Ten Thousand Commandments 2007

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Executive Summary

President George W. Bush’s federal budget for fiscal year (FY) 2008 proposed $2.902 trillion in discretionary, entitlement and interest spending. Although those costs fully express the federal government’s on-budget scope, the government’s reach extends far beyond the taxes that Washington collects. Federal environmental, safety and health, and economic regulations cost hundreds of billions of dollars every year—in addition to official federal outlays.

Firms generally pass along to consumers some of the taxes imposed. Similarly, some regulatory compliance costs imposed on businesses fall to consumers. Exact regulatory costs can never be fully known; unlike taxes, they are unbudgeted. But scattered government and private data exist on scores of regulations and the agencies that issue them, as well as on regulatory costs and benefits, some of which can be compiled in a way that makes the regulatory state more comprehensible. That compilation is one purpose of the annual Ten Thousand Commandments report, highlights of which appear next.

• Extrapolations from an estimate of the federal regulatory enterprise by economist Mark Crain show that regulatory costs hit $1.14 trillion in 2006.
• Given that 2006 government spending reached $2.654 trillion, the hidden tax of regulation now approaches half the level of federal spending itself.
• Regulatory costs are more than quadruple the $248 billion budget deficit.
• Regulatory costs exceed 2004 corporate pretax profits of $1.059 trillion.
• Regulatory costs exceed the estimated 2006 individual income taxes of $998 billion.
• Regulatory costs dwarf corporate income taxes of $277 billion.
• Regulatory costs of $1.14 trillion absorb 9 percent of U.S. gross domestic product (GDP), which was $13.06 trillion for 2006.
• If regulatory costs are combined with federal fiscal year 2006 outlays of $2.654 trillion, the federal government’s share of the economy reaches 29 percent.
• The Weidenbaum Center and the Mercatus Center jointly estimate that agencies spent $41 billion to administer and police the regulatory state in 2006. If one includes the $1.142 trillion in off-budget compliance costs, the total regulatory burden reaches $1.183 trillion.
• The 2006 Federal Register contained 74,937 pages, a 1.4 percent increase from 2005’s 73,870 pages. Both the past two years are down from 2004’s record-high 75,676 pages.
• In 2006, agencies issued 3,718 final rules, a 6 percent decline from 2005’s 3,943 rules.
• Well over 48,000 final rules were issued from 1995 to 2006—that is, during Republican control of Congress.
• While regulatory agencies issued 3,718 final rules, Congress passed and the president signed into law a comparatively low 321 bills in 2006. Considerable lawmaking power is delegated to unelected agencies.
• In the 2006 Unified Agenda, agencies detailed 4,052 regulations now at various stages of implementation throughout the 50-plus federal departments, agencies, and commissions.
• Of the 4,052 regulations now in the pipeline, 139 are “economically significant” rules with at least $100 million in economic impact. That number implies at least $13.9 billion yearly in future off-budget costs.
• Economically significant rules in the works increased slightly between 2005 and 2006, from 137 to 139.
• The five most active rule-producing agencies (the Departments of the Treasury, Agriculture, Interior, and Commerce, plus the Environmental Protection Agency, or EPA)—with 1,791 rules among them—account for 44 percent of all rules in the Agenda pipeline.
• Of the 4,052 regulations now in the works, 787 affect small business.

The U.S. government has conclusively ended its recent short-lived string of budgetary surpluses—the first since 1969. But if their regaining and maintaining a genuine surplus remains a priority, policy makers must control regulatory costs. Consider: the Congressional Budget Office projects no surplus over the coming decade until a speculative $170 billion in 2012. Regulatory costs of more than $1.14 trillion clearly dwarf that amount. Moreover, regulations and taxes can substitute for one another; a new government program requires increasing spending—or imposing new rules and regulations. Thus, without better regulatory monitoring, deficit control may invite congressional adoption of off-budget, private-sector regulations rather than new deficit spending. If regulatory costs remain largely hidden from public view, regulating remains attractive when compared with taxing and spending.

Regulations should be accounted for like federal spending: Whenever possible, Congress should answer for the compliance costs—as well as the benefits—of federal regulations. Cost-benefit analysis of rules is the typical remedy proposed to police excess regulation. The problem with cost-benefit analysis, however, is that it is largely a form of agency self-policing; agencies would perform “audits” of their own rules but would rarely admit that a rule’s benefits do not justify the costs involved. At the least, some third-party review would be needed.

A way to maximize congressional accountability is to require expedited congressional votes on agency rules before they become binding. This step would fulfill citizens’ expectation of “no regulation without representation.”

Disclosing rules’ costs would remain important, however, even if Congress approved rules; openness about regulatory facts and figures is critical, just as disclosure of program costs is critical in the federal budget. Rather, simple federal “regulatory report cards,” similar to the presentation in Ten Thousand Commandments, could be issued officially each year to distill regulatory data.