Government Regulations: A hidden tax

According to The Impact of Regulatory Costs on Small Firms a report for The Office of Advocacy, U. S. Small Business Administration:

To comply with federal regulations, Americans spent $843 billion in 2000. Had every household received a bill for an equal share, each would have owed $8,164. That bill would be in addition to the $19,613 share each household contributes (directly or indirectly) to federal revenues.

Complying with state and local regulations add to this total.

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Susan Dudley notes in her Tech Central Station article entitled It's Not Just the Spending that:

Another interesting measure of regulatory activity is provided by an annual report issued jointly by the Mercatus Center at George Mason University and the Weidenbaum Center at Washington University in St. Louis. It examines the Budget of the United States Government to track federal expenditures and staffing devoted to regulation between 1960 and 2006.

The FY 2006 Budget requests that Congress allocate $41.4 billion for regulatory activities, up from $39.5 billion in 2005. This reflects a 4.8 percent increase in outlays directed at writing, administering, and enforcing federal regulations. The regulators' budget is growing at a faster rate than other nondiscretionary spending, which the President's budget held to only 2.1 percent in 2006. Since 2000, the regulators' budget has grown an amazing 46 percent, after adjusting for inflation.

In 2001, the Regulatory Right-to-know law was put into place (see: ANNUAL STATEMENT AND REPORT ON RULES AND REGULATIONS Pub. L. 106-554, Sec. 1(a)(3) [title VI, Sec. 624], Dec. 21, 2000, 114 Stat. 2763, 2763A-161. at 31 USC Sec. 1105 ) which provides for:

(a) In General. - For calendar year 2002 and each year thereafter, the Director of the Office of Management and Budget shall prepare and submit to Congress, with the budget submitted under section 1105 of title 31, United States Code, an accounting statement and associated report containing - (1) an estimate of the total annual costs and benefits (including quantifiable and nonquantifiable effects) of Federal rules and paperwork, to the extent feasible - (A) in the aggregate; (B) by agency and agency program; and (C) by major rule; (2) an analysis of impacts of Federal regulation on State, local, and tribal government, small business, wages, and economic growth; and (3) recommendations for reform.

How's that for irony?; a regulation to determine the cost/benefits of regulations. Regulations.gov tracks 13 major regulatory categories and may have been built as a result of the law.

Draft 2005 Report To Congress on the Costs and Benefits of Federal Regulations is a draft of this year's report complying with that law. The draft claims:

The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 1994 to September 30, 2004 range from $68.1 billion to $259.6 billion, while the estimated annual costs range from $34.8 billion to $39.4 billion. A substantial portion of both benefits and costs is attributable to a handful of Environmental Protection Agency clean-air rules that reduce public exposure to fine particulate matter.

However, a closer reading of the report allows for the accusation of 'cherry picking' to be leveled. The same report has the following footnote (2) associated with the description of benefits and costs on page 6:

In many instances, agencies were unable to quantify all benefits and costs. We attempted to capture the essence of these effects on a rule-by-rule basis in the columns titled "Other Information" in the various tables reporting agency estimates. The monetized estimates we present necessarily exclude these unquantified effects.

That reads like a hole in the methodology you could drive a convoy of Mack trucks through, side-by-side, in light of the huge federal bureaucracy.

James L. Gattuso, of the Heritage Foundation, provided testimony and recommendations to Congress in 2004 advocating reform. Though well intentioned, the recommendations themselves create yet another bureaucracy.

This is a big hole we've dug ourselves into and the business community can't be faulted for a growing pessimism.

Acknowledgements: Thanks BizzyBlog for the email pointing out Susan Dudley's article inspiring this post.