Federal regulations cost the U.S. economy an estimated $1.88 trillion in 2014, a sum greater than the gross domestic product of India.
The $1.88 trillion exceeds the combined revenues from corporate and individual income taxes, according to the Competitive Enterprise Institute’s annual report on the cost of federal regulations.
The report, written by CEI Vice President for Policy Clyde Wayne Crews Jr., is an attempt to improve on incomplete government reports by assessing the total costs imposed by federal regulations based on data compiled from all available sources.
Although nobody “pays” for them directly, Crews explains, “federal regulations can compel the private sector, as well as state and local governments, to bear the costs of federal initiatives,” making them a kind of “hidden tax.” (RELATED: Obama Admin Releases 300 New Regulations in First Week of 2015)
Whether the actual costs are borne by businesses or local governments, they are ultimately passed along to individuals in the form of either higher taxes or higher prices for goods and services.
According to Crews, those costs added up to an average of about $15,000 per household last year. If that bill were paid directly, it would be the second-largest item on the average family’s budget behind housing costs.
Regulations even impose some direct costs. “Estimated FY 2014 enforcement costs incurred by federal departments and agencies stood at an estimated $59.5 billion,” Crews claims.
At the macro level, the $1.88 trillion cost of regulations dwarfs the FY 2014 federal budget deficit of $468 billion, and equates to roughly half of all federal spending ($3.656 trillion). (RELATED: EPA Sneaks ‘Costliest Regulation Ever’ Over Holidays)
“Only eight countries have GDPs that exceed the estimated cost of regulation in the United States,” Crews notes, adding that the U.S. and China are the only countries in the world that even collect revenues greater than that cost.
Moreover, the vast majority of new regulations are enacted without explicit legislative approval, a situation that suits lawmakers perfectly, because “where regulatory compliance costs prove burdensome, Congress can escape accountability by blaming an agency for issuing an unpopular rule.”
As a result of such deliberately lax oversight, the ratio of regulations to laws, dubbed the “unconstitutionality index,” has reach 16 new regulations for each law passed by Congress. In 2014, federal agencies issued a combined 3,554 new regulations—an average of nearly 10 per day.
Nor does the trend show any indication of slowing: There are currently 3,415 regulations in development at various stages in the pipeline. (RELATED: White House Quietly Releases Plans for 3,415 Regulations Ahead of Thanksgiving Holiday)
Constraining the increase in burdensome regulations, Crews believes, can best be accomplished through transparency and public debate, because such an approach would allow full consideration of all relevant costs and benefits. “Without more complete regulatory accounting,” he explained. “It is difficult to know whether society wins or loses as a result of rules.”
Crews maintains that there are several immediate steps that can be taken to improve disclosure. Congress could, for example, require agencies to conduct cost-benefit analyses for all new regulations, instead of limiting such analysis to regulations that are expected to impose costs of $100 million or more.
Even more meaningfully, Crews suggests that Congress “cease delegating legislative power to unelected agency personnel,” and instead assume direct responsibility for regulatory costs, which he believes would give lawmakers a strong incentive to demand thorough assessments of proposed regulations.
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