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Study: Regulations Cost Nearly One-Third of Average Household’s Budget

August 7, 2015

The Competitive Enterprise Institute’s (CEI) 2015 annual survey Ten Thousand Commandments (10kC) examines the size, scope, and cost of federal regulations and how they impact U.S. consumers, businesses, and the economy.

regulatory_costs

The Competitive Enterprise Institute’s (CEI) 2015 annual survey Ten Thousand Commandments (10kC) examines the size, scope, and cost of federal regulations and how they impact U.S. consumers, businesses, and the economy.

            The study, authored by CEI Vice President for Policy Clyde Wayne Crews Jr. exposes what Crews says is a large, growing “hidden tax” resulting from federal regulations costing nearly one-third of the average family’s budget. 

Regulatory Costs are Hidden Taxes

Commenting on CEI’s annual report, Americans for Tax Reform (ATR) President Grover Norquist said, “Ten Thousand Commandments reminds us that the tax burden is only part of the economic costs imposed by government.

            “As the taxpayer movement has been more successful in highlighting the damage done by high taxes, politicians have shifted to hiding the costs of government in regulations,” Norquist said. “These costs are less visible [but] just as damaging.”

            The report notes regulations get relatively little attention in policy debates because, unlike taxes, they are unbudgeted and are difficult to quantify because their impacts on consumers, businesses, and the broader economy are often indirect.

            Crews found federal regulations cost U.S. consumers and businesses approximately $1.88 trillion in 2014 in lost economic productivity and higher prices. If the costs of U.S. federal regulation were a nation’s gross national product, it would be the world’s 10th largest economy, ranking ahead of India.

            In terms of the impact on individuals and households, regulatory costs amount to an average of $14,976 per household, around 29 percent of an average family’s annual budget of $51,100. Although not paid directly by individuals, this cost of regulation exceeds the amount an average family spends on health care, food, and transportation. 

Operating Outside Normal Process

“One of the most striking aspects of this year’s Ten Thousand Commandments report is the level of federal agency activity operating outside the traditional rulemaking process,” said James Broughel, program manager for regulatory studies at the Mercatus Center. “Agencies published almost 24,000 notices in the Federal Register in 2014, compared to roughly 3,500 final rules.

            “While many of these notices announce non-regulatory actions like public hearings, others amount to ‘stealth regulations’ because they announce important policy changes that impose costs on businesses and consumers just like traditional regulations, yet they never go through the traditional regulatory process,” Broughel said.

            The report also provides an “Unconstitutionality Index,” the ratio of regulations issued by unelected agency officials compared to legislation enacted by Congress in a given year. In 2014, agencies issued 16 new regulations for every law; 3,554 new regulations compared to 224 new laws.

            “Agencies issue far more rules and laws than Congress does,” Crews told Environment & Climate News.

            “That, and the fact our elected representatives pass bad laws in the first place, is bad enough.” Crews added. “Worse is today’s ‘regulatory dark matter.’ Agencies issue regulations without providing the public adequate notice and an opportunity to comment, taking advantage of the ‘good cause’ exemption to bypass the requirement.

            “But that’s just the beginning,” Crews said. “Agencies avoid public and congressional scrutiny by issuing memos, letters, guidance documents, bulletins, and other proclamations and decrees that influence the behavior of the public outside normal Administrative Procedure Act processes, let alone constitutional lawmaking processes.”

D. Brady Nelson (darren.nelson@me.com) is a columnist with Townhall.

Internet Info

Clyde Wayne Crews, Ten Thousand Commandments 2015: An Annual Snapshot of the Federal Regulatory State, May 8, 2015; https://www.heartland.org/policy-documents/ten-thousand-commandments-2015-annual-snapshot-federal-regulatory-state

Author
Darren Brady Nelson is an Austrian school economist who serves as the chief economist at LibertyWorks and as an associate scholar with the Center for Freedom and Prosperity. Nelson is also a policy advisor to The Heartland Institute.
darren.nelson@me.com