In my 2013 article, "Regulations Have Made Your 75 Percent Poorer," I reported a fascinating study by economists John Dawson of Appalachian State University and John Seater of North Carolina State which found that the proliferation of regulations had dramatically slowed economic growth. By how much?
The growth of federal regulations over the past six decades has cut U.S. economic growth by an average of 2 percentage points per year, according to a new study in the Journal of Economic Growth. As a result, the average American household receives about $277,000 less annually than it would have gotten in the absence of six decades of accumulated regulations—a median household income of $330,000 instead of the $53,000 we get now.
Instead of a $54 trillion dollar economy, we live in a $17 trillion economy.
Every year, the free market Competitive Enterprise Institute issues its Ten Thousand Commandments report on the more direct costs that the regulatory state imposes on the economy. CEI has issued a fact sheet that outlines the costs of regulations. Depress highlights (lowlights?) include:
Federal regulation and intervention cost American consumers and businesses an estimated $1.88 trillion in 2014 in lost economic productivity and higher prices.
Economy-wide regulatory costs amount to an average of $14,976 per household – around 29 percent of an average family budget of $51,100. Although not paid directly by individuals, this "cost" of regulation exceeds the amount an average family spends on health care, food and transportation.
The "Unconstitutionality Index" is the ratio of regulations issued by unelected agency officials compared to legislation enacted by Congress in a given year. In 2014, agencies issued 16 new regulations for every law —that's 3,554 new regulations compared to 224 new laws.
Many Americans complain about taxes, but regulatory compliance costs exceed what the IRS is expected to collect in both individual and corporate income taxes for last year—by more than $160 billion.
The 2014 Federal Register contains 77,687 pages, the sixth highest page count in its history. Among the six all-time-high Federal Register total page counts, five occurred under President Obama.
The George W. Bush administration averaged 62 major regulations annually over eight years, while the Obama administration has averaged 81 major regulations annually over six years.
The CEI reports the cost-side of regulation, but what about the benefits? Surely, the benefits of some regulations outweigh their costs. That is certainly what the cost-benefit analyses that regulatory agencies generally report. In 2014, the Office of Management and Budget issued a report that concluded:
The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 2003, to September 30, 2013, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $217 billion and $863 billion, while the estimated annual costs are in the aggregate between $57 billion and $84 billion. These ranges are reported in 2001 dollars and reflect uncertainty in the benefits and costs of each rule at the time that it was evaluated.
In other words, the benefits of regulations outweighed their costs by a ratio of at least 4 to 1, but perhaps as high as 10 to 1.
But, as noted above, the study I cited at the beginning strongly suggests that reductions in economic growth over the long run likely cost far more than the benefits that regulations are supposed confer on the citizenry.
Disclosure: I had the honor of being the first Warren Brookes Fellow at CEI.