

    2. My wife has expressed the desire to open a business – I have encouraged, offered to help with the paperwork, red tape, etc….but it is still too daunting for her, even with a lawyer at her side. I want to kick every city, state and county papershuffler in the nuts.

      1. We had to hire an accountant to deal with all of the nonsense. For a pretty small business, too. That’s with two people with business educations and backgrounds.

    3. The toy maker whose Ebay toy business closes because she can’t afford to test every single item for lead

      This is exactly what happened to former poster and occasional lurker “Bronwyn”. She used to make sockpuppets (the non-Internet kind). She had to stop because of the lead regulation.

      Because we all know socks are full of lead. COMMON SENSE REGULATION.

  3. To quote sarcasmic – “Freedom means asking permission and taking orders”. We appear to be quite free here in the US!

    1. Almost as free as China. Almost.

      1. Not to worry, we’re quickly closing the “freedom gap.”

  4. Uh, multiplier effect? Anyone heard of it?

    1. Also known as Unicorn farts? Sure.

      1. No, it exists. The multiplier is just negative.

        1. Not negative, just less than 1. But they try to make it up on volume.

    2. Exactly. For every new regulation, businesses need more lawyers, consultants, bureaucrats to comply which mean MORE JOBZ!

      1. Break them windows!

        1. Those fucking windows don’t break themselves.

      2. But we get the valuable benefit of guarenteed lead-free sock puppets.

    3. I wish this multiplier effect worked for my sex life too.

  5. But we’d all be DEAD (or horribly, horribly maimed without these completely reasonable and sensible restrictions on the ability of kkkorporations to poison us and despoil the land.

  6. Some fucking dummy was on Bloomberg yesterday babbling about how incredibly EASY it is to start a business. Maybe in app-land. Go open a manufacturing facility (without the financial and political resources of a multinational heavyweight) and let me know what a cakewalk it is.

    1. My wife ran a small eBay business and it was a pain in the ass. To be fair, the regulatory burden and bullshit was as much local and state as it was federal.

      1. And that right there is the problem.

        Everyone focuses on national politics but a lot of the biggest problems originate from the State and Local levels

        1. Like cops. That’s not really a federal issue.

    2. I see more and more underground businesses – at least in the hobbies I do. There are little one-man “companies” that sell gear, parts, and music – and I bet any number of them aren’t paying taxes. It’s the ‘net version of the forever garage sale.

  7. To be fair, the regulatory burden and bullshit was as much local and state as it was federal.

    Unquestionably true. I live in a place where pretty much any attempt to open a business which does not involve serving food brings out the pitchfork brandishers. I often think about planting a rumor that I am going to buy one of the many empty buildings in town and start making Hello Kitty lunch boxes; I suspect the letters in the paper would run at least ten to one against.

    Apparently, “quality of life” involves being broke and hungry, and watching any kid with half a brain pack up his/her shit and depart for greener pastures immediately upon graduation from high school.

  8. Detroit homeowners shooting burglars in record numbers.

    1. “I’m very concerned a public official, a police chief, would raise the flag to shoot when you see the whites of their eyes,” said Carl Taylor, a sociology professor at Michigan State University in East Lansing who specializes in violence and gangs.

      The 64-year-old Detroit native carries a gun when doing research in the city, though he said what’s really needed is a “Peace Corps-style” intervention.

      Ok for me, but not for thee?

    2. Finally, sanity reasserts itself.
      Maybe Detroit IS having a turnaround.

  9. This is the paperwork needed to request the paperwork needed to comply with the Paperwork Reduction Act of 1995

    Don’t quote me regulations. I co-chaired the committee that reviewed the recommendation to revise the color of the book that regulation’s in… We kept it grey!

    PS: See Uncivil, alt-text on graphs. And it is glorious.

    1. This is an Alt-Text Hall of Fame entry.

  10. Ten Thousand Commandments

    Shouldn’t that be “Ten Million Commandments”?

    1. Those are derived commandments. The Ten Thousand are just the system level commandments.

  11. Why should so crazy amounts be spent on enforcing and complying with federal regulations in the country, where most of the middle class has been ruined and lots of people check the borrowing options with Personal Money Service monthly to live through till the pay day. Where all this money goes?

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