The Public Policy

Washington’s Ten Thousand Commandments

Regulations and red tape should be campaign issues this year.

By and 6.5.12

Send to Kindle

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.

Like this Article

Print this Article

Print Article
About the Author

Ryan Young is Fellow in Regulatory Studies at the Competitive Enterprise Institute.

About the Author

Wayne Crews is Vice President for Policy at the Competitive Enterprise Institute in Washington, D.C.