June 14, 2001
Ten Thousand Commandmentsby Wayne Crews
Wayne Crews is director of technology policy at the Cato Institute.
In the new fiscal year 2002 federal budget, President George W. Bush proposed $1.96 trillion in spending. While these costs encompass the on-budget scope of the federal government, there is considerably more to the government’s reach. Federal environmental, safety and health, and economic regulations cost hundreds of billions of dollars every year on top of official federal outlays.
The exact cost of federal regulations can never be fully known. Assorted data exist on the numbers of regulations and on their costs and benefits that can provide something of a snapshot. For example:
· The 2000 Federal Register contained 74,258 pages, the highest level since Jimmy Carter’s presidency and a four percent jump over 1999.
· In 2000, 4,699 regulations were at various stages of implementation throughout the 50-plus federal departments, agencies, and commissions.
· Of the 4,699 regulations now in the works, 158 are “economically significant” rules that will have at least $100 million in economic impact. That means new regulations to impose at least $15.8 billion yearly in future off-budget costs are in the pipeline.
· The five most active rule-producing agencies (the departments of Transportation, Treasury, Interior, and Commerce, and the Environmental Protection Agency) account for 48 percent of all rules under consideration.
· Of the 4,699 regulations now in the works, 1,054 impact small business. Rules impacting small businesses are up nine percent over the past year and up 40 percent over the past five years.
· The costs of meeting the demands of off-budget social regulations were as high as $229 billion, according to the Office of Management and Budget (OMB). A more broadly constructed competing estimate that includes economic regulatory costs and paperwork costs pegs regulatory expenditures at $788 billion in 2000, or 44 percent the size of all federal fiscal year 2000 outlays.
· Regulatory costs of $788 billion are equivalent to 7.9 percent of U.S. gross domestic product, estimated at $9,974 billion for 2000.
· Regulatory costs rival the $952 billion estimated to be paid in 2000 individual income taxes.
· In 1998, the median two-earner family’s after-tax income of $41,846 contained $7,410 in hidden regulatory costs. Thus, regulatory costs eat up about 18 percent of the after-tax family budget.
· Agencies spent $19 billion to administer and police the regulatory state in 2000, 6.7 percent more than the previous year. Counting the $788 billion in off-budget costs, that brings the total regulatory burden to $807 billion.
The U.S. is now enjoying its first string of budgetary surpluses in decades. But if maintaining a true surplus remains a priority, then sincere policymaking also must seek to control regulation and its costs. Think of it this way: The maximum anticipated surplus is $796 billion in 2010. But the regulatory costs of over $700 billion already rival that number.
Moreover, regulations and taxes can be substitutes for one another; a new government program requires increasing spending—or imposing new rules and regulations. Thus, unless regulatory activity is better monitored, the balanced budget imperative may tend to invite Congress to adopt new off-budget private-sector regulations rather than new explicit spending that would chip away at the surplus.
Cost-benefit analysis of rules is the typical remedy proposed to police excess regulation; however, it’s largely a form of agency self-policing. But agencies have little incentive to admit that benefits of a rule do not justify the costs involved.
Regulations should be treated the same way federal spending is treated: Along with cost disclosure, to the extent possible, Congress should be held directly accountable for the compliance costs—as well as the benefits—that federal regulations confer. If Congress were to vote on agency rules (in an expedited fashion) before they are binding, it would fulfill citizens’ right to “No regulation without representation.”
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