Most people understand that high taxes can stifle investment and undermine growth. But do we give enough attention to the burdens that too much regulation can place on the economy?
A recent study seeking to measure the cost of new regulations coming from Washington sheds some light on the issue.
Researchers at American Action Forum, a Washington, D.C.-based public policy group, estimate that federal agencies published $112 billion in net regulatory costs in 2013, and a cumulative total of $494 billion in final rules published since 2009. That’s more than the gross domestic product of countries such as Sweden, Peru, and Ireland. AAF estimates the tab for 2014 could be an additional $87.6 billion in regulatory costs.
“Economically significant” regulations growing
To get a sense for yourself, search through the Unified Agenda and Regulatory Plan on the website of the Office of Management and Budget. The Unified Agenda houses comprehensive data on regulatory actions under development throughout the federal government.
You’ll find that from 2009 to 2013, a total of 526 “economically significant” regulations hit the final rule stage – an average of 105 per year.
What constitutes an economically significant rule? One the government estimates will result in an annual impact of more than $100 million on the economy. Keep in mind the federal government promulgates numerous additional regulations that impose costs, even if they don’t meet the $100 million threshold.
For a good overview of how regulations are crafted and the costs they impose, I recommend this primer by Susan Dudley, former administrator of OMB’s Office of Information and Regulatory Affairs and now director of the Regulatory Studies Center at George Washington University, and Jerry Brito of the Mercatus Center at George Mason.
Entangling regulation
Why is this regulatory growth significant?
The Progressive Policy Institute recently articulated the impacts of layers of regulation:
As the number of approved regulations grows, they inevitably interact in ways we may not expect. And when taken together, multiple regulations can overlap or conflict, become the primary focus of company management, or even interfere with a company’s willingness and ability to innovate. The buildup of regulations over time can block the natural flow of economic growth and innovation, to no fault of any single regulation.
In 2012, former Obama administration regulatory advisor Cass Sunstein gave a speech in which he made a similar observation:
A particular problem is the rise of cumulative burdens, stemming from the aggregation of rules that may make sense in individual cases, but that when taken as a whole, are not easy to justify.
Not easy to justify indeed.
One of the government’s most important responsibilities is to regulate and hold businesses accountable. We also need to hold government accountable for its regulations.
One way to bring Washington policymakers together is to start exploring – and reforming – the cases where excess regulations add complexity, undermine investment, and threaten economic growth.
It is clearly a project worthy of bipartisan support.
