Deficits, taxes, and spending are the defining issues of the
2012 campaign. Regulation deserves a seat at the table, too. The
federal government spent $3.6 trillion in 2011. But according to
the Small Business Administration (SBA), the annual cost of
complying with federal regulations has exceeded $1 trillion since
around 2005, and none of those costs appear in the federal budget.
The federal government actually costs us half again more than most
people think it does.
By way of comparison, Canada’s entire Gross National Income is
$1.42 trillion. The budget deficit is currently $1.08 trillion.
Those are big numbers. And the cost of federal regulation is an
even bigger number. This needs to change if the economy is to get
back on track.
Politicians love to blame unregulated markets for America’s
economic troubles. But as the just-released 2012 edition of the
Competitive Enterprise Institute’s annual Ten Thousand
Commandments report shows, those unregulated markets are hard
to find. The federal government lists all of its regulations in the
Code of Federal Regulations. It is more than 169,000 pages
long and growing. Last year alone, 3,807 new final rules were
published in the Federal Register — more than 10 per day. In 2010,
it was 3,573 new rules.
Small businesses bear an outsize share of regulatory burdens.
Candidates from both parties constantly climb over each other to
seize the mantle of Protector of Small Business. But their claims
ring hollow if they don’t work to enact top-to-bottom regulatory
reform.
Big businesses, with more than 500 employees, pay about $7,755
per employee to comply with federal rules each year, according to
the SBA. But small businesses with fewer than 20 employees pay
$10,585 per employee per year. That’s a built-in competitive
advantage for big business of nearly $3,000 per employee, courtesy
of Washington.
The states pile on regulations, too. No wonder a recent Kauffman
Foundation-Thumbtack.com survey of 6,000 small businesses found
that, “Small businesses care almost twice as much about licensing
regulations as they do about tax rates when rating the
business-friendliness of their state or local government.”
President Obama has made some gestures in the direction of
regulatory sanity. He recently guided the repeal of five rules,
which should save $6 billion over five years. That’s a good start
— an average of $1.2 billion per year will soon be put to more
productive uses than, say, redundant vapor recovery systems in gas
pumps. But trimming $1.2 billion from $1 trillion lightens the
regulatory burden by only a fraction of a percent. It’s the
equivalent of a 200-pound man declaring his diet a success after
shedding less than three ounces.
Congress passed 81 new laws last year, but agencies issued 3,807
new regulations. This is called regulation without representation,
and needs to be stopped. Of those rules, 212 are classified
“economically significant,” which means they cost more than $100
million per year. Congress should, at the very least, vote on rules
with such a large price tag.
There is now a bill that would require Congress to do just that,
the Regulations from the Executive in Need of Scrutiny (REINS) Act.
It passed the House, but is stalled in the Senate. The world’s
greatest deliberative body should pick up the baton that it so
carelessly dropped and take it to the finish line.
Just as Congress is supposed to pass a budget every year for
what it spends, it should pass a regulatory budget. If it
caps regulatory burdens at, say, $1 trillion, it would then have to
prioritize which rules it believes provide the most bang for the
buck. Voters would also know when Congress votes to increase
regulatory costs, giving members at least some incentive to keep
regulation in check.
The fight for real regulatory reform is a long one, not least
because neither party has shown the seriousness needed to see it
through. But the only way to win is to fight. That’s why
politicians and agencies are so resistant to transparency reforms
like the ones above. If enough people learn the truth about
regulatory costs, the politicians lose.
