Regulations Cost Your Family $15,000 a Year
As the battle to control Congress heats up, Republicans and Democrats are blaming each other for Washington's runaway spending and high deficits. And they're both right.
A positive result of all this mudslinging is many voters are becoming familiar with some sobering numbers. This year, the federal government will spend about $3.5 trillion and will run a deficit of about $500 billion. But another equally important figure has yet to gain enough attention: The federal regulatory state costs the economy an additional $1.86 trillion annually.
If it were its own country, the federal regulatory state would be the world's tenth-largest economy -- larger than that of Canada, Italy, or India. Federal regulations amount to a hidden tax of almost $15,000 per household. That's more than families spend on food, clothing, health care, education, and other necessities. Only housing costs more. Factor in regulation, and the federal government is half again as large as most people think it is.
The above figures are from the 2014 edition of the Competitive Enterprise Institute's Ten Thousand Commandments report. As a matter of basic transparency, the federal government should issue an annual report similar to Ten Thousand Commandments on its own. But it doesn't, so CEI has to.
Every year, more than 3,600 new regulations hit the books -- a rate of nearly ten new rules per day. This flow piles onto a stock of regulations that now fills more than 175,000 pages in the Code of Federal Regulations and includes more than 1 million regulatory restrictions that impose a significant burden on the economy.
Incumbent firms use regulations to stifle smaller and potential new competitors. Licensing requirements prevent ordinary, honest people from making a living. Other regulations have a chilling effect on innovation. It could well be that the next Google is never founded because regulations made it impossible.
However Capitol Hill's balance of power shifts after this year's midterm elections, don't expect any action from Congress on removing these barriers to wealth creation. Congress has delegated away most of its lawmaking authority to regulatory agencies. For instance, last year Congress passed and the president signed into law 72 bills, whiles agencies issued 3,659 regulations. The difference, which we call the Unconstitutionality Index, is greater than a factor of 50. Congress rather likes this arrangement, as it can shift blame for burdensome or controversial rules onto agencies, which don't have to face voters.
Unfortunately, reform is extraordinarily difficult. The regulatory process is very efficient at creating new rules, but it is nearly impossible to get rid of old rules. The solution is not to pray for favorable political winds, but to change the rules of the regulatory process itself to make it easier to repeal unneeded regulations.
One method is to establish an independent commission modeled along the lines of the successful Base Realignment and Closure Commission, which closed unneeded military bases after the Cold War ended. The idea has broad political support, and has been backed by figures from former Sen. Phil Gramm (R., Texas) to the Progressive Policy Institute's Michael Mandel. The commission would comb the books annually and send a repeal package to Congress, which would be legally required to hold a timely up-or-down vote, with no amendments allowed, in order to prevent vote-trading and other political hijinks that would water down the package.
As dire as the government's fiscal situation is, the problem of over-regulation is at least as serious. If enough people learn the true size of the federal regulatory state, politicians from both parties will have no choice but to take note and enact serious reforms, or risk ending their careers as soon as this November.
Wayne Crews is vice president for policy, and Ryan Young is a fellow, at CEI.