Jaws dropped when the government announced recently that the national debt would increase by $14,000,000,000,000 over the next decade. Right now, roughly every third dollar the government spends is one it does not have.
Even more worrying is how politicians are reacting to the news. Few are talking about cutting spending, which would be politically difficult. Instead, Congress and the administration could resort to spending off-budget through a neat trick known as the unfunded mandate.
For example, rather than fund a new federal job training program through a Department of Labor appropriation, Congress could mandate that all Fortune 500 firms provide, and pay for, such training. The first appears on the federal budget, the second does not. For politicians, it’s the perfect scheme. The government can spend — or, rather, force other people to spend — as much as it wants without adding to the deficit.
The economic consequences are severe. The federal budget contains $40 billion to enforce regulations-but compliance with those regulations actually costs about 29 times that, or $1.17 trillion. For the government, that hidden trillion is entirely off-budget. Instead, businesses, consumers, and state and local governments have to pay for it.
Few people outside of Washington appreciate the beauty of off-budget spending. Governors and other state and local officials will occasionally revolt, weary of the federal government’s habit of passing regulatory costs on to state and local jurisdictions. Conceding the point, Congress passed the Unfunded Mandates Reform Act in 1995. But it didn’t do much good, as last year’s 3,830 new regulations can attest.
That’s why a proposal from Rep. Virginia Foxx (R-N.C.) is a breath of fresh air. The proposed Unfunded Mandates Information and Transparency Act seeks to make the federal government provide better information about what the regulatory state actually costs. That would hopefully redirect public ire back to overregulation’s real source: Congress itself.
Mandates that impose higher wages, increase unemployment, or increase consumer prices should not slip through Congress unacknowledged. Congress should have to tally up its mandates’ indirect costs. Knowing those impacts is crucial. Mandates can cost workers their jobs, and even prevent jobs from being created in the first place.
Mandates mount quickly as a small firm grows. Mandatory compliance with the Americans with Disabilities Act kicks in at 15 employees, the Health Maintenance Organization Act at 25, the Family and Medical Leave Act at 50, and so on. It is not a good sign when it becomes routine for firms to stick to 49 employees and hire temps to stay under the FMLA threshold.
Rep. Foxx’s proposed reform would not curtail Congress’ power to regulate, per se. Hers is a disclosure bill. Congress would still be free to pass any unfunded mandate it pleases-as long as it accounts for the costs involved.
Unfunded mandate cost disclosure is a simple, yet needed, wake-up call. As the deficit and federal spending grow-and public anger with them-unfunded mandate reform may just have a chance. If Congress refuses to approve this modest reform it might as well take a roll-call vote on a resolution stating: “The public has no business knowing the costs of the regulations that we impose upon them.”